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L1 L1 CAPITAL L1 Long Short Fund Limited Investor Letter | MARCH 2021 The Company's NTA increased 8.7 % for the quarter ( ASX200AI 4.3 % ) . Over the past year , the Company has had an exceptionally strong period of performance , with its NTA increasing 112.5 % ( ASX200AI 37.5 % ) . The Company's robust return over the quarter was driven by strong stock performance during reporting season with further support from the early stages of a rotation towards cyclical and value stocks . Performance was broad - based , with 18 individual stock positions contributing 0.5 % or more to returns . Please join us for an investor briefing at 11am ( AEST ) on Friday 30 April . Click here to register for the webinar . Equity Market Observations Global markets have recovered strongly over the past twelve months as investors gained comfort on the progress and efficacy of vaccines and the concurrent recovery path through COVID - 19 . Despite this strong improvement , we continue to believe the equity market will remain supported , with numerous compelling stock - specific opportunities . We have started to see the early signs of a major market rotation that we previously flagged would accompany a strong rebound in economic activity . We believe this is likely to extend further , with an acceleration in global GDP growth likely through 2021 leading to a rotation from : 1 . 2 . Bonds and cash into equities - Equities continue to look far more attractive than other asset classes , with cash and most investment grade bonds currently yielding less than inflation . We expect tailwinds for equities from monetary and fiscal stimulus , strong corporate earnings , rising M & A activity and the vaccine rollout ( which will unleash enormous pent - up demand for a range of services ) . Defensive stocks into cyclical stocks - Investor positioning remains skewed towards defensive sectors ( such as technology , healthcare and supermarket stocks ) that have been largely unaffected by COVID - 19 shutdowns . With a recovery in global GDP growth and our positive outlook on the path to a " COVID normal " environment , we believe there will be a further shift towards hard hit " COVID losers " as their operating metrics begin to show tangible improvement in the second half of 2021 . 3. Growth stocks into value stocks - Value stocks have endured the largest and longest period of underperformance on record as bond yields have collapsed to historic lows , supporting the outperformance of long duration equities . COVID - 19 exacerbated this trend , with a further melt - up in high P / E stocks as investors sought safety in " COVID winners " . As Figure 1 illustrates , the recovery in value and cyclical stocks has been modest relative to history . Growth stocks continue to trade at the widest premium to value stocks since the dot - com bubble of the late 1990s ( refer Figure 2 ) . This supports our view that there is still further to go to see conditions revert to a more balanced " equilibrium " . We believe the catalyst will be the combination of accelerating operating metrics for many cyclical stocks , along with a rise in long term bond yields , particularly in the U.S. and Australia . Figure 1 : Growth vs. Value - Relative performance Figure 2 : Growth - Value P / E spread 1974 1978 1981 1984 1988 1991 1994 1998 2001 Investor Letter | MARCH 2021 | L1 Long Short Fund Limited 200 180 Growth Outperforming World Value vs Growth 160 140 120 my 100 V 80 60 Rotation to value / cyclicals still in very early stages → 35.0 2004 2008 2011 2014 Fwd . P / E Spread , S & P 500 , Expensive vs Value Source : Datastream , Goldman Sachs Global Investment Research , J.P. Morgan U.S. Equity Strategy & Global Quantitative Research 30.0 25.0 Median = 9.7x 20.0 Current = 26.5x ( 98.7 % ile ) 15.0 10.0 5.0 2018 2021 0 1986 1988 1990 2092 1992 1996 1998 2000 2002 2003 2006 2008 2010 2012 2014 2016 2018 2020 1