LHC Capital, the Sydney-based hedge fund which topped the returns table in 2018-19, says it is responding to a "valuation conundrum" caused by lower interest rates by selling its winning trades.

The $400 million fund's chief investment officers, Marcus Hughes and Stephen Aboud, told investors in the LHC high conviction fund that the strategy returned 24.8 per cent after fees over the financial year, including 8.5 per cent in the fourth quarter.