NEWS
Performance Report: Loftus Peak Global Disruption Fund
3 Dec 2018 - Australian Fund Monitors
The Loftus Peak Global Disruption Fund has returned +11.07% over the past 12 months, outperforming AFM's Global Equity Index by +3.32%. Since inception in November 2016, the Fund has returned +22.67% per annum.
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3 Dec 2018 - Performance Report: Loftus Peak Global Disruption Fund
By: Australian Fund Monitors
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| Fund Overview | The investment process involves a combination of top-down analysis with fundamental bottom-up qualitative and quantitative research to derive a risk-adjusted discounted cash flow (DCF) valuation of companies in the target universe. The investment team will generally buy stocks from the pool of securities that are trading below Loftus Peaks' valuation and sell them when they are trading above Loftus Peak's valuation. The approach allows for both fundamental accounting information as well as market-oriented inputs to be factored into the portfolio construction process. Loftus Peak's model typically does not rely on leverage to deliver investment returns and specifically takes into account risk in the valuation process. Capital preservation can be managed by holding up to 50% cash. Index and currency options and futures may also be used to manage risk. |
| Manager Comments | In reference to the market's performance in October, Loftus Peak noted it is never the case that stock market performance is linear. They therefore used the weakness in October to add to a number of key strategic holdings at low prices, starting the month with 10% in cash and finishing with 2%. The Fund is 98% invested in 24 holdings which the manager considers likely outperformers. Key detractors included Nvidia, Tencent, Alibaba, Amazon and Qualcomm, whilst on the positive side Tesla performed well on the back of US$1.4b of operating cashflow in the quarter. Loftus see the falls in Tencent and Alibaba to be the result of the impact of tariffs on China, whilst they believe the fall in Amazon was expected after some very aggressive price targets. They believe Nvidia to hold an important role in machine learning and global data centres, and thus remain invested. They also see Qualcomm as being key in the roll out of the 5G network, which is why they continue to invest. In addition, the Australian dollar depreciated 2.05% over the month against the US dollar, which meant the value of the Fund's US dollar positions increased. As at 30 October 2018, the Portfolio carried a foreign currency exposure of 99%. |
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Performance Report: Touchstone Index Unaware Fund
3 Dec 2018 - Australian Fund Monitors
The Touchstone Index Unaware Fund has returned +3.23% over the past 12 months versus the ASX200 Accumulation Index's +2.94%. Since inception in April 2016, the Fund has returned +9.96% per annum.
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3 Dec 2018 - Performance Report: Touchstone Index Unaware Fund
By: Australian Fund Monitors
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| Fund Overview | The portfolio is constructed using Touchstone's Quality-At-a-Reasonable-Price ('QARP') investment process. QARP is a fundamental bottom-up process, however, it also incorporates a top-down risk management framework designed to successfully manage the portfolio during varying market conditions and economic cycles. The Touchstone Fund is concentrated, typically holding between 15-20 stocks. No individual stock will ever make up more than 10% of the portfolio at any one time. The Investment Manager may temporarily exceed the exposure limits of the Fund occasionally, particularly during periods of market volatility, to allow for holdings in excess of this 10% limit where the increase in value of the underlying security is due to market movement. The Fund may also hold between 0-50% of the portfolio in cash. The Fund has a high level of associated risk, therefore, the minimum suggested investment time-frame is 5 years. |
| Manager Comments | As at the end of October, the Fund held 20 stocks with a median position size of 4.6%. The portfolio's holdings had average price/earnings of 14.9, EPS growth of 11.8%, tangible ROE of 27.0% and dividend yield of 4.9%. The Fund's cash weighting increased to 7.0% from 4.5% at the end of September. The Touchstone Index Unaware Fund primarily selects stocks from the ASX300 Index, typically holding between 10-30 stocks. The Fund seeks to invest in reasonably priced, good quality companies with a significant share of expected returns coming from sustainable dividends. |
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Hedge Clippings - 30 November, 2018
30 Nov 2018 - Australian Fund Monitors
In years to come, when looking back, (hindsight being a wonderful thing) there are going to be a number of dominant themes which affected markets in 2018. One of those, namely the threat of impending increases in interest rates in the US
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30 Nov 2018 - Hedge Clippings - 30 November, 2018
By: Australian Fund Monitors
Major Themes for 2018
In years to come, when looking back, (hindsight being a wonderful thing) there are going to be a number of dominant themes which affected markets in 2018. One of those, namely the threat of impending increases in interest rates in the US, was clearly evident this week as Federal Reserve Chair Jerome Powell hosed down the market's hawkish expectations, resulting in a massive "relief rally" as equity investors, who had been nervous all year, pinned their ears back and pushed the market sharply higher.
Unfortunately one of the other big themes (or concerns) hanging over the market, namely the impending US/China tariff war, overcame their optimism ahead of the G20 meeting in Argentina. Welcome to Donald Diplomacy, Huff, Puff and Threat. Every war has an armistice, and in this case it remains to be seen if the initial skirmishes and threats prevent the war actually starting, or whether it will escalate come January 2019.
However, if the messages out of the G20 are positive, particularly if added to the Fed's more benign outlook, then expect a bumper Christmas rally to end the year.
In Australia, one of the great themes of the year has been the revelations from the HRC, with the final round of public hearings concluding today ahead of Commissioner Hayne's final report due in February. With the exception of Macquarie's Nicholas Moore, none of the bank CEO's or Chairmen did their (or their organisations') reputations any favours. In particular Ken Henry shone for all the wrong reasons when he presumably decided he'd had enough of copping flak, and was going to take a different approach. We'd rate his performance as a 9/10 for effort, and a 1/10 for success.
The other theme for 2018 was falling residential property values. Combining the problems of the banking and financial services sector with an over-indebted consumer, an oversupplied market well overdue for a correction, and brakes put in Chinese buyers' access to credit, resulted in the inevitable correction which will no doubt continue for at least a year, and possibly more.
Finally, politics will go down (unfortunately) as a theme to remember for 2018. Be it The Donald, Brexit, or the revolving door at the Lodge, it is not encouraging optimism.
As we said at the beginning, hindsight's a wonderful thing. Predicting the future is fraught with difficulty, so we'll leave that to another day!
Performance Report: Bennelong Concentrated Australian Equities Fund
30 Nov 2018 - Australian Fund Monitors
The Bennelong Concentrated Australian Equities Fund has returned +16.24% per annum since inception in February 2009 versus the ASX200 Accumulation Index's +10.06% p.a. over the same period.
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30 Nov 2018 - Performance Report: Bennelong Concentrated Australian Equities Fund
By: Australian Fund Monitors
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| Fund Overview | The overriding objective of the Concentrated Australian Equities Fund is to seek investment opportunities which are under-appreciated and have the potential to deliver positive earnings, while satisfying our stringent quality criteria. Bennelong's investment process combines bottom-up fundamental analysis together with proprietary investment tools which are used to build and maintain high quality portfolios that are risk aware. The portfolio typically consists of 20-35 high-conviction stocks from the S&P/ASX 300 Index. The Fund may invest in securities listed on other exchanges where such securities relate to ASX-listed securities. Derivative instruments are mainly used to replicate underlying positions and hedge market and company specific risks. |
| Manager Comments | As at the end of October, the Fund's weightings had been increased in the Health Care, Industrials, Materials and REIT's sectors, and decreased in the Discretionary, Consumer Staples, Communication and Financials sectors. The Fund's cash weighting was increased from 0.9% at the end of September to 1.6%. The Fund is most heavily weighted towards the Discretionary, Health Care and Consumer Staples sectors, each with weightings of 30.7%, 22.1% and 19.0% respectively. The Fund aims to invest in a concentrated portfolio of high quality companies with strong growth outlooks and underestimated earnings momentum and prospects. By comparison with the ASX300 Accumulation Index, the portfolio's holdings, on average, have a higher return on equity and lower debt/equity (Premium Quality), higher sales growth and higher EPS growth (Superior Growth), as well as higher price/earnings and lower dividend yield (Reasonable Valuation), highlighting that the Fund is in line with its objective. |
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Adam Smith Would Want Higher Power Prices
30 Nov 2018 - Chad Slater, Morphic Asset Management
Adam Smith, the author of The Wealth of Nations and arguably the first modern economist, famously said:
"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to...
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30 Nov 2018 - Adam Smith Would Want Higher Power Prices
By: Chad Slater, Morphic Asset Management
A cancer detection solution leads to rapid sales growth (FRA: PHS)
29 Nov 2018 - James McDonald,
Photocure (FRA: PHS), also known as The Bladder Cancer Company, develops products and services with the aim of improving the lives of bladder cancer patients. Photocure has a current market capitalisation of USD $130m and we estimate 2018...
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29 Nov 2018 - A cancer detection solution leads to rapid sales growth (FRA: PHS)
By: James McDonald,
Performance Report: KIS Asia Long Short Fund
29 Nov 2018 - Australian Fund Monitors
The KIS Asia Long Short Fund returned -0.15% in October, outperforming the ASX200 Accumulation Index by +5.9% and taking annualised performance since inception in October 2009 to +12.74%.
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29 Nov 2018 - Performance Report: KIS Asia Long Short Fund
By: Australian Fund Monitors
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| Fund Overview | Whilst the Fund's primary strategy is focused on long/short equities, the ability to retain discretionary powers to allocate across a number of other investment strategies is reserved. These strategies may include, but not be limited to: convertible bond investments, portfolio hedging, equity related arbitrage, special situations (e.g. merger arbitrage, rights offerings, participation in international public offerings and placements, etc.). The Fund's geographic focus is Asia excluding Japan, but including Australia). The Fund may invest outside of this region to the extent that: 1. The investment decision is driven from the Asian region or; 2. The exposure is intended to mitigate risk or enhance return from factors external to the Asian region. |
| Manager Comments | October's volatility saw KIS reduce gross exposure and increase activity. Long exposure to gold companies such as Evolution Mining and Newcrest mining helped, contributing 29bp and 14bp respectively. The Fund's smaller companies impacted negatively, detracting -283bp across all names. This was mostly offset by a short bias across large caps (+94bp) and index hedges (+134bp). KIS noted October presented investors with one of the toughest months since 2008. They believe we are entering a corporate buyback period in the US equity market and that the higher yields in the US will temper further borrowing to fund these buy backs. KIS don't expect yields to increase any further over the short to medium term. |
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Performance Report: Bennelong Kardinia Absolute Return Fund
29 Nov 2018 - Australian Fund Monitors
The Bennelong Kardinia Absolute Return Fund has returned +9.57% p.a. with an annualised volatility of only 7.11% since inception in May 2006. By contrast, the ASX200 Accumulation Index has returned +5.37% p.a. with an annualised volatility...
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29 Nov 2018 - Performance Report: Bennelong Kardinia Absolute Return Fund
By: Australian Fund Monitors
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| Fund Overview | The Fund's discretionary investment strategy commences with a macro view of the economy and direction to establish the portfolio's desired market exposure. Following this detailed sector and company research is gathered from knowledge of the individual stocks in the Fund's universe, with widespread use of broker research. Company visits, presentations and discussions with management at CEO and CFO level are used wherever possible to assess management quality across a range of criteria. Detailed analysis of company valuations using financial statements and forecasts, particularly focusing on free cash flow, is conducted. Technical analysis is used to validate the Manager's fundamental research and valuations and to manage market timing. A significant portion of the Fund's overall performance can be attributed to the attention and importance given to the macro economic outlook and the ability and willingness to adjust the Fund's market risk. |
| Manager Comments | Kardinia Capital noted October was a brutal month for equity markets and the Fund. The Fund fell -5.71%, with performance impacted primarily by the Fund's Resources exposure (which they believe will be a primary beneficiary of the merging global reflationary environment) and core holdings in quality growth stocks like Aristocrat, CSL and Macquarie. However, fundamental stock-specific news flow was positive. Other detractors included WorleyParsons, Seven Group, Nine Entertainment, and a short position in MYOB. The Fund's shorts performed well overall, with Share Price Index Futures contracts adding 95bp for the month and individual stock shorts, led by financials, IT and bond proxy stocks, adding 44bp. In addition, during the sell-off Kardinia Capital added to their highest conviction positions, building net exposure to 55% (72.4% long and 17.4% short) from 30% on their expectation that this is a short but violent pullback rather than the beginning of a bear market. The key changes to the portfolio included new positions in Westpac, NAB and ANZ, as well as increased weightings in Macquarie Group, CSL and Aristocrat Leisure. Kardinia noted this was partly offset by the sale of Bluescope, Nine Entertainment, Services Stream and WorleyParsons. |
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Performance Report: Quay Global Real Estate Fund
28 Nov 2018 - Australian Fund Monitors
The Quay Global Real Estate Fund returned -0.8% in October, outperforming its benchmark (FTSE/EPRA NAREIT Developed Index Net TR AUD) by +0.9% and taking 12-month performance to +13.13%.
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28 Nov 2018 - Performance Report: Quay Global Real Estate Fund
By: Australian Fund Monitors
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| Fund Overview | The Fund will invest in a number of global listed real estate companies, groups or funds. The investment strategy is to make investments in real estate securities at a price that will deliver a real, after inflation, total return of 5% per annum (before costs and fees), inclusive of distributions over a longer-term period. The Investment Strategy is indifferent to the constraints of any index benchmarks and is relatively concentrated in its number of investments. The Fund is expected to own between 20 and 40 securities, and from time to time up to 20% of the portfolio maybe invested in cash. The Fund is $A un-hedged. |
| Manager Comments | Quay noted almost all of the Fund's investees reported earnings in line with or better than their expectations in October, with many lifting full year guidance. They believe improving earnings outlook (especially in the USA) is the flip-side to higher interest rates; i.e. if higher interest rates are the result of a strong economy then that strength will be felt in rental growth and earnings. This, Quay noted, is particularly evident in the Fund's multifamily exposure, which in simple terms is apartments to rent. Quay also mentioned that the US reported new homes sales fell -5.5% to a new two-year low, which they believe the market's reaction suggests investors could be equating soft new home sales with another financial crises event. Quay believe, on this occasion, weak new home sales don't suggest a poor economy but instead an affordability issue. They noted housing affordability around the world has been one of their key themes, pointing to high levels of students debt, rising construction costs, weak wage growth and a 200bp increase in mortgage rates in the US keeping more young Americans from home ownership and living at home with their parents for longer. Quay added that new homes in the US are still needed and total new housing supply remains relatively low by historic standards. Consequently, the Fund's US residential investees continue to report very robust leasing demand and 'better-than-inflation' rental growth. By contrast with the residential environment in Australia today where supply of new dwellings is at a record high and banks continue to tighten lending standards, Quay believe the relative income stability of off-shore residential property to be a better alternative. |
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Performance Report: 4D Global Infrastructure Fund
28 Nov 2018 - Australian Fund Monitors
The 4D Global Infrastructure Fund has returned +9.96% p.a. since inception in March 2016 versus its benchmark (OECD G7 Inflation Index +5.5%) which has returned +7.42% p.a. over the same period.
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28 Nov 2018 - Performance Report: 4D Global Infrastructure Fund
By: Australian Fund Monitors
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| Fund Overview | The fund will be managed as a single portfolio of listed global infrastructure securities including regulated utilities in gas, electricity and water, transport infrastructure such as airports, ports, road and rail as well as communication assets such as the towers and satellite sectors. The portfolio is intended to have exposure to both developed and emerging market opportunities, with country risk assessed internally before any investment is considered. The maximum absolute position of an individual stock is 7% of the fund. |
| Manager Comments | In October, the Fund returned -0.97%. The strongest performers throughout the month were Brazilian toll road operators CCR (+34.7%) and Ecorodovias (+32%) following a positive outcome in the Brazilian elections which saw investors find favour in Brazil again. 4D noted these stocks had been considerably oversold over the past few months and they expect further re-rating as the market gains comfort with Bolsonaro. The weakest performer in October was Mexican airport operator GAP (-17.9%), following AMLCO's cancellation of the Mexican City Airport after a farce referendum which raised concerns about his leadership and influence over the infrastructure sector. 4D noted that, given the generally positive global macro environment, they remain overweight user pay assets which have a direct correlation to macro strength. However, due to ongoing geopolitical concerns they're maintaining core exposure to quality defensive utilities. |
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