The HRC has produced (amongst other things) some memorable moments over the past 6 months, ranging from the destruction of the AMP's reputation, and that of its chairperson, the collapse of a witness in the midst of his testimony (which might have saved him from further immediate embarrassment), and overall the understanding that the consumer invariably comes second in dealings with the banking system.

The past two weeks have shone a similar light on the insurance sector, with equally horrific tales of appalling, and in some cases allegedly criminal behaviour, generally inflicted on those most vulnerable. Maybe, as one who has had to deal with an insurance company over a claim, or been on the end of a sales call, there weren't expected to be too many surprises, but surprises there were.

Charging deceased people premiums? Tick. Denying claims without just cause? Tick. What was of concern was the size of the organisations, and the seniority of those in the know, with the ability, but not the inclination, to prevent such practices. 

If one had to have sympathy for a witness appearing before the HRC however, it was today's victim, Sally Loane, CEO of the Financial Services Council, the peak industry body with the unenviable task of representing, amongst others, the insurance sector. Without being the perpetrator of the actions of her members, she was made to look responsible for endorsing their collective misdeeds.

It made for uncomfortable TV, and will no doubt be replayed again and again on tonight's news and current affairs channels.  With nowhere to go without condemning or damning her members, Loane resembled someone crossing a river full of crocodiles on a tightrope, whilst dodging well-aimed spears from the other side, all the while with no protection other than "I'm the CEO, and have an expert better able to answer that technicality".

Of course in her position, one question was unanswerable: Why is the insurance industry not subject to the same law that requires directors (and others) to "deal honestly, efficiently and fairly" as required by the Corporations Act?

The problem, however, is that even when applied to the rest of the banking and financial services sector, the issue seems to have been well and truly swept under the (boardroom) carpet.

Moving away for the HRC (which by the way is due to produce its interim report in time for next week's "Hedge Clippings") this week saw the US 10 year bond rate poke its head above the 3% mark again. With multiple opinions on the downward direction of Australia's housing market, one thing remains clear: The rising housing tide we've seen was caused significantly, if not totally, by 10 years of unrealistically low interest rates, and easy credit. 

As those rates rise, and easy credit becomes a distant memory, so that tide will recede, most likely very quickly. Add to that the threat of Bill Shorten and a potential limit on negative gearing, and the outgoing tide may become a flood, with resultant effects on the economy as a whole.

BENNELONG KARDINIA ABSOLUTE RETURN FUND

Attached is our most recently updated Fund Review. You are also able to view the Fund's Profile.

• The Fund is long biased, research driven, active equity long/short strategy investing in listed ASX companies with over ten-year track record. 

• The Fund has significantly outperformed the ASX200 Accumulation Index since its inception in May 2006 and also has significantly lower risk KPIs. The Fund has an annualised return of 10.40% p.a. with a volatility of 6.87%, compared to the ASX200 Accumulation's return of 6.08% p.a. with a volatility of 13.33%.

• The Fund also has a strong focus on capital protection in negative markets. Portfolio Managers Mark Burgess and Kristiaan Rehder have significant market experience, while Bennelong Funds Management provide infrastructure, operational, compliance and distribution capabilities.

For further details on the Fund, please do not hesitate to contact us.

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - August 2018 (pdf format)

GFC turns 10, Hedge Funds Rock turns 17!

10 years on from the collapse of Lehman Brothers, the trigger that fired a bullet that was to become known as the Global Financial Crisis, and there are a number of voices warning that whilst everything in the garden may seem rosy, there are worries that markets are heading for further turbulence.

As the recent AFM Insights article from Arminius Capital explains, the US equity market has risen by 350% from its March 2009 low, but the real growth has been in debt, thanks to central banks flooding the system with credit, and allowing eager corporate and individual borrowers to take advantage of impossibly low interest rates.

Other voices are spreading the same cautionary tale. At this week's Australian AIMA (Alternative Investment Management Association) conference, a number of respected voices, including Regal's Philip King, warned of the dangers of the valuations of some growth stocks which he fears will be unsustainable in due course. 

While King is warning of the danger, he is also looking forward to the opportunity - or opportunities - which will present themselves on the short side. Given the track record of Regal's various funds, which have provided twelve-month returns of between 28% and 74%, and annualised returns ranging from 13% to 35% over a long period which included the GFC, albeit with commensurate volatility, it would be well worth listening to King's voice of experience.

The AIMA conference was followed by last night's 17th annual Hedge Funds Rock event, which combined recognition of the best performing managers across eight categories, along with raising funds for well worth charities, including Redkite which supports the families of children with cancer - with the total raised over 17 years now well over $2 million. Like the industry itself, this event has evolved over the past 17 years from a bunch of managers letting their hair down at Sydney's legendary Basement, through to last night's excellent event for almost 500 held at the Westin's Ballroom.

The award for the individual contribution to the Australian hedge fund industry went to Bronte Capital's John Hempton. For those not aware, Hempton's skills have been particularly evident in uncovering dodgy, if not fraudulent, accounting, and shorting overvalued companies. One person who will not be impressed either by the industry's recognition of Hempton, or by his expertise on the short side, would be Harvey Norman's Gerry Harvey, who once again this week came out spitting chips about the level of short sales in his beloved company.

Without going into the rights or wrongs of short selling, Hedge Clippings' view is that the best way to avoid short sellers is to clean up one's balance sheet, have accurate and transparent accounts, and focus on managing the business at hand (and in Harvey's case that means retailing, not farming). Of course that doesn't cover the situation of short sellers of stocks that are considered vastly overvalued, but if anything they are helping to ensure that valuations don't become even further stretched.

BENNELONG TWENTY20 AUSTRALIAN EQUITIES FUND

Attached is our most recently updated Fund Review on the Bennelong Twenty20 Australian Equities Fund.

• The Bennelong Twenty20 Australian Equities Fund invests in ASX listed stocks, combining an indexed position in the Top 20 stocks with an actively managed portfolio of stocks outside the Top 20. Construction of the ex-top 20 portfolio is fundamental, bottom-up, core investment style, biased to quality stocks, with a structured risk management approach.

• Mark East, the Fund's Chief Investment Officer, and Keith Kwang, Director of Quantitative Research have over 50 years combined market experience. Bennelong Funds Management (BFM) provides the investment manager, Bennelong Australian Equity Partners (BAEP) with infrastructure, operational, compliance and distribution services.

For further details on the Fund, please do not hesitate to contact us.

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - August 2018 (pdf format)