Uncertainty Rules!

The fallout from Brexit, which had only just hit the newswires when Hedge Clippings went to print last Friday, continues, and what a shambles it shows democracy to be at times.

Of course, it was Winston S. Churchill who famously said that "Democracy is the worst form of government, except for all the others" although I am not sure he wouldn't reconsider that opinion given the uncertainty that not only the UK and Europe but also the rest of the world now faces. Of course, it's unlikely that had Churchill still been around that England would have joined the EU in the first place. It is even less likely that he would have fallen into the trap of leaving such an important decision to mere voters, particularly given the U.K.'s non-compulsory voting system which allowed a little less than 36% of those eligible to vote to carry the day.

We can't imagine that David Cameron will go down as a great British PM, and now Boris has pulled out of the race who knows what the outcome will be? The only definitive outcome is ongoing uncertainty, and uncertainty is not a friend of financial markets or economic growth.

Depending on which newspaper one reads in Australia, tomorrow's local election result is either going to be a cliff-hanger, or a win to Malcolm Turnbull and the Liberal coalition. Either way the worst outcome, although one that is quite possible, is that neither party will have the clear run or majority in the Senate to implement their stated policies. If you're on the side of the losing party of course this is probably seen as a positive, but from the point of view of strong government, and economic growth it will just lead to further uncertainty.

Whatever the result we can't see economic growth being anything other than lukewarm at best for the next three years as Australia, like the rest the world, will be impacted to a degree by Europe. And that's even before the potential for Donald Trump to make it to the White House following November's US election.

If that outcome eventuates any uncertainty will become a certainty.

PERFORMANCE NEWS

Pengana PanAgora Absolute Return Global Equities Fund generated a positive 0.88% for the month of May. The Fund has a low systematic risk (beta) to the ASX200 and the MSCI World Indices of 0.07 and 0.08 respectively.

Insync Global Titans Fund  returned +6.30% in May, outperforming the MSCI All Country World ex-Australia Net Total Return Index in $A which returned 5.5%, by 0.80%.

KIS Asia Long Short Fund returned -0.25% for the month of May, to take annualised return since inception to 14.70% p.a.

FUND REVIEWS released this week: Bennelong Twenty20 Australian Equities Fund; QATO Capital Market Neutral Long/Short Fund;

And on that note, try to have a great weekend working out not only the strange ways of the democratic World, but also the Australian Senate voting paper.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.

Be careful of what you wish for....

I suppose it's always gratifying to be able to say "I told you so", or "don't tell me you weren't warned", but last week's Hedge Clippings was entitled "Lookout for the unknown unknowns", and went on as follows:

"I don't know if it is just me, boredom with the election campaign both here and in the US, or a case of going  grey, getting old (and grumpy) but I get the feeling that something significant is going to shake the world's major economies and their current low growth, low inflation trends."

And even though we noted that Brexit was a "known unknown", all the smart money, if that's how one describes the bookies and various UK fund managers, were backing the REMAIN vote, and presumably putting their money where their mouths were. Sadly (for them) and for the stability of financial markets for the foreseeable future, based on current indications they got it badly wrong.

Of course in last week's Clippings we did go on to say that we didn't know what the event might be, when all the time it was right there in front of us. However, sometimes you just have trust your gut feeling, combined with a reasonable understanding of the peculiar vagaries of the psychology of the English, and the peculiarity of a voting system that relies on the weather to determine a nation's future.

So what happens now is anyone's guess, but what is certain is that volatility will be back with a capital V. Markets hate uncertainty, and that's now what they've got, and here in Australia we will not be immune to it.

PERFORMANCE NEWS

Affluence Investment Fund rose 1.87% to take annualised return since inception to 11.8% p.a.

NWQ Fiduciary Fund rose 2.86% in May bringing the net performance for the trailing 12 months to 9.50%.

Bennelong Twenty20 Australian Equities Fund returned +4.48%, outperforming the ASX200 Accumulation Index by 1.39%.

Signature Quantitative Fund generated a positive return of 0.40% in May to take annualised return since inception to 7.18% p.a.

APN AREIT Fund returned +1.58% in May to take annualised return since inception to 18.46% p.a.

QATO Capital Market Neutral Long/Short Fund returned 2.19% in May. The Fund is negatively correlated to the S&P/ASX-100 Index (beta of -0.33).

FUND REVIEWS released this week: Bennelong Kardinia Absolute Return Fund; Pengana Absolute Return Asia Pacific Fund; APN Asian REIT;

And on that note, try to have a great weekend working out the ways of the World.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.

Look out for the unknown unknowns...

I don't know if it is just me, boredom with the election campaign both here and in the US, or a case of going grey, getting old (and grumpy) but I get the feeling that something significant is going to shake the world's major economies and their current low growth, low inflation trends.

In the US the Fed kept things on hold once again this week. They have been trying to raise rates for at least a year, but the combination of the economy and the markets won't let them do it. They also have to worry about the potential election of President Trump… 12 months ago that was considered unlikely and therefore, a known known. Now its a known unknown.

Europe is on hold waiting to see if Brexit occurs, and if it does what impact it will have on both economies and markets, and whether it will lead to other European countries following suit. Even six months ago Brexit was hardly mentioned - now it's a known unknown.

Locally we're stuck waiting for the outcome of the July 2 election result, which before Christmas was considered a known known. Now, with the whole nation (excepting the politicians themselves) becoming immune to the daily dose of political campaigning it looks like a known unknown. Even after the election is over, whoever is elected will have to work out how to pay for their promises and kick-start a post-mining boom economy. Another known unknown.

Whilst not always a fan of Donald Rumsfeld, Hedge Clippings would agree that it is the  "unknown unknowns - the ones we don't know we don't know…. that tend to be the difficult ones."

The bottom line  is that whenever investors get used to or expect something to happen (or in this case not to happen), there is the potential for the "unknown unknowns" to arrive unexpectedly and (normally) negatively affect markets.

Of course, as it's unknown, it would be unwise for me to try and predict what such an event might be, and maybe I am being excessively cautious.

So while from week to week we look at some of the best performing funds, there is also  sound reasoning for also looking at the most defensive. Those funds that in spite of the worst that markets throw at them, protect investors' capital.

PERFORMANCE NEWS

Overall the share markets rose in May. The Australian share market (S&P/ASX 200 Index) was up +2.4% for the month. The US market (S&P 500 Index) returned +1.5%, Europe (MSCI Europe Index) gained +1.5%, Japan rose +3.4%, while the rest of Asia was slightly weaker (MSCI Asia ex-Japan -1.6%).

Bennelong Kardinia Absolute Return Fund rose 1.60%, to take annualised return since inception to 11.86% p.a.

Pengana Absolute Return Asia Pacific Fund returned -0.56%, for an annualised return of 9.75%.

Totus Alpha Fund rose 9.36%, to take annualised returns since inception to 25.89% with standard deviation of 15.91%.

Pengana Global Small Companies Fund generated a positive return of 5.11% in May.

APN Asian REIT Fund returned +0.90%, outperforming the Bloomberg Asia REIT Index which returned 0.64%, by 0.26%  and taking annualised returns since inception to 17.09%.

FUND REVIEWS released this week: Meme Australian Share Fund; Jamieson Coote Bonds Active Fund; Optimal Australia Absolute Trust; Bennelong Long Short Equity Fund;

And on that note, have a great weekend.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.

World Bank cuts 2016 growth forecast  from 2.9% to 2.4%

Hedge Clippings sometimes wonders at those really smart people who are tasked with producing economic forecasts. Why can't they ever seem to get it right? OK, we accept that it's not an easy job, but a 50 basis point cut since their previous forecast issued in January suggests they need to take a look out of the window, or even take a walk in the street.

To make matters worse the overview on their website included the warning (if you didn't need it) that their "projections are subject to substantial downside risks, including additional growth disappointments in advanced economies or key emerging markets and rising policy and geopolitical uncertainties". That sounds to us like hedging their bets, with the likelihood that at some time in the next few months they will announce further (downward) adjustments. They'd better get a move on, because the year is almost half gone already, so the margin for error is getting slimmer by the day.

To be fair these are difficult times, and there are a significant number of risks out there. It seems that Janet Yellen and the US Fed have put off a rate rise in the immediate future, while in Germany of all places, that European powerhouse of industrial growth, yields have finally slipped into negative territory. 

And talking of false or wildly hopeful expectations, how either of Australia's two political parties expect the electorate to believe that the budget can be brought back into surplus within the next five years, or for that matter the next ten, without a major overhaul of both spending and taxation, neither of which are politically acceptable to a significant proportion of the population, never ceases to amaze us.

On a completely different and unrelated note and nothing to do with the World Bank, economic forecasts, or unrealistic politicians, Mohammed Ali sadly passed away last week-end. Among all the articles that were written was one by Peter FitzSimons which (probably correctly) blamed boxing for our heroes' condition, and ultimately his untimely end. However, Fitzy missed the point that without boxing it is unlikely that Cassius Clay would have ever emerged onto the world stage, and we would all have been worse off as a result.

So as a tribute to a real hero, a couple of quotes out of the thousands from the man who rightly claimed to be the "greatest" - in many senses of the word, in and out of the ring:

"Impossible is just a big word thrown around by small men who find it easier to live in the world they've been given, than to explore the power they have to change it. Impossible is not a fact. It's an opinion. Impossible is not a declaration. It's a dare. Impossible is potential. Impossible is temporary. Impossible is nothing."

And another:

"Don't count the days, make the days count."

RIP

PERFORMANCE NEWS

APN Asian AREIT Fund  rose 4.57% for the month of April, compared to the BBAREIT Index's return of 5.68%. Since inception, the Fund has an annualised return of 17.19% p.a.

Insync Global Titans Fund returned 0.7% in April, taking annualised return since inception in October 2009 to 9.2%.

Meme Australian Share Fund rose 5.43% for the month of May, to take latest 12 months return to 22.93%.

Cyan C3G Fund returned +5.70% in May 2016. Over two years since inception, the Fund has an annualised return of 35.07% p.a.

Jamieson Coote Bonds Active Fund rose 1.19%, against the Bloomberg Australian Government Bond Index which returned 1.37%.

The Paragon Fund rose 7.0% for the month of May to take annualised return over 3 years since inception to 22%.

Optimal Australia Absolute Trust returned 2.29% to take annualised return since inception in 2008 to 9.22% p.a; standard deviation of just 3.68%, and a Sharpe ratio of 1.53.

Bennelong Long Short Equity Fund rose 7.58% in May, outperforming the ASX 200 Accumulation Index by 4.49%, while taking 12-month performance to 31%, and annualised performance over 13 years to 18%.​

FUND REVIEWS released this week: APN Asian REIT Fund; Insync Global Titans Fund;  

And on that note, have a great weekend.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.

​Upcoming election outcomes - What would we know?

Had you asked 12 months ago if Donald Trump was going to be one of the runners in a two horse US presidential race, most people, including yours truly, but possibly not Trump himself, would have bet the house against such an outcome. Everything coming out of the US since then has backed that view, but here we are, so it just shows that Hedge Clippings knows about as much about US politics as anyone else.

Assuming the Republican party machine doesn't rain on his parade in the meantime, we're still not convinced that when voting day comes around in November the average American who can be bothered to turn up at the polls will actually elect him, but as above, what would we know?

Meanwhile in Great Britain, what would seem to be unthinkable not long ago, namely that they might abandon the opportunity to nip across the English Channel for the day to stock up on some cheap plonk (sorry, quality French wine), now looms as a distinct possibility.

Closer to home, if last October you'd asked there would have been an equally lopsided book on the question of who was going to win the next Australian Federal Election, due in just over a month's time. In fact, if you'd asked most punters who were the then leader of the opposition, they probably either wouldn't have known or couldn't have cared. If told, most would have responded "Wee Willie Who?" 

At the time newly appointed PM Malcolm Turnbull's approval rating was at an all-time record high of close to 70%. Once again, what would we know?

What went wrong? Watching Tasmanian Senator Jacqui Lambie, possibly not considered to be the sharpest brick in the load, on the ABC's Kitchen Cabinet with Annabel Crabb perhaps gave an accurate clue from one, who if nothing else, seems disarmingly honest*. When asked about Malcolm Turnbull's subsequent decline in popularity, she responded firstly that a combination of relief  at the change and unrealistic expectations might have been part of the problem, with the other being that he's been shackled by his predecessor's right wing cabal.

So with five months (and a bit) to go in the US before Americans vote to elect the most powerful (and potentially dangerous) politician in the world, less than four weeks to British voters possibly "BREXITING", and five weeks and one day until Australians decide their future, Who Knows? What is extraordinary is that any of the outcomes is in doubt.

*Jacqui Lambie also advised she'd happily vote to halve Tasmania's number of Senators from the current 12 to 6, even if it did cost her seat. Now that's unusually honest!

The ASX200 Accumulation Index returned +3.37% in April, with a range of fund returns as follows:

Supervised Global High Yield (previously Supervised High Yield Fund) rose 0.48% for the month of April, to bring annualised performance since inception to 9.35% p.a.

Pengana PanAgora Absolute Return Global Equities Fund returned -3.49% for the month of April. The Fund has a low systematic risk (beta) to the ASX200 and the MSCI World Indices of 0.07 and 0.08 respectively.

APN AREIT Fund rose 3.37% in April, outperforming the S&P/ASX300 Property Trust Accumulation Index's return of 2.76%, by 0.61%.

Signature Quantitative Fund returned -0.30% to take annualised return since inception to 7.26% p.a.

FUND REVIEWS released this week: Pengana Absolute Return Asia Pacific Fund; Bennelong Twenty20 Australian Equities Fund; Supervised Global Income Fund;

And on that note, have a great weekend.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.

Low inflation and low returns - Peter Costello weighs in.

For some time Hedge Clippings has been flagging that investors will need to lower their return expectations in the current low interest rate, low inflation environment.

Peter Costello, the architect of Australia's Future Fund, and now its chairman, made much the same call this week, warning that the fund's double digit returns of the past few years were unlikely to be repeated, and that the "inflation +5%" target will be a big ask in the current environment.

Given that Australia's inflation rate is negligible, and looking forward a few years is likely to be no more than 1 to 2 percent, this means investors are unlikely to achieve returns of 5% at best. With government bonds returning little more than 2%, and the local equity market seemingly up against a hard ceiling around the 5500 level, and many key areas of the property market looking soft, (which in turn will impact the banks) achieving the 10 to 15% returns many investors have become used to will not be easy.

To reinforce that unpleasant truth, in the 12 months to the end of April the ASX 200 accumulation index fell 4.93%, compared with an average of the active equity funds in AFM's database which gained 2% and providing an outperformance of 7%. 

73% of funds in AFM's database outperformed the ASX 200, although individual 12 month returns ranged widely from -35% through to +44%. Within those extremes smart and well informed investors still picked up the elusive 10 to 15% per annum return with limited risk by investing in the better managers.

While some may accuse Hedge Clippings of bias, the facts prove that actively managed and absolute return funds provide significant benefits provided investors have the ability to sort the wheat from the chaff.

If Peter Costello's right, and we believe he is, most investors in Australia's $1.8 trillion superannuation sector, plus those relying on the Future Fund's $117 billion, are going to have to tighten their belts over the next 3 to 5 years.

The ASX200 Accumulation Index returned+3.37% in April, with a range of fund returns as follows:

The Paragon Fund returned a +10.80% after fees for the month of April, outperforming the Index by 7.43%.

Alexander Credit Opportunities Fund increased 0.57% to take annualised return since inception to 17.18% p.a.

Cyan C3G Fund rose 7.90% in April 2016, outperforming the ASX 200 Accumulation Index by 4.53%.

Optimal Australia Absolute Trust returned -0.69% to take annualised return since inception to  9.00% p.a.

Bennelong Twenty20 Australian Equities Fund returned 2.31% for the month of April.

Jamieson Coote Bonds Active Fund rose 0.33%, outperforming the Bloomberg Australian Government Bond Index by 0.21%.

Bennelong Kardinia Absolute Return Fund returned 0.52% in April. Since inception, the Fund has an annualised performance of 11.79% p.a.

Totus Alpha Fund returned -1.37% in April to take the latest 12 months return to 20.66%. 

Pengana Absolute Return Asia Pacific Fund rose 1.32% for the month of April, compared to the HFR Event Driven Index, which returned 0.43%. 

NWQ Fiduciary Fund returned 0.27% bringing the net performance for the trailing 12 months to 6.25%.

Pengana Global Small Companies Fund returned 1.01% for the month of April.

Affluence Investment Fund returned 1.92%, to take annualised return since inception to 8.78% p.a.

FUND REVIEWS released this week: Meme Australian Share Fund; Bennelong Long Short Equity Fund; Bennelong Kardinia Absolute Return Fund; Optimal Australia Absolute Trust; Jamieson Coote Bonds Active Fund; 

And on that note, have a great weekend.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.

Sell in May and go away - at your peril!

We are never quite sure whether the above adage is simply a useful way to remind investors that markets quieten down over the northern summer, or a serious warning about potential market declines. In any event the rocky and volatile markets of the past 12 months, and the first quarter of 2016 in particular would certainly be encouraging many investors to hold fire from making serious investment decisions for the next few months.

While the worst of January and February's volatility would appear to be behind us, the rebound has not been kind to many fund managers when much of the bounce in some stocks has not been based on fundamentals. While there have only been a few funds report April numbers so far they are at least positive, alongside the ASX 200's accumulated return of 3.37%.

The big question facing most investors now is whether the rally of over 8% in March and April is sustainable, or whether it is merely a bounce from an oversold position based on oversold commodities, and overdone fear on China's outlook. They're still appear to be as many followers of the hard landing scenario as there are of the soft, and so many investors are left with the challenge of whether to hold their gains from the recent rally, or fold their cards and cash in their chips.

The past week has been a big one on a couple of fronts. The RBA cut interest rates by 0.25% just a few hours before Tuesday's federal budget to a historic low of 1.75%, a level not seen since the days of Capt Philip and the first Fleet (and doubtfully not even then). Admittedly this cut was driven more by exceptionally low (negative) inflation than low economic growth, but it now has the pundits wondering if there will be a further cut over the coming months.

Scott Morrison delivered his first budget which on the face of it seemed responsible, including changes to high-end superannuation entitlements, albeit that they were undeniably overly generous in the first place. However justified, making these changes retrospective would appear to be a dangerous precedent. That aside we are now expecting at any moment to officially be in election mode. Hence politics will not only dominate the airwaves, but are likely to dominate investor concerns and uncertainty for the next couple of months until July 2.

Overseas Donald Trump seems to have done what many thought was impossible just six or 12 months ago. Without being an expert on US politics, it would appear that winning the Republican Party nomination was one thing, getting enough people to vote him into the White House might be an altogether more difficult challenge given the multitude of voters who have been insulted or sidelined during the nomination process. The flow on effects of Trump's success so far are unknown, but are likely to be significant and damaging to the Republican Party, whether he makes it to the Oval Office or not.

Abraham Lincoln was quoted as saying that you can "fool some of the people all the time, or all of the people some of the time, but not all of the people all the time". We sincerely hope that is correct!

Meanwhile, the Australian share market returned+3.37% (ASX200 Accumulation Index) in April, assisted mostly by better commodity prices boosting major resource company shares.

Meme Australian Share Fund rose 8.60%, outperforming the ASX 200 Accumulation Index by 5.23%. Since inception, the Fund has an annualised return of 18.90% p.a.

Bennelong Long Short Equity Fund returned -2.30% for the month of April. The long term performance since inception, remains strong with annual returns of 17.51% p.a. over 14 years.

Clarity Multi Strategy Fund returned -8.82% for the month of March. Since inception, the Fund has achieved double-digit annualised returns of 23.43% p.a, which has been achieved with a volatility of 14.14% p.a.

Newgate Real Estate and Infrastructure Fund was flat (-0.06%) for the month of March to take annualised return since inception to 12.20% p.a.

FUND REVIEWS released this week: QATO Capital Market Neutral Long/Short Fund; Insync Global Titans Fund; Supervised High Yield Fund; 

And on that note, have a great week-end.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.

It's a rocky road, but unlikely to change soon.

Looking at the performance (-2.45%) of all funds through to the end of March they broadly matched the ASX 200 Accumulation Index (-2.75%) on a year-to-date basis. Averages of course cover a multitude of underlying performances, but 58% of all funds outperformed the ASX 200 Accumulation Index over the first three months of this year.

Over the previous 12 months however funds outperformed significantly, while just managing to keep their noses above water, returning a positive 0.87% against the ASX 200 Accumulation Index which fell 9.59%. Over the longer term 85% of funds in AFM's database outperformed the index, with just over 50% in positive territory. In fact using AFM's proprietary research analysis and taking 15 key risk and performance criteria into consideration, the ASX is performing amongst the bottom quintile of all Australian focused equity-based funds. So much for the benefits of ETF's.

But no wonder fund managers and investors have been struggling to make decent returns this year:

According to Richard Coppleson of Bell Financial Group, and reported in today's Financial Review, 50% of trading days in 2016 have seen the ASX move up or down by 1% or more. This in itself is not necessarily a problem, provided the up and down days were skewed to the upside. Unfortunately they are balanced 50-50 which means rather than having a flat line trend, the market has been whipsawing both the average investor, and a fair few fund managers as well.

For market neutral and long short managers being skewed to the downside would not be an issue either, but to have gone through the volatility that's been seen over the past four months, only to have the market pretty much back to where it started in January, makes life difficult.

But these are difficult times, both in Australia and globally, and Hedge Clippings' crystal ball is looking particularly murky. Locally the economy has yet to transition from the resources boom, and to be fair that wasn't going to happen overnight anyway. This has not been assisted by the politics of the last few years, and neither has it been helped by a global economy which is struggling in some areas to register a pulse, and where it is, struggling to overcome the combination of low inflation, low growth, and zero or negative interest rates.

China probably represents both the greatest threat and the greatest opportunity. The potential for there to be a major credit crisis in China would seem to be significant, but getting a real handle on the actual numbers is as difficult as ever.

Meanwhile politics both locally and abroad also represent further risks. Think Trump in the USA, and BREXIT in the UK and Europe, and that's before we consider our domestic situation ahead of the Federal budget next Tuesday, followed by a two-month election campaign with an outcome that is anything but certain. The prospect of "Wee Willie Shorten" for the next three years would certainly skew the negative market days to the downside.

On the positive political side the Prime Minister has announced the introduction of an Infrastructure Fund to be funded through infrastructure bonds. While we take no credit for the announcement, Hedge Clippings has long suggested that infrastructure bonds would be an ideal investment for superannuation funds, and further it should be either mandatory for a percentage of all superannuation inflows to have an allocation to them, or to tie taxation benefits to investments in long term Infrastructure Bonds.

With almost $2 trillion currently tied up for the long term in Australia's superannuation pool, and which is forecast to rise to $7 trillion by 2030, an allocation of 10 or even 20% to government infrastructure bonds would be significant. Maybe this is a rabbit to be pulled out of his hat on Tuesday evening by the Treasurer?

Meanwhile as markets, particularly in Australia, seem to continue to rally from the first quarter's sharp sell off, further March fund results came in as follows:

Pengana Global Small Companies Fund generated a return of 1.48% in March compared to a 0.76% return for the MSCI AC World SMID Cap Index.

NWQ Fiduciary Fund returned -1.48% in March bringing the net performance for the trailing 12 months to 6.07%.

Bennelong Twenty20 Australian Equities Fund rose 4.07% against the ASX 200 Accumulation Index's return of 4.73%.

Jamieson Coote Bonds Active Fund returned -0.30% in March. Since inception, the Fund has an annualised return of 5.47% p.a., achieved with relatively low volatility of 2.54%.

Totus Alpha Fund returned -6.15% for the month of March to take annualised return since inception to 24.72% p.a.

KIS Asia Long Short Fund returned a positive 2.39% for the month of March to take latest 24 months to 17.24%.

Alexander Credit Opportunities Fund rose 0.46% to take annualised return since inception to 17.31% p.a.

Affluence Investment Fund rose 1.20% in March to take annualised return since inception to 7.80% p.a.

Pengana PanAgora Absolute Return Global Equities Fund returned -1.41% for the month of March.

APN AREIT Fund returned +2.83% in March, outperforming the S&P/ASX300 Property Trust Accumulation Index's return of 2.50%, by 0.33%.

FUND REVIEWS released this week: Optimal Australia Absolute Trust; Bennelong Kardinia Absolute Return Fund; APN Asian REIT Fund; Pengana Absolute Return Asia Pacific Fund; Bennelong Twenty20 Australian Equities Fund; Totus Alpha Fund; 

And on that note, have a great week-end.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.

Bubble Bubble, Toil and Trouble.

Hedge Clippings is probably not the only party to be frustrated by what has broadly been portrayed as "debate" about the upcoming budget, or for that matter the overall political stand-off that now seems to be the norm in Australia.

With Parliament due to resume next week, and the budget now only a few weeks away, we hope things will become a little bit clearer. However what seems to be abundantly clear is that while everyone understands that as a nation we are living beyond our means, the reality is that the only way to fix it is to either reduce expenditure, or increase revenue.

It really doesn't matter whether this is applied at the household, corporate or government level, the rules remain the same. Unfortunately at government level reducing expenditure translates into either reduced welfare, or reduced services such as health and education. Meanwhile increasing revenue translates into higher taxation, or a reduction of various tax breaks.

Under the Abraham Lincoln political rule that you can "please some of the people all of the time, or all of the people some of the time, but you can't please all of the people all of the time," whatever is handed down in this year's budget is going to disappoint. Everyone wants more, while no one wants to give up what they've already got.

Added to that is the problem that the Turnbull government, which kicked off with so much optimism, seems to have been backed into a corner of having to rule out most budget options before they started. We guess the PM will be ruing the day that he didn't take over and call an early (read "immediate") election last November, and use the following three years to get on with it. We certainly are.

Finally this week the IMF downgraded forecasts for world economic growth, while interestingly also being a bit more optimistic about China's outlook. We take this news with a pinch of salt, as the IMF's track record for economic fortune telling hasn't been too good over the years. Whether it's the economic models they are using, or the possibility that they are cocooned in ivory towers, it's a long time (if ever) since the IMF predicted world economic growth accurately, instead consistently having to downgrade their previous forecasts as they catch up to the real world economy.

Meanwhile as markets, particullary in Australia, seem to continue to see-saw, some March fund results came in as follows:

Meme Australian Share Fund returned a positive 3.38% to take their latest 12 months return to 9.20%.

Pengana Absolute Return Asia Pacific Fund finished up +1.68% for the month, compared to the HFR Event Driven Index which rose +2.6%.

The Paragon Fund rose an impressive 7.40% for the month to take annualised return since inception to 17.13% p.a.

Optimal Australia Absolute Trust recorded a positive 2.30% to take prior 12 months return to 12.59%.

Bennelong Kardinia Absolute Return Fund returned +0.30% to take annual returns since inception to 11.83% p.a.

APN Asian REIT Fund returned -2.70%, compared to the BBAREIT Index's return of -4.29%, to give an outperformance of 1.59%.

Cyan C3G Fund fell 3.38% to take latest 12 months return to 27.86%, after posting a gain of 48% in calendar 2015.

Bennelong Long Short Equity Fund returned -6.73% to take 12 month performance to 22.71% with annual returns since inception of 17.81% p.a.

Supervised High Yield Fund returned a positive 0.20% for the month of February, to bring annualised performance since inception to 9.39% p.a., Standard Deviation of 2.1% and a Sharpe Ratio of 2.86.

FUND REVIEWS released this week: Meme Australian Share Fund; Morphic Global Opporunities Fund; Bennelong Long Short Equity Fund; Insync Global Titans Fund; QATO Capital Market Neutral Long/Short; Supervised High Yield Fund;

And on that note, have a great week-end.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.

"Beta" Rally does some damage, and so long Ronnie Corbett. RIP.

While no fund performances for March are available as yet, anecdotal evidence suggests it has been a pretty tough month for many active managers courtesy of a "beta" rally, particulary in stocks of pretty dubious quality, or those that had previously been oversold. This can make it difficult for non index type funds, such as hedge or those seeking absolute returns, as they normally have good reason to either avoid, or short stocks with poor management or a poor outlook, only to see a significant bounce in the price against all apparent logic or fundamentals.

These situations work themselves out over time as the cream always floats to the top, and the dregs sink to the bottom. However, it can take a while for the turbulence to end, and the froth to subside before the end product declares itself and is worth consuming. In this environment investors are best either sitting tight in funds which have a sound long term track record and good risk adjusted performance, or sitting on the sidelines, as many SMSF's have done over the past few years.

The problem with sitting on the sidelines in the current interest rate environment is evident, and sooner or later investors will have to lower their targeted returns from the previously acheivable double digits, to a more realistic single digit number. And if cash is only hovering around 2-3% (and unlikely to move higher in the foreseeable future) then a return of 2 to 3 times that, provided it doesn't come with excess risk, is likley to be pretty attractive.

On a different note we have uploaded an excellent piece to our library by Hugh Dive of Aurora Funds Management on the subject of short selling. Clear and concise the article takes you through the history, mechanics, logic and rationale for short selling in a brief 3 pages which won't send you to sleep or have you reaching for a glass of something.

Against a backdrop of further volatility in March the ASX200 rose 4.17% for the month to halve the YTD losses to 4.02%. Meanwhile:

APN AREIT Fund rose 3.13%, outperforming the S&P/ASX300 Porperty Trust Accumulation Index's return of 2.81%, by 0.32%.

Jamieson Coote Bonds Active Fund rose 1.08% to take annualised performance since inception to 6.10% p.a., achieved with low volatility of 2.53%.

NWQ Fiduciary Fund fell 2.53% bringing the net performance for the trailing 12 months to 9.27%.

The Bennelong Twenty20 Australian Equities Fund returned -2.67% against the ASX 200 Accumulation Index which returned -1.76%.

Affluence Investment Fund returned -0.20% against the Australian equities market return of -1.76%, to give an outperformance of 1.56%.

Pengana Absolute Return Asia Pacific Fund rose 1.10%, compared to FTSE All World Asia Pacific Index which fell 2.05%.

Newgate Real Estate and Infrastructure Fund delivered a negative 0.70% outperforming the ASX200 Accumulation Index, by 1.06%.

Insync Global Titans Fund returned -1.80%, compared to the MSCI All Country World ex-Australia Net Total Return Index in $A, which returned -1.6%.

Pengana PanAgora Absolute Return Global Equities Fund returned -1.62% for the month of February. The Fund has low systematic risk (beta) to the ASX200 and the MSCI World Indices of 0.10.

FUND REVIEWS released this week: Bennelong Kardinia Absolute Return Fund; Meme Australian Share Fund; APN Asian REIT Fund; Totus Alpha Fund; Pengana Absolute Return Asia Pacific Fund; Bennelong Twenty20 Australian Equities Fund

We have not been publishing our usual "and now for something completely different" for some time, partly due to the time it took to find original, and hopefully funny, or original content. However the sad passing of Ronnie Corbett overnight, the "little" half (or should that be one third) but the remaining one of the Two Ronnies should have provided plenty of material.

Sadly the choice was so great it was difficult to choose, but here's a selection put forward by the Independent.  Meanwhile I couldn't find my own favourite, although I can't recall which of the two Ronnies delivered it, dead pan as only they could:

"And now some late news in from Sydney, Australia where a woman has been taken to hospital after being bitten on the funnel by a finger-web spider."

And on that note, have a great week-end.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.