NEWS
26 Dec 2017 - Fund Review: Bennelong Kardinia Absolute Return Fund November 2017
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 10.84% p.a. with a volatility of 7.00%, compared to the ASX200 Accumulation's return of 5.69% p.a. with a volatility of 13.62%.
- 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.
AFM Fund Review - November 2017 (pdf format)
25 Dec 2017 - Performance Report: Insync Global Titans Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | Insync employs four simple screens to narrow the universe of over 40,000 listed companies globally to a focus group of high quality companies that it believes have the potential to consistently grow their profits and dividends. These screens are size of the company, balance sheet performance, valuation and dividend quality. Companies that pass this due diligence process are then valued using dividend discount models, free cash flow yield and proprietary implied growth and expected return models. The end result is a high conviction portfolio of typically 15-30 stocks. The principal investments will be in shares of companies listed on international stock exchanges (including the US, Europe and Asia). The Fund may also hold cash, derivatives (for example futures, options and swaps), currency contracts, American Depository Receipts and Global Depository Receipts. The Fund may also invest in various types of international pooled investment vehicles. At times, Insync may consider holding higher levels of cash if valuations are full and it is difficult to find attractive investment opportunities. When Insync believes markets to be overvalued, it may hold part of its resources in cash, or use derivatives as a way of reducing its equity exposure. Insync may use options, futures and other derivatives to reduce risk or gain exposure to underlying physical investments. The Fund may purchase put options on market indices or specific stocks to hedge against losses caused by declines in the prices of stocks in its portfolio. |
| Manager Comments | Performance in November was driven by positive contributions from Zoetis, PayPal, Heineken, Disney and Visa. The main negative contributors were Oracle, Cognizant Tech Solutions, eBay, BAT and Priceline. The Fund continues to have no foreign currency hedging in place as Insync consider the main risks to the Australian dollar to be on the downside. Over 50% of the Fund is currently protected using Insync's put protection strategy. Insync's latest report discusses the acceleration of 'cord cutting', the act of cancelling one's pay-TV subscription in favour of internet-delivered video options, and the impact on Fox's business. However, Insync noted nearly 40% of Fox's revenues are generated outside the US, Star India being one of Fox's international businesses in which Insync see significant potential. Insync also noted the recent negative trend in cord cutting has created an opportunity to invest at depressed valuations. They see an asymmetric risk profile with limited downside risks but significant upside opportunity. |
| More Information |
25 Dec 2017 - Bennelong Twenty20 Australian Equities Fund November 2017
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.
AFM Fund Review - November 2017 (pdf format)
22 Dec 2017 - Hedge Clippings, 22 November, 2017
With only three more sleeps to go, Hedge Clippings can almost hear Santa's sleigh as 2017 draws to a close. Looking back over the year it was one of persistent and declining low volatility from an equity market perspective as low interest rates, low inflation, low wages growth, and steadily improving employment numbers underwrote business conditions and confidence, and thus market returns.
Conversely, Australian consumer confidence failed to follow suit. Low interest rates continued to fuel a surging real estate market - some would call it a boom - and massive household debt, but with no to low wages growth. As a result consumers aren't sharing the joy.
In spite of dire predictions from some quarters at the beginning of the year that investors would have to accept mid to low single digit returns in this environment it looks as if that may not be the case. To the end of November the ASX200 Accumulation Index has risen 9.81%, although less than half that of the S&P500's total return of 20.49%. Volatility, as measured by the VIX in Chicago spent most the past 6 months below 10, with a 52 week low of just 8.56. Not even three tightening's from the US FED, tensions on the Korean peninsula, or chaos in the Canberra sandpit managed to disrupt the market's party.
So where to from here in 2018? It seems dangerous to say it, let alone go to print, but probably more of the same. Improving business conditions in the USA will enable the FED's gradual tightening policy to continue. In Australia low inflation, low wages growth will see rates on hold probably until at least the 4th quarter. In that environment, all things being equal, markets should remain stable, or at least continue their current course.
The danger is that all things rarely remain equal. While it is difficult to predict what might occur to upset the apple cart, the risk remains. Our best guess is something political, be it global or local. So while the weight of inflows remains firmly in the passive funds sector, so does the risk.
And why not? Active equity funds in AFM's database have outperformed the ASX200 YTD to November, returning 11.59% compared to the market's 9.81%. Of those almost 20% have doubled the return of the ASX200. Most importantly, with a couple of exceptions, they have done so with lower volatility than that of the market, even in the current "low vol" environment.
22 Dec 2017 - Performance Report: KIS Asia Long Short Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| 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 | Top contributors in November included Cobalt One Ltd (63bp contribution to performance), which experienced strong gains after its merger with First Cobalt Corporation. KIS Capital remain positive on this company and the industry and remain long. KIS noted being short index cost the Fund -34bp, however, this was offset by gains on long positions in a variety of different names with no one single name contributing more than 25bp. The portfolio remains diversified with more than 50 different lines as at the end of the month. In their latest report KIS discuss concerning signs they see about the state of markets, however, they feel the Fund is broadly hedged against them. They noted that, despite equity markets continuing to make fresh highs, there are moves occurring within equity markets and elsewhere that can often be a precursor to a significant broad market downturn. |
| More Information |
21 Dec 2017 - Performance Report: Quay Global Real Estate Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| 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 | During the month the Manager exited Hansteen Holdings, a company they'd held since inception in July 2014. The company delivered the Fund a total return of +55% over the investment period, surpassing the Fund's objective. Performance was further enhanced after the recently acquired position in GGP Inc received an offer from entities associated with its largest shareholder, Brookfield. GGP Inc owns and manages approximately 120 mall in the US. The Manager noted the GGP offer is in its early days and that there is no certainty a transaction will eventuate, therefore they are not adding to their position at this stage. At month end, the Fund held slightly more cash than normal due to its exit of Hansteen Holdings. The Manager expects to deploy this capital soon, as they continue to believe attractive investment opportunities exist across the global real estate landscape. |
| More Information |
20 Dec 2017 - Performance Report: ARCO Absolute Trust (formerly Optimal)
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | The Fund's bias is likely to be net long under normal market conditions, with the core strategy being to construct a portfolio of listed equity securities priced at levels that do not adequately reflect their underlying value. The Fund will seek to boost returns and limit potential market downside by selective short selling of individual stocks which are priced at levels that are viewed as materially above their underlying value. The Fund will also use certain trading strategies both within its core portfolio (through rebalancing stock weights and overall market exposure in response to price movements) and in certain other situations (typically of a shorter-duration and/or opportunistic nature) with the objective of further increasing returns. *Formerly the Optimal Australia Absolute Trust |
| Manager Comments | The Fund's long positions drove performance in November, most notably from a number of long-held positions in JHG, WOW, CYB, AHG and ORE. Limiting the Fund's long exposure in banks to CBA, Macquarie and CYB was also a positive contributor, as was the broader short position in the sector with the Royal Commission announcement into banks. ARCO exited Pilbara Minerals and trimmed Orocobre, although they remain interested in EV and energy storage. Lynas Corporation was added to the portfolio during the month. The Fund exited its investment in FXJ and the Fund continues to be active in TLS, where ARCO believe a solid long investment case is emerging. The Fund's aggregate short positions detracted from performance, ARCO expect these positions to continue to protect investor capital in a market they believe is increasingly overvalued. Into 2018, ARCO believe the 'lower for longer' monetary policy of central banks will continue to be unwound and that the economic fundamentals of companies will play a greater role in their stock price valuations. ARCO noted Corporate Australia will continue to benefit from low domestic rates which should fuel their growth plans, though consumer weakness (indebtedness and sentiment) and tightening bank credit will be a challenge to broad market earnings. They believe volatility in the Australian market will likely rise. |
| More Information |
19 Dec 2017 - Performance Report: Bennelong Twenty20 Australian Equities Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | The Fund is managed as one portfolio but comprises and combines two separately managed exposures: 1. An investment in the top 20 stocks of the markets, which the Fund achieves by taking an indexed position in the S&P/ASX 20 Index; and 2. An investment in the stocks beyond the S&P/ASX 20 Index. This exposure is managed on an active basis using a fundamental core approach. The Fund may also invest in securities expected to be listed on the ASX, securities listed or expected to be listed on other exchanges where such securities relate to ASX-listed securities.Derivative instruments may be used to replicate underlying positions and hedge market and company specific risks. The companies within the portfolio are primarily selected from, but not limited to, the S&P/ASX 300 Accumulation Index. The Fund typically holds between 40-55 stocks and thus is considered to be highly concentrated. This means that investors should expect to see high short-term volatility. The Fund seeks to achieve growth over the long-term, therefore the minimum suggested investment timeframe is 5 years. |
| Manager Comments | At the end of November, weightings were increased in the Consumer Staples, Health Care, Energy and REIT's sectors and were decreased in the Discretionary, Industrials, Telco's, Financials and Materials sectors. The Fund combines a passive investment in the S&P/ASX20 Index and an actively managed investment in Australian listed stocks outside this index. The passive position is achieved by investing individually in each of the S&P/ASX20 Index's individual stocks with approximately the same weightings they represent in the S&P/ASX300. Currently this weight is approximately 60% of the Fund's portfolio. The active position in ex-20 stocks has the goal of allowing the Fund to outperform the broader market. |
| More Information |
18 Dec 2017 - Performance Report: NWQ Fiduciary Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | The Fund aims to produce returns, after management fees and expenses of between 8% to 11% p.a. over rolling five-year periods. Furthermore, the Fund aims to achieve these returns with volatility that is a fraction of the Australian equity market, in order to smooth returns for investors. |
| Manager Comments | There were solid contributions to the overall Fund performance from both the Alpha and Beta managers. The Beta managers benefited from the continued strength of the broader equity market, while the Alpha managers benefited from higher levels of dispersion both within and across sectors. Overall, seven of the eleven underlying managers comprising the Fund delivered positive returns. The Fund is a diversified multi manager portfolio comprising 11 managers in total, 6 Alpha managers and 5 Beta managers. The objective of the Fund is to produce attractive positive returns irrespective of market direction. The Fund places emphasis on managers who demonstrate a rigorous and repeatable investment process that has delivered a strong track record. |
| More Information |
15 Dec 2017 - Hedge Clippings, Friday 15 December, 2017.
Do Lowy and Murdoch know more than the rest of us? Undoubtedly!
Last week Hedge Clippings discussed the potential for the $8 billion in bank dividends due in December being fed back to the market as a driver of a Santa Rally, although given the current negative publicity banks are receiving, it might not all necessarily find its way back in to bank stocks themselves. This week came news which might herald a similar injection (or more) from Westfield shareholders, although a fair proportion of that might be re-allocated to the property sector.
Not content with the Lowy's taking a profit after over 50 years getting to, and at the top of their game, Rupert Murdoch's announcement overnight signifies there could be a move by two of Australia's most successful businessmen that there's something afoot. Could this be the start of the smartest money in town taking a "little" off the table while asset prices are high, and the market is still buoyant, or is it just a co-incidence?
Hedge Clippings suggests possibly a little bit of each, along with a number of other reasons. Apart from both being incredibly successful on the global stage, neither are getting any younger, although there's no suggestion Murdoch is stepping back from the fray. Both have built and are/were at the helm of businesses which having benefitted from massive change over their tenure, are facing even greater pressure from a change in technology going forward. With nothing left to prove, why not cash in some chips while there are willing buyers?
In Lowy's case he also referenced the increasing burden of reporting and compliance in an increasingly regulated world which, while it might be necessary, has become such a feature of the corporate, and particularly listed corporate, world. Anecdotal evidence suggests that in many cases the risk and compliance role of a director of a listed company, particularly in financial services or any other heavily regulated sector, outweighs time and focus on strategy and direction. Given the CBA's current woes this may seem implausible, but that doesn't allow for incompetence.
For those readers in private financial services businesses we suspect the emphasis on the compliance and reporting requirements are also an equal or increasing burden, with few technological solutions to the problem. In fact advancing technology may simply be increasing the compliance burden.
Meanwhile, the US FED raised rates 0.25% as expected, even if the vote was not unanimous, and with expectations of three more to come in 2018, the markets were unsurprised. Well that depends if it was the equity market - happy that the economic signals continue to gather momentum without undue inflation - or the bond market, unhappy as yields rise. The question is when does the switch in asset allocation out of equities start? Probably not for a while yet, but the tipping point will come at some point.
Labour markets and employment are strong both at home and the USA, but not so wages growth. That tipping point will no doubt change when labour markets go from being strong to tight, a scenario which will be delayed somewhat by advancing technology, but which the corporate world will not be looking forward to.
