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 10.67% p.a. with a volatility of 7.01%, compared to the ASX200 Accumulation's return of 5.26% p.a. with a volatility of 13.68%.

• 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 - September 2017 (pdf format)

Anniversary, yes. Celebration? No!

It is understandable that those who survived the October '87 crash would want to remember its 30^th anniversary, less understandable that many, if any, might be celebrating the event itself. Remembering the past is a useful lesson when trying to avoid making the same mistakes again, although there is no doubt that it is only a matter of time before the next major market event occurs.

October '87 was the most significant market shock since the crash of 1929, but there have been a series of market shocks since, all of which were preceded, to a greater or lesser extent, by irrational buying, thereby creating the necessary asset price bubble before the inevitable pop. While the details of each event differs, the underlying causes do not: Asset pricing ceasing to reflect reality.

Looking at current Australian equity prices it is difficult to argue that the market is in bubble territory, even if valuations in certain sectors are certainly stretched on a historical basis. While the US market has certainly steamed ahead by comparison, a market pullback of 25 to 50% would seem unlikely based purely on stretched valuations. If anything is going to upset this market, (leaving aside Trump or North Korea) one would assume it is going to be driven by excessive debt, a tightening of credit, or higher interest rates, be that in the US, Australia or China.

Having said that, while it seems certain that the next move in interest rates will be up, it is difficult to see rates moving so sharply that they would create an equity market crash. However, with rates having been so low for so long, even a small (say 2 to 3%) increase could magnify the relative effect on a number of asset classes, particularly Australian residential property, and the banking sector as a result.

This is what concerns the RBA, but the difficulty would seem to be how to resolve the dilemma.  As usual it will be those who are over-geared who will pay a price and learn the hard way.