NEWS
17 Oct 2017 - Bennelong Twenty20 Australian Equities Fund September 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.
13 Oct 2017 - Hedge Clippings, 13 October, 2017
"Same old, same old" vs. "In with the new…."
Over the past 12 months the top 20 ASX stocks - which make up 55% of the market cap of the ASX200 - have risen a paltry 3.45%. The ASX200 index itself has not surprisingly fared little better, rising 4.52%. Dominated as it is by the big four banks and BHP, and now to a lesser degree by Telstra, (the market cap of which has fallen by almost one third over the past 12 months), it is no wonder the Australian market is locked into a tight trading range.
Compared with the S&P500, which has risen 19% over the past 12 months, the local market has been a great disappointment. One of the great differences is that the US market is now dominated by new economy growth stocks, or the so called FANG's, namely Facebook, Apple, Netflix and Google, which have risen 33%, 33%, 97% and 24% respectively over the past year. Not only are these new economy companies, they're new businesses and, with the possible exception of Apple, had hardly been heard of by the average investor 10, and certainly not 20 years ago.
Australia's banks, plus Telstra, are driven and supported by dividend yield - or not in the case of Telstra - which results in the ASX200 having a total return over 12 months more than double that of its simple return based on price. Meanwhile the FANG's reinvest their profits in growing their global and industry domination.
The bottom line would seem to be that any upward driving force for the local market as a whole is limited accordingly. The banks are not only under pressure from Canberra, but their upside would seem to be constrained by a housing market that has been driven by easy credit and offshore property buying. Judging from today's Financial Stability Review published today by the RBA, the outlook for the banks at best is as good as it gets, and faces significant risks, even if the RBA did note the sector was well capitalised. And if the Treasurer is overseas spruiking that our banks are as safe as houses, you can bet your bottom dollar it is because he's not preaching to the converted.
So where do investors look for attractive returns, assuming index managers will be locked into market returns albeit with low fees - although as Hamish Douglass from Magellan points out in today's AFR, there are many active managers "dressed up in drag" charging plenty more while still hugging the index.
The answer surely lies in active management, be it a concentrated long only portfolio, probably outside the ASX100, or market neutral or long/short. Alternatively funds investing offshore, be it in Asia or Globally. A quick scan of AFM's database of top performing funds demonstrates the benefit of either approach.
12 Oct 2017 - Performance Report: Bennelong Long Short Equity Fund
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Fund Overview | In a typical environment the Fund will hold around 70 stocks comprising 35 pairs. Each pair contains one long and one short position each of which will have been thoroughly researched and are selected from the same market sector. Whilst in an ideal environment each stock's position will make a positive return, it is the relative performance of the pair that is important. As a result the Fund can make positive returns when each stock moves in the same direction provided the long position outperforms the short one in relative terms. However, if neither side of the trade is profitable, strict controls are required to ensure losses are limited. The Fund uses no derivatives and has no currency exposure. The Fund has no hard stop loss limits, instead relying on the small average position size per stock (1.5%) and per pair (3%) to limit exposure. Where practical pairs are always held within the same sector to limit cross sector risk, and positions can be held for months or years. The Bennelong Market Neutral Fund, with same strategy and liquidity is available for retail investors as a Listed Investment Company (LIC) on the ASX. |
Manager Comments | The long portfolio generated a positive return in a negative month for equities, however, the short portfolio was the key driver, contributing three quarters of the Fund's return. Top performing long/short pairs included long Xero (XRO)/short MYOB (MYO), long BlueScope Steel (BSL)/short Sims Metal (SGM) and long Qantas Airways (QAN)/short Flight Centre (FLT). Amongst the Fund's losing pairs, only one was significant - long James Hardie (JHX)/short CSR (CSR). Bennelong continue to see equities as offering less attractive returns in the future than in recent years. They believe that, while earnings fundamentals remain sound, the graduated reduction in monetary policy stimulus will weigh on future returns. Bennelong note that the S&P 500 P/E ratio, currently at 18x, indicates that based on historical S&P 500 P/E data future returns will likely be zero or negative. |
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9 Oct 2017 - Fund Review: Optimal Australia Absolute Trust September 2017
OPTIMAL AUSTRALIA ABSOLUTE TRUST
AFM have released the most recently updated Fund Review on the Optimal Australia Absolute Trust.
We would like to highlight the following aspects of the Fund;
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ARCO Investment Management is a specialist Australian equity investment manager and the Fund has a long/short equity strategy typically with a low but variable net market exposure comprising 40 to 65 stocks broadly selected from within the ASX200.
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The investment team comprising George Colman, Peter Whiting, and Stephen Nicholls bring 100 years combined experience in equity markets.
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The Fund has an annualised return since inception of +8.25%. The Fund's approach to risk is shown by the Sharpe ratio of 1.34 (Index 0.26), Sortino ratio of 2.82 (Index 0.26), both of which are well above the ASX 200 Accumulation Index and has recorded over 79% positive months.
For further details on the Fund, please do not hesitate to contact us.
6 Oct 2017 - Fund Review: Bennelong Long Short Equity Fund September 2017
BENNELONG LONG SHORT EQUITY FUND
Attached is our most recently updated Fund Review on the Bennelong Long Short Equity Fund.
- The Fund is a research driven, market and sector neutral, "pairs" trading strategy investing primarily in large large-caps from the ASX/S&P100 Index, with over fourteen-year track record and annualised returns of 16.27% p.a.
- The consistent returns across the investment history indicate the Fund's ability to provide positive returns in volatile and negative markets and significantly outperform the broader market. The Fund's Sharpe Ratio and Sortino Ratio are 0.98 and 1.60 respectively.
For further details on the Fund, please do not hesitate to contact us.
5 Oct 2017 - Performance Report: Paragon Australian Long Short Fund
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Fund Overview | Paragon's unique investment style, comprising thematic led idea generation followed with an in depth research effort, results in a concentrated portfolio of high conviction stocks. Conviction in bottom up analysis drives the investment case and ultimate position sizing: * Both quantitative analysis - probability weighted high/low/base case valuations - and qualitative analysis - company meetings, assessing management, the business model, balance sheet strength and likely direction of returns - collectively form Paragon's overall view for each investment case. * Paragon will then allocate weighting to each investment opportunity based on a risk/reward profile, capped to defined investment parameters by market cap, which are continually monitored as part of Paragon's overall risk management framework. The objective of the Paragon Fund is to produce absolute returns in excess of 10% p.a. over a 3-5 year time horizon with a low correlation to the Australian equities market. |
Manager Comments | Performance for September was driven by several positions from the Fund's Electric Vehicle thematic, New Century Zinc and Lend Lease, and short positions in Newcrest, Telstra, Select Harvest and Perpetual. At the end of the month the Fund had 36 long and 14 short positions. Paragon noted that the Fund's Electric Vehicle (EV) thematic has been its best contributor to date and, in their view, is a theme with significant growth potential. The latest report details global sentiment surrounding the transition from internal combustion engines to EV and, consequently, several automobile companies' significant investments in Lithium and Cobalt. While Paragon expects Lithium and Cobalt to perform strongly going forward, they have also forecast bull markets in Copper, Graphite/Graphene and Nickel. Paragon believes the Fund is well positioned in these sectors. |
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5 Oct 2017 - Performance Report: Bennelong Australian Equities Fund
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Fund Overview | The Bennelong Australian Equities Fund seeks quality investment opportunities which are under-appreciated and have the potential to deliver positive earnings. The investment process combines bottom-up fundamental analysis with proprietary investment tools that are used to build and maintain high quality portfolios that are risk aware. The investment team manages an extensive company/industry contact program which helps identify and verify various investment opportunities. The companies within the portfolio are primarily selected from, but not limited to, the S&P/ASX 300 Index. The Fund may invest in securities listed on other exchanges where such securities relate to the ASX-listed securities. The Fund typically holds between 25-60 stocks with a maximum net targeted position of an individual stock of 6%. |
Manager Comments | Between the end of July and the end of August, the Fund has increased its weightings in the Industrials, REIT's, Consumer Staples and Materials sectors whilst decreasing its weightings in the Discretionary, Health Care, Utilities and Financials sectors. |
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4 Oct 2017 - Performance Report: Quay Global Real Estate Fund
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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 | The biggest contributors for the month were Store Capital (US) and CyrusOne (US), while Scentre Group (Aus) and Safestore (UK) detracted from performance. Geographically, Hong Kong and Germany were the best performers while Japan and the US lagged. The portfolio remained broadly unchanged during the month. The Manager noted that the local currency has acted as a significant headwind for AUD reported returns over the past two years. On a constant currency basis, total annualised returns for the Fund have been +9.8%, with currency deducting almost 4% per annum. The Manager believes that, over time, currency has a diminished impact on total returns due to their 'mean-reverting' nature. |
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4 Oct 2017 - Performance Report: Insync Global Titans Fund
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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 | Positive performers include PayPal, Visa, Microsoft, Diageo and Unilever. The main negative contributors were Stryker Corp, Reckitt Benckiser, Medtronic, Walt Disney Co and Priceline.com Inc. The Fund's only outright sell during the month was Nestle based on valuation, the Fund has held the stock since inception. New buys during the month include Stryker and Accenture, Insync believes both are well positioned to benefit from growth in their respective sectors. 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. |
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3 Oct 2017 - Fund Review: Insync Global Titans Fund August 2017
INSYNC GLOBAL TITANS FUND
Attached is our most recently updated Fund Review on the Insync Global Titans Fund.
We would like to highlight the following:
- The Global Titans Fund invests in a concentrated portfolio of 15-30 stocks, targeting exceptional, large cap global companies with a strong focus on dividend growth and downside protection.
- Portfolio selection is driven by a core strategy of investing in companies with sustainable growth in dividends, high returns on capital, positive free cash flows and strong balance sheets.
- Emphasis on limiting downside risk is through extensive company research, the ability to hold cash and long protective index put options.
For further details on the Fund, please do not hesitate to contact us.