Markets are once again focusing on the potential for a rate rise after Janet Yellen's comments flagging a US tightening later in the year, with 12 out of 16 of the Fed's members expecting a rise by December. However it should be remembered that rate rises have been on the cards for some years now, but each time the expectations have not been met with actions, with markets, hooked on QE, unable to accept the effects of withdrawal. This time it may be a little different as there does seem to be a gradual robustness in the US economy - with the accent on gradual, and robust being a relative term.

Coupled with those comments from the US, the Reserve Bank governor also came out with the seemingly obvious statement that interest rates in Australia were unlikely to fall from here, while also issuing a caveat that rate rises when (and it is when, not if) they occur are going to bite hard on those who have extended themselves to borrow for Australia's housing market.

Meanwhile Australian equity markets continue to go nowhere, which can't be pleasing the passive index following funds - or their investors. YTD in 2017 to the end of August the ASX200 has risen just 3.88% on an accumulation basis, compared with the S&P500 which is up around 12%. Actively managed equity funds have fared slightly better on average, up 4.98% year-to-date to the end of August, although as we always point out, averages can cover a multitude of individual performances, both good and bad. Whilst almost exactly 50% of funds in AFM's database have outperformed the ASX200 (and therefore by definition 50% have underperformed) almost 25% have posted year-to-date performances of 10% or more, with the best performing fund up 30% year-to-date.

Finally a matter closer to home: Today's report on CNBC that fine wine has provided the best luxury asset price growth (+ 25%) over the past 12 months. In the same report jewellery has been a poor investment by comparison, only rising 4%, while coloured diamonds (which luckily she has never quite understood the attraction of) have not appreciated at all. Possibly connected with the increase in wine prices was the statistic that Chinese ceramics had fallen by 12% over the past 12 months.

Hedge Clippings is sad to admit that fine and collectible wines do not feature in the domestic cellar as a result of impatience, and rarely on the wine list of any establishment we visit as a result of the disparity between the budget and the bill. However we will be happy to avoid future purchases of jewellery and coloured diamonds on the basis that they're no better as an investment than the ASX200!

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 10.69% p.a. with a volatility of 7.04%, compared to the ASX200 Accumulation's return of 5.30% p.a. with a volatility of 13.72%.

• 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 2017 (pdf format)