​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.

SUPERVISED GLOBAL INCOME FUND

Attached is AFM's updated Fund Review on the Supervised Global Income Fund (SGIF).

We would like to highlight the following aspects of the Fund:

• The Supervised Global Income Fund (previously Supervised High Yield Fund) has a 6-year track record investing in fixed interest investments. The Investment strategy aims to deliver returns with zero correlation to equity markets by investing in debt securities with minimal default probability and offering a premium return above the risk-free rate.
• The Fund is managed by Philip Carden whose experience in debt and capital markets spans over 33 years, including time with JB Were's Capel Court Securities and Macquarie Bank, where he was the Executive Director responsible for the Debt Markets Division.
• SHYF is an Alternative Income fund which invests in Global and Australian debt markets, with all foreign currency receivables hedged back to Australian dollars.
• The Fund utilises a top-down analysis of the economic environment and market to screen and identifies debt market opportunities which it believes offer low risk with high yield. The next stage is the development of a risk matrix and investment strategy, following which detailed research is undertaken on specific investment opportunities which meet the pre-defined criteria established in the investment strategy.
• Prior to approving an investment for the Fund, each potential investment is subject to two stress tests. The first of these is of credit and default risk, in which the investment is stress-tested to ensure that in a worst case economic environment it can repay 100% of its principal and interest obligations case scenario for the asset by examining the highest margin over the risk rate that the investment has previously experienced in a crisis situation. Any decline in value under the stress test that exceeds 10% of the Fund's value is avoided The second test examines market risk.  In this case, Carden looks at the worst case scenario for the asset by examining the highest margin over the risk rate that the investment has previously experienced in a crisis situation.  Any decline in value under the stress test that exceeds 10% of the Fund's value is avoided.

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - April 2016 (pdf format)

BENNELONG TWENTY20 AUSTRALIAN EQUITIES FUND

Attached is our most recently updated  Fund Review on the Bennelong Twenty20 Australian Equities Fund.

• The Bennelong Twenty20 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.

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - April 2016 (pdf format)

PENGANA ABSOLUTE RETURN ASIA PACIFIC FUND

Attached is our most recently updated Fund Review on the Pengana Absolute Return Asia Pacific Fund.

• The Pengana Absolute Return Asia Pacific Fund ("PARAP") was established in 2008 by portfolio managers Antonio Meroni and Vikas Kumra. The Fund is a feeder fund into a Cayman Islands AUD share class fund.
• The Fund invests both long and short in Asia Pacific equities, including in Australian and New Zealand, after a stock specific "event" has either occurred or been announced and the portfolio aims to be uncorrelated to the underlying equity markets. A combination of the Manager's experience, thorough research and continuous back- testing identify the most attractive of these events.
• Risk controls include limits on individual positions as well as gross and net exposure. Limits are in place for option exposure and cash borrowing, with stop loss limits on individual positions. Overall the manager is looking to derive returns from the event strategies as opposed to any currency or market exposures.
• Since inception, the Fund has an annualised return of 9.95% p.a., compared to the AFM's Asia Pacific Index of 4.49%. The Fund has achieved this with lower volatility of 6.09% (Index 11.89%).

For further details on the Fund, please do not hesitate to contact us.

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - April 2016 (pdf format)

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.