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;

• Optimal Australia 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. 

• The investment team comprising George Colman, Peter Whiting supported by Stephen Nicholls and Justin Hay have over 100 years combined experience in equity markets.

• In August, the Fund recorded a flat return (+0.02%), to take annualised return since inception to 8.62% p.a. The Fund's approach to risk is shown by the Sharpe ratio of 1.37 (Index 0.21), Sortino ratio of 2.86 (Index 0.19), both of which are well above the ASX 200 Accumulation Index and has recorded 79% positive months.

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

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - August 2016 (pdf format)

Regal wears the crown at Annual Hedge Fund awards

Philip King's Regal Funds Management was awarded the Australian hedge fund manager of the year title at the annual "Hedge Funds Rock" event held in Sydney this week, as well as taking out the award for the best long-short equity manager for the Regal Atlantic Absolute Return Fund, having returned 136% in 2015, and an annualised return of 40% since inception in 2004.

Established by Philip's brother Andrew King in 2004, Regal Funds Management is a fundamental Long Short manager that has been one of the mainstays of the Australian industry for over a decade. Whilst probably best described as "old school" Regal's investment team are not scared of taking risk provided they see the potential for significant upside. Since inception, the fund has achieved an annual return of over 100% on no less than five occasions, whilst just missing out on the sixth with a return of 99.35% in 2005.

Those returns have not come without significant volatility with a standard deviation of 36% since inception, and some significant drawdowns along the way, but for those investors prepared to accept risk, 40% per annum after fees over 12 years provides much to write home about.

Other winners on the night included Bennelong's market neutral fund, and NWQ Capital Management, a West Australian based fund of funds which took the award for the best investor in hedge funds. Hedge Clippings has noticed an increase in the number of fund of funds in recent times, with NWQ joined by the likes of Affluence Funds Management, and New Zealand based King Tide Asset Management, each of which focus on investing in local Australian absolute return funds.

Fund of Funds were on the nose with investors around the time of the GFC after they were caught out investing (mainly overseas) while providing a liquidity mismatch between their investors and their underlying investments. However it is good to see that the modern breed, such as those above are gaining traction amongst both advisors and investors who don't necessarily have the capacity or potential to complete the detailed due diligence and monitoring required to put together a truly risk averse portfolio of underlying funds.

While the returns provided by the likes of Regal are highly attractive, they are not always suitable for the everyday investor who now has the word RISK firmly tattooed on his or her hip pocket, and the current trend is very much towards returns being balanced by the requirement for capital protection.

Elsewhere this week the media had a field day with the revelation that Morphic Asset Management, a local long-short fund that traditionally seeks investment opportunities offshore, had taken, and profited from a short position in the listed Australian hedge fund manager Platinum Asset Management. The fact that Morphic, along with all other equity-based hedge fund managers take short positions every day in various companies that they perceive to be overvalued seemed to miss the point. Neither was it a case that Morphic considered Platinum to be badly managed - far from it. Shorting merely consists of selling an asset that is overvalued, irrespective of its underlying quality.

It's probably just easier when or if the company's a dog, and more newsworthy when its a fellow fund manager.

PERFORMANCE NEWS

Insync Global Titans Fund rose 0.2% in July to take annualised return since inception to 9.63% p.a.

Bennelong Long Short Equity Fund returned -5.90% in August and +26.81% for the latest 24-months.

The Paragon Fund returned -7.80% after fees for the month of August. The Fund's latest 12-months return was 29.98%.

Totus Alpha Fund rose 2.58% for the month of August, outperforming the ASX 200 Accumulation Index which returned -1.55%, by 4.13%.

Pengana Global Small Companies Fund rose 3.3% in August 2016, compared to a 1.3% return for the MSCI AC World SMID Cap Index.

APN Asian REIT Fund returned +0.06% in August. Since inception, the Fund has an annualised return 17.10% p.a.

Optimal Australia Absolute Trust recorded a flat net return in August in a weaker market, with the ASX 200 Index down 2.3%.

Cyan C3G Fund rose 1.60% in August, outperforming the market (ASX 200 Total Return Index) that fell -1.55%, by 3.15%.

Bennelong Kardinia Absolute Return Fund returned -1.02% in August to take annualised return since inception to 11.71% p.a.

Signature Quantitative Fund returned -0.5% in August, outperforming the ASX 200 Accumulation Index by 1.05%. 

KIS Asia Long Short Fund rose 0.52% for the month of August taking the return for the most recent 12 months to 18.12% versus an S&P/ASX 200 Accumulation Index of 8.96% over the same period. 

Bennelong Twenty20 Australian Equities Fund returned -0.74% to take latest 6-months return to 13.42%. 

FUND REVIEWS released this week: Jamieson Coote Bonds Active Fund; Supervised Global Income Fund; Insync Global Titans Fund; Bennelong Long Short Equity Fund;

And on that note, have a great weekend.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

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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.