Dear [FirstName],

Who won the election?

I noticed a comment in today's media by Graham Richardson, surely one of the more interesting and surprisingly non-partisan political minds around. To paraphrase "Richo", his view is that the government is sounding as if they won the recent election by a significant margin, rather than by one lower house seat and failing to control the Senate, while Bill Shorten is acting as if he won the election, rather than losing it.

Meanwhile, the Treasurer has suddenly worked out that the budget has both an income and an expenditure problem. Amazing that no one had worked that out before. It could be a long three years until the next election - or alternatively not long at all.

But that's not what Hedge Clippings should be all about - so back to fund performances which, again as reported in the media earlier in the week, have been pretty average.

Average. Who wants average?

Courtesy of the stellar post BREXIT bounce giving the ASX 200 a return of 6.29% in July, the local equity market has just managed to keep its nose above water since January, and has now returned 7.45%  -  although on a rolling 12-month basis the Index is only up 2.37% on an accumulation basis.

Without taking dividends and distributions into account the figures are even less impressive, with the ASX200 falling -2.4% over 12 months to the end of July. In other words dividend yields and distributions are running at over 4.5%, in large part explaining the resilience of the market in a low-interest rate environment, even if the overall performance is flat or negative.

Meanwhile, on the face of it's the average performance of equity-based absolute return funds has also been disappointing, with a January to July year-to-date performance of just 1.63%, and a 12-month rolling performance of 4.43%.

However, averages can be deceiving, particularly in a sector as diversified as actively managed, absolute returns, and hedge funds. While almost 60% of all funds have outperformed the ASX 200 accumulation index over the past 12 months (which based on the ASX200 returns noted above is not all that difficult), individual fund returns have ranged between -29% and +121%.

Importantly out of the 240 funds which have reported their July numbers so far, 74 have returned 10% or more over the past 12 months, and 31 have returned over 20%. The opportunities to gain excellent returns are alive and well, frequently with lower risk than the ASX and individual stocks, provided you do your research correctly. Some examples are shown below.

PERFORMANCE NEWS

Bennelong Kardinia Absolute Return Fund rose 2.95% in July to take annualised return since inception to 11.92% p.a.

Cyan C3G Fund returned a positive 5.80% in July to take latest 12-months return to 42.41%.

The Paragon Fund returned a positive 2.90% after fees for the month of July. Since inception, the Fund has an annualised return of 24.45% p.a.

Optimal Australia Absolute Trust returned -2.3% in July to take annualised return since inception to 8.71% p.a.

APN Asian REIT Fund rose 2.07% in July, outperforming the Bloomberg Asia REIT Index which returned 0.77%, by 1.30%.

Pengana PanAgora Absolute Return Global Equities Fund rose 1.08% in July.

QATO Capital Market Neutral Long/Short Fund returned 3.71% for the month of July.

APN AREIT Fund  rose 4.94% in July, to take annualised return since inception to 19.38% p.a.

Bennelong Twenty20 Australian Equities Fund returned +6.43% against the ASX 200 Accumulation Index's return of 6.29%.

KIS Asia Long Short Fund rose 2.99% in July to take latest 24-months return to 25.09%.

Pengana Absolute Return Asia Pacific Fund returned -0.97% after fees for the month of July. Since inception, the Fund has an annualised return of 8.70% p.a.

Signature Quantitative Fund recorded a flat return (0.003%) in July. Since inception, the Fund has an annualised return of 6.41%.

Affluence Investment Fund returned +2.98% in July to take the latest 12-months return to 12.28%.

Totus Alpha Fund rose 8.82% for the month of July, outperforming the ASX 200 Accumulation Index which returned 6.29%, by 2.53%

NWQ Fiduciary Fund returned 1.88% in July and returned +6.54% over the last 12 months.

Touchstone Index Unaware Fund returned +5.82% in July. Since inception in April 2016, the Fund has returned +7.4%, net of fees and expenses. 

King Tide NZ/Australian Long/Short Equity Fund returned +4.29% to take latest 12-months return to 11.29%.

Pengana Global Small Companies Fund rose 2.80% in July 2016, compared to a +3.3% return for the MSCI AC World SMID Cap Index.

FUND REVIEWS released this week: Meme Australian Share Fund; Bennelong Long Short Equity Fund; Optimal Australia Absolute Trust; Bennelong Kardinia Absolute Return Fund; APN Asian REIT Fund; QATO Capital Market Neutral Long/Short Fund; Pengana Absolute Return Asia Pacific Fund; Bennelong Twenty20 Australian Equities 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.

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 - July 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 8.70% p.a., compared to the AFM's Asia Pacific Index of 5.16%. The Fund has achieved this with lower volatility of 6.37% (Index 11.94%).

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

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - July 2016 (pdf format)

QATO Capital Market Neutral Long/Short Fund

Attached is our most recently updated Fund Review on the QATO Capital Market Neutral Long/Short Fund.

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

• Qato Capital is a Melbourne-based boutique fund manager backed by single family office, Larkfield Funds Management.
• Qato has a systematic, market-neutral strategy which invests exclusively in S&P/ASX 100 stocks.
• The QATO Capital's Q-score process captures and quantifies six broad fundamental factors, which assess multiple underlying sub-categories. Those companies with the top score (quality companies) are included in the "long" portfolio, those with the lowest score are sold short.
• The Fund seeks to preserve capital and maximises absolute returns through active and constant risk management, targeting monthly a net market exposure of 0% to hedge broader market risks through 30 S&P/ASX-100 positions (15 long & 15 short equally-weighted positions).
• Qato Capital's process is entirely systematic - stock selection and risk management are employed in a rules-based approach. The Fund employs no financial leverage/gearing to purchase securities, no derivatives, and no financial products to imitate leverage.

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

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - July 2016 (pdf format)