NEWS
15 Aug 2016 - QATO Capital Market Neutral Long/Short Fund
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| Fund Overview | The fund targets a net market exposure of 0% to hedge broader market risks through long and short positions. The process is entirely systematic - stock selection and risk management are all employed in a rules based approach. The Market Neutral Long/Short Fund employs no financial leverage, no derivatives and no financial products to imitate leverage. The Investment Manager's three principal investment goals for the Fund are: 1. Market neutral long/short portfolio management with little correlation to equity markets; 2. Over a 3-5 year period, seeking to target annualised volatility of 15% per annum and annualised returns of 15-30% per annum above the Benchmark; Sharpe Ratio 1.0-2.0 and a negative beta to ASX listed equities; and 3. To provide investors with a co-investment opportunity alongside the founding members' investments in the Investment Manager's strategy. |
| Manager Comments | The Fund positioned the portfolio net long in the mining and materials sector in July. Long exposures included positions in Alumina, BlueScope, Fortescue and South32, largely due to their significant fundamental improvements and rising commodity prices. These positions have continued to enable Qato to profit from the rebound in commodity prices over the past three months. |
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12 Aug 2016 - Cyan C3G Fund
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| Fund Overview | Cyan C3G Fund is based on the investment philosophy which can be defined as a comprehensive, clear and considered process focused on delivering growth. These are identified through stringent filter criteria and a rigorous research process. The Manager uses a proprietary stock filter in order to eliminate a large proportion of investments due to both internal characteristics (such as gearing levels or cash flow) and external characteristics (such as exposure to commodity prices or customer concentration). Typically, the Fund looks for businesses that are one or more of: a) under researched, b) fundamentally undervalued, c) have a catalyst for re-rating. The Manager seeks to achieve this investment outcome by actively managing a portfolio of Australian listed securities. When the opportunity to invest in suitable securities cannot be found, the manager may reduce the level of equities exposure and accumulate a defensive cash position. Whilst it is the company's intention, there is no guarantee that any distributions or returns will be declared, or that if declared, the amount of any returns will remain constant or increase over time. The Fund does not invest in derivatives and does not use debt to leverage the Fund's performance. However, companies in which the Fund invests may be leveraged. |
| Manager Comments | Positive performers for the month included Afterpay (AFY), Bellamy's (BAL), Vita Group (VTG), APN Outdoor (APO) and Seafarm group (SFG). In response to managing absolute risk, the Fund reduced its exposure in Abundant Produce (ABT), Adacel Technologies (ADA), Afterpay (AFY), BlueSky (BLA), Lovisa (LOV), Melbourne IT (MLB) and Sealink (SLK). The portfolio held ~35% cash balance accompanied by a diversified portfolio of listed companies. Click below to read the latest Fund Manager's Report. |
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12 Aug 2016 - Alexander Credit Opportunities Fund
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| Fund Overview | The Fund may also invest in derivatives for hedging purposes. The portfolio of the Fund comprises primarily Investment Grade holding of 75% of the Fund's assets. Benchmark allocations are Australasia 50% to 100%, North America 0% to 50% and Europe 0% to 50%. Currency hedging may take place depending on benefits to the Fund. |
| Manager Comments | The Fund has benefited from the general tightening in credit products over the last couple of months and believes this trends will continue in the near term. The Fund's macro hedges have recently been increased and the Fund is ready to add further protection if required. For July, the majority of the portfolio was allocated in the Residential Mortgage-Backed Securities (RMBS) at 50%, followed by Corporate Bonds/Loans at 22%. Click below to read the latest monthly report. |
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11 Aug 2016 - Bennelong Kardinia Absolute Return Fund
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| Fund Overview | The Fund's discretionary investment strategy commences with a macro view of the economy and direction to establish the portfolio's desired market exposure. Following this detailed sector and company research is gathered from knowledge of the individual stocks in the Fund's universe, with widespread use of broker research. Company visits, presentations and discussions with management at CEO and CFO level are used wherever possible to assess management quality across a range of criteria. Detailed analysis of company valuations using financial statements and forecasts, particularly focusing on free cash flow, is conducted. Technical analysis is used to validate the Manager's fundamental research and valuations and to manage market timing. A significant portion of the Fund's overall performance can be attributed to the attention and importance given to the macro economic outlook and the ability and willingness to adjust the Fund's market risk. |
| Manager Comments | Aristocrat Leisure, BWX, BlueScope Steel and Beadell Resources were the largest positive contributors to performance whilst Share Price Index Futures (hedging longs), Yowie and Syrah Resources were the largest detractors. Net equity market exposure (including derivatives) was increased to 55.6% (65.8% long and 10.2% short). Click below to read the latest Fund Report. |
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11 Aug 2016 - The Paragon Fund
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| Fund Overview | Paragon believes that markets are not always efficient, exhibiting a common tendency to price securities well outside of their intrinsic value over the medium term. This market characteristic provides the opportunity for Paragon, an active manager with a flexible mandate, to generate superior investment returns over the longer term. Paragon believes that it is critical to understand both the companies and the industries in which they operate, in order to fully comprehend each investment opportunity. Accordingly, a fundamental approach to company research is taken. Assessing the potential downside is also paramount in framing the risk/reward trade-off for potential investments. |
| Manager Comments | Key positive contributors for July included various gold holdings, as well as NetComm Wireless, Aconex and Smartgroup, offset by short positions in a rising market. The Fund's largest industry net exposure was in the Resources sector, at +59.9%. Cash balance was 7.4%. At the end of the month, the Fund had 31 long positions and 9 short positions. Click below to read the latest monthly report. |
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10 Aug 2016 - APN Asian REIT Fund
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| Fund Overview | Pete Morrissey and Corrine Ng are the Portfolio Managers of the Fund. Morrissey has over 15 years financial markets experience and joined APN in 2006. Previously, he worked at Lonsec and also managed an internationally focused private investment fund as well as spending several years as an analyst in the UK for Nomura, amongst others. He has also completed Masters level academic research papers on both commercial real estate cycles and global property cycles. Ng also has a strong background in property and REITs in Australia, Asia and the North American markets. Prior to joining APN, Ng worked for Aviva Investors (Senior Investment Analyst, North America Real Estate Securities Team) and Goldman Sachs & Co (Vice President, Goldman Sachs Asset Management Real Estate Securities Team) in New York. The Fund aims to deliver a competitive yield with lower risk than the market. The underlying stocks are selected based on a highly disciplined investment approach that focuses on the fundamentals and number of valuation approaches. The universe is expected to be dynamic as new IPO's, other corporate actions take place and / or corporate governance improvements at country or REIT level bring new stocks into focus. The Fund focuses on passive rental earnings derived from well managed Asian REITs listed in mature capital markets and will not invest in infrastructure, property development companies or stocks with a 'loose association with property'. The Fund provides access to a wide spread of property-based revenue streams that are specifically analysed, selected and weighted with the aim of delivering strong and sustainable income returns. The Fund is an unhedged product. The Fund is suited to medium to long term investors seeking a relatively high income and some capital growth over the long term. The manager has offered a special 50% reduction in management fee for all existing and new investors who apply by 30 June 2016. |
| Manager Comments | For July, the portfolio's two largest geographic exposure were in Japan at 38.3%, and Singapore at 31.7%. The majority (66.6%) of the Fund was invested in the Retail REITs (40.1%) and the Office REITs (26.5%) sectors. The top five holdings comprised of over 20% of the portfolio with 2 holdings above 4% each. Click below to read the latest Fund's performance report. |
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10 Aug 2016 - Fund Review: Bennelong Long Short Equity Fund July 2016
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 17.81%.
- 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 1.08 (Index 0.32) and 1.83 (Index 0.35) respectively.
For further details on the Fund, please do not hesitate to contact us.
AFM Fund Review - July 2016 (pdf format)
9 Aug 2016 - Optimal Australia Absolute Trust
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| Fund Overview | The Fund's bias is likely to be net long under normal market conditions, with the core strategy being to construct a portfolio of listed equity securities priced at levels that do not adequately reflect their underlying value. The Fund will seek to boost returns and limit potential market downside by selective short selling of individual stocks which are priced at levels that are viewed as materially above their underlying value. The Fund will also use certain trading strategies both within its core portfolio (through rebalancing stock weights and overall market exposure in response to price movements) and in certain other situations (typically of a shorter-duration and/or opportunistic nature) with the objective of further increasing returns. |
| Manager Comments | The Fund's small investment in lithium producer Orocobre was the big winner over the year. The insurance, builders, banks and media sectors positively contributed in July. However, the healthcare, staples, resources and index futures sectors detracted from the performance. The bias against interest-rate sensitive stocks proved expensive as a means of hedging portfolio risk. At month-end, the Fund had gross exposure of 94% and net short exposure of 22%. The Fund will continue to maintain a defensive focus. Click below to read the latest Fund monthly report. |
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8 Aug 2016 - Fund Review: Meme Australian Share Fund July 2016
Meme Australian Share Fund
Attached is our most recently updated Fund Review on the Meme Australian Share Fund.
We would like to highlight the following aspects of the Fund;
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The Meme Capital Management is a Perth-based boutique Fund Manager, established in 2012 and manages the Meme Australian Share Fund.
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The Fund specializes in technical and quantitative strategies to identify investment opportunities expected to provide both positive price appreciation and relative price outperformance over the medium to long term.
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The Fund's objective is to outperform the S&P/ASX All Ordinaries Accumulation Index over rolling three-year periods, through investing in ASX listed securities outside the S&P/ASX 20. The Fund only takes long positions and does not use derivatives.
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Since inception, the Fund has an annualised return of 22.23% p.a., versus the Index's return of 9.59% p.a.
AFM Fund Review - July 2016 (pdf format)
6 Aug 2016 - Hedge Clippings
RBA winds down the cash rate, while the Bank of England goes one better, and winds back the clock.
This week's news has been all about interest rates. In fact, when you think about it, it's been all about interest rates for the past few years.
Not only did the RBA drop interest rates by a further 0.25% to just 1.5% as expected, but there is a pretty fair chance that there will be a further cut before the end of the year. If you think that's low, the Bank of England announced a similar cut overnight, taking their rate to just 0.25%, the lowest since 1694. That's A.D. 1694 just in case there is any confusion.
For those with time on their hands over the weekend, or desperate to understand what our policy makers are thinking, here's a link to the RBA's Quarterly Statement on Monetary Policy.
For comparison, casting around the world the Bank of Canada's rate is 0.5%, the European Central Bank 0%, and the People's Bank of China a whopping 4.35%. In various parts of Europe, the rate is now negative.
Those of you (us) who are old enough, might remember the scary days of mortgage rates of 18 or 19%. At that time I remember being advised by the managing director of one Australian bank that we would never see interest rates in single digits again and our lifetime. It would be unfair to name him, or for that matter single him out, but he was one of the most successful and smartest in the business - then or since.
So here we are, locked into this low interest rate, low inflation environment which seems to be spiralling, or should that be inching, ever lower.
In the short term investors in equities will welcome this as good news. Minimal returns on cash in the bank, or invested in government bonds inevitably makes equities look attractive, with the result that equity PE multiples are at scary levels.
The danger of this is that increased PE multiples are not necessarily a reflection on economic or corporate health, or in many cases the result of increased earnings. Rather they are merely a reflection of the attractiveness of dividend yields, and particularly of franked dividend yields, of 4 to 6%.
As we enter the earnings season proper, it's worth noting that YTD to the end of July the ASX200 financial sector fell 9%, so merely chasing yield doesn't always provide a positive outcome.
By comparison, the Materials Sector (dominated by BHP and Rio) gained 23%, while REITs gained 20%.
So if the outlook for interest rates for the next one, three or five years is to remain low, expect that to support equity markets, in spite of the potential volatility and capital loss that can occur. The real risk will come when interest rates start to rise, and the inflows into equities of the past few years will convert to outflows.
Not tomorrow, but when it happens look out!
Early results for July are thin on the ground so far, but with the ASX200 up over 6% in a post-Brexit selloff - rally yo-yo, are looking positive so far.
Meme Australian Share Fund rose 7.81% in July, outperforming the ASX-200 Accumulation Index which returned 6.29%, by 1.52%.
Bennelong Long Short Equity Fund returned +1.46% in July and +15.63% for the latest 12-months.
FUND REVIEWS released this week: Pengana Absolute Return Asia Pacific Fund; Supervised Global Income Fund; Insync Global Titans Funds;
And on that note, have a great weekend.
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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