• APN is an ASX-listed fund manager specialising in property investment, with an investment team of six. Established in 1996, APN now has FUM of $A2.1bn including four REIT (Real Estate Investment Trust) funds.
• The APN Asian REIT Fund (Fund) is a property securities fund that invests in a quality portfolio of Asian REITs, listed on the securities exchanges of the Asian Region, with the ability to hold some cash and fixed interest investments. 
• 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 can include 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 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.
• APN's Asian REIT Fund invests in a portfolio of 25-40 listed Asian REITs with a core philosophy of investing in properties with a sustainable rental income streams.
• The Fund has delivered an annalised return of 17.96% p.a., since inception in July 2011 with standard deviation of 9.11% p.a. The Sharpe and Sortino ratios are 1.54 and 2.96 respectively.

ATTACHED FILESAPN Asian REIT Fund AFM Fund Review September 2015 (pdf format)

• Totus Capital is a Sydney based long short fund manager established in 2012 by Ben McGarry which aims to place equal emphasis on performance and capital preservation.  The Fund invests mainly in Australia, but also in other developed economies, with a primary exposure to equity markets.
• The Totus Alpha Fund's investment strategy is to identify structural themes, and then seek to drive performance by investing in securities that have concentrated exposure to those themes.  Single stock short positions are used to generate alpha, frequently in under researched parts of the market such as the small and mid-cap space. Index derivatives are used to hedge the portfolio's market risk.
• McGarry qualified as a Chartered Accountant with PWC in 1999 and has 14 years market experience, commencing his career covering European building materials and construction sectors at Morgan Stanley in London. Previous experience included analytical roles at Ausbil, a Sydney based $10bn+ long-only manager, and sell side emerging companies experience at UBS. McGarry's emerging company research with UBS included exposure to a range of sectors including energy, materials, industrials, tech, financials, retail and telecommunications.
• The Fund has delivered an annalised return of 30.14% since inception in March 2012 as compared to 10.18% for the ASX 200 Accumulation Index. The standard deviation has been higher than the Index at 14.04% as compared to 12.31% and the Sharpe ratio is 1.77.  

ATTACHED FILESTotus Alpha Fund AFM Fund Review October 2015 (pdf format)

Is the Hedge Fund Fee Frenzy a Furphy?

A cursory glance at the Index table on www.fundmonitors.com gives a stark reminder that while the fees charged by hedge and absolute return funds might be high compared with their "long only" counterparts, and higher again still than the increasingly popular ETF sector, you only get what you pay for.

YTD to the end of October equity based funds in AFM's database have returned 10.66% after all fees, against the ASX200 Accumulation Index (AI) which has returned a meagre 0.53%, and 12.39% over 12 months against a fall of 0.74% for the ASX200 (AI). So while it is easy for the detractors of hedge funds due to their higher fees, and performance fees in particular, when calculating the total cost of those fees to the end investor, the choice would seem pretty simple: Either pay for performance, or pay the price.

Certainly the performance of different funds varies, which is where research, and the ability of the underlying manager comes into play, but 80% of funds have outperformed the ASX200 YTD, and over 12 months that climbs to 83%. It would seem on the surface that the worse the market does, the better hedge funds do by comparison.

Putting aside individual skill for a moment (which we generally do not advise) the reasons behind the out-performance seems pretty obvious. The ability of a fund with a flexible investment mandate, including the ability to short sell, move to cash, or protect investors' capital using risk averse option strategies, provide a clear advantage over those funds which are forced to remain in the market come what may (ETF's), or have limited flexibility in overall stock, sector or asset allocation (long only, index aware).

Figures in today's AFR showed the rise of allocations to ETF's in particular, but why an investor, or their advisor would choose to do so escapes me. Sure the fees are minimal, and certainly they get market performance, but that's not much benefit when the market is going nowhere - or worse.

Price isn't everything: Quality and performance is, otherwise we'd all be eating hamburgers and pizza, and drinking vino collapso out of a cardboard box. So before making a decision based on the cost of an investment product, consider the value of the investment, risk of capital loss, and performance in both positive and negative markets.

FUND REVIEWS released this week: Morphic Global Opportunities Fund; Bennelong Kardinia Absolute Return Fund; Jamieson Coote Bonds Active Fund;  Meme Australian Share Fund; Bennelong Long Short Equity Fund

And on that note, I trust you have a safe and enjoyable week-end.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

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• Jamieson Coote Bonds is a Melbourne-based Boutique Manager launched in December 2014.
• The Founders, Charles Jamieson and Angus Coote bring over 30 years of international experience dealing with central banks, hedge funds and real money managers.
• The Jamieson Coote Active Bond Fund is a long-only macroeconomic investment fund, investing in Australian Dollar denominated bonds backed by AAA and AA+ rated Government, Semi (State) Government and Supranational agencies.
• The Fund Objective is to out-perform the Bloomberg Australian Government Bond Index through active management in a sound risk-framework and usually holds around 20 bond securities of varying maturities.

ATTACHED FILESJCBAF Fund Review October 2015 (pdf format)