NEWS
9 Oct 2015 - Hedge Clippings
Only Performance is Reality
As you might have noticed Hedge Clippings has been off the air (no comments please) for a few weeks. In a case of either poor timing (or bad management) Clippings has been in the UK, leaving for home just as the RWC was getting under way, and missing the Wallabies' winning performance against England. One swallow doth not a summer make, but there was an improved air of confidence notable both on and off the field.
Which leads of course to the change of PM which also took place in my absence. Having been both vocal and critical over the past few years regarding the performance of a succession of Prime Ministers and their Treasurers of various persuasions, I can only say "welcome" and let's move ahead. Although only three or four weeks has passed since Malcolm Turnbull became PM there seems to a new mood, and once again an improved air of confidence amongst both business and consumers.
Tony Abbott may not be happy, but only performance is reality. Of course the biggest potential loser is probably Bill Shorten.
Enough of politics! Talking of performance and reality, economies globally have taken a beating as China's inevitable slowdown has taken its toll on markets. The extreme volatility has seen the ASX200 Accumulation Index fall almost 13% from its February high to the end of September, with the September quarter falling 6.6%, although month to date half of that loss has been recovered.
In that volatile environment absolute return and hedge funds have once again proven themselves to be risk averse as opposed to risky. YTD the average equity fund is up 7.31%, an outperformance of 10% vs the market, and over 12 months they're up 9.68%, again 10% better than the ASX200 Accumulation Index. Over 12 months 81% of the funds in AFM's database have outperformed the index, and YTD that number rises to almost 92%.
Of course these are averages, with the best doing considerably better than that. Over 12 months: Totus Capital, up over 30%; Bennelong Long Short, up 27%; QATO, up 24%, to name just a few.
In spite of this there remains a small section of the media, probably prompted either by lack of hard facts, and passive index funds, driven by vested interests that continue to sing the "risky and expensive" tune, although in times like these as above, Only Performance is Reality.
Specific results received this week include the following PERFORMANCE UPDATES:
Jamieson Coote Bond Active Fund rose 0.52%, in comparision the Bloomberg Australian Government Bond Index's returned 0.41%.
FUND REVIEWS released this week: Totus Alpha Fund; Supervised High Yield Fund; Meme Australian Share Fund; APN Asian REIT Fund; QATO Capital Market Neutral Long/Short Fund;
And now (and about time) for something completely different: Malcolm Turnbull!
And on that note I wish you an enjoyable week-end. It's good to be back, and Go! The Wallabies against Wales at Twickenham!
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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9 Oct 2015 - Jamieson Coote Bonds Active Fund
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Fund Overview | JCBAF seeks to establish a mid to long term core portfolio using both domestic and global macroeconomic analysis. This is overlaid with a number of valuation indicators and international market intelligence from a global network of market moving investors, including central bankers and hedge funds, to construct an optimal indexed portfolio allocation at any given time. The Fund recognises short term oscillations driven by technical factors and supply dynamics create opportunities within short term pricing cycles, which can generate significant alpha when managed within a risk adjusted framework. The Fund aims to outperform its index using duration and curve management at appropriate times in the pricing cycle whilst retaining a core long. The JCB Active Fund gives direct access to the management team whilst providing portfolio balance with increased capital stability and a fixed income streams with both income and principle repayment secured by the Australian or State Governments. |
Manager Comments | The Fund reduced risk, closing curve exposures and running less duration at 4 years for the first half of the month. The Fund added duration within seconds of the FED rate decision and added further duration during the dovish FOMC press conference taking the funds duration above index up to 6.1 years. As the market rallied strongly in the following few days, the Fund started lightening risk into the rally, locking in gains and returning the Fund to a more balanced position into quarter end at 4.2 years duration. At month-end, majority (54.23%) of the portfolio was in the Australian Government Bonds, followed by State Government Bonds at 30.65%. Click below to read the Fund's monthly performance and Fund Managers market outlook. |
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9 Oct 2015 - 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 | Vitaco, Blackmores, Paragon Care and a short position in Share Price Index Futures were the largest positive contributors to performance, whilst Surfstitch, Ramsay Health Care, Westpac and National Australia Bank were the largest detractors. Net equity market exposure (including derivatives) was reduced to 43.2% (61.7% long and 18.5% short). Click below to read the September 2015 Fund Report. |
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9 Oct 2015 - 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 | September's return was again all about stock selection. The Fund was slightly net long invested during the month, with average net exposure around 13% of NAV, and derived no benefit from the further fall in the market. In the Long positions, the positive key contributors by sector were commercial services, chemicals, media and energy. In the Short positions, the positive contributors were energy, steel, healthcare and index futures. The negative contributors were banks, utilities, infrastructure and wealth management. Click below to read the latest Fund Manager's commentary on the Fund and market outlook. |
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9 Oct 2015 - Fund Review: QATO Capital Market Neutral Long/Short Fund August 2015
- 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 maximise 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.
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8 Oct 2015 - Fund Review: APN Asian REIT Fund August 2015
- 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 17.67% p.a., since inception in July 2011 with standard deviation of 9.25% p.a. The Sharpe and Sortino ratios are 1.49 and 2.85 respectively.
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7 Oct 2015 - Fund Review: Meme Australian Share Fund September 2015
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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 out-performance 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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Over the past 12 months, the Fund returned positive 18.00%, versus the Index's negative 0.68% return.
6 Oct 2015 - Fund Review: Supervised High Yield Fund August 2015
We would like to highlight the following aspects of the Fund:
- The Supervised High Yield Fund (SHYF) 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 32years, 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 identify 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 for 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.
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5 Oct 2015 - Fund Review: Totus Alpha Fund August 2015
- 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 $10bn+ long-only manager, and sell side emerging companies experience at UBS. McGarry's emerging company research with UBS included exposure to a range of sectors including energy, materials, industrials, tech, financials, retail and telecommunications.
- The Fund has delivered an annalised return of 28.97% since inception in March 2012 as compared to 10.28% for the ASX 200 Accumulation Index. The standard deviation has been higher than the Index at 14.21% as compared to 12.29% and the Sharpe ratio is 1.69.
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2 Oct 2015 - Fund Review: Insync Global Titans Fund August 2015
INSYNC GLOBAL TITANS FUND
Attached is our most recently updated Fund Review on the Insync Global Titans Fund.
We would like to highlight the following:
- The Fund outperformed its benchmark MSCI All Country World ex-Australia Net Total Return Index ($A) by 0.8%, in August. The performance was driven by positive contributions from our holdings in Zimmer, Diageo and Nestle. The main negative contributors were Disney, Medtronic and Time Warner. The Fund continues to have no foreign currency hedging in place as Insync consider the main risks to the Australian dollar to be on the downside.
- The Global Titans Fund invests in a concentrated portfolio of 15-30 stocks, targeting exceptional, large cap global companies with a strong focus on dividend growth and downside protection.
- Portfolio selection is driven by a core strategy of investing in companies with sustainable growth in dividends, high returns on capital, positive free cash flows and strong balance sheets.
- Emphasis on limiting downside risk is through extensive company research, the ability to hold cash and long protective index put options.
For further details on the Fund, please do not hesitate to contact us.