NEWS
16 Jul 2015 - Morphic Global Opportunities Fund
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| Manager Comments | The biggest contribution to performance was from the US Banking and US Healthcare with Bank of Internet and HCA Holdings. The other large contributor came from Japan with Open House. The main detractors from the month's performance was mainly due to China. The Fund had over 50% of their equity exposure in North American and over 35.0% in the Financial Sector. The Fund closed June fully invested, though with some hedges. Click below to read the Fund Manager's monthly report and their June outlook of the market. |
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returned a net +2.9%, against a 6.5% fall in the market
16 Jul 2015 - Fund Review: Optimal Australia Absolute Trust June 2015
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.
- The Fund's approach to risk is shown by the Sharpe ratio of 1.46 (Index 0.26), Sortino ratio of 3.16 (Index 0.18), both of which are well above the ASX 200 Accumulation Index and has recorded 80% positive months.
For further details on the Fund, please do not hesitate to contact us.
16 Jul 2015 - Fund In Focus - Morphic Global Opportunities Fund
Chad Slater, the Joint CIO of the Morphic Global Opportunities Fund discusses the markets and the July monthly outlook.
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monthly result since May 2013.
15 Jul 2015 - Bennelong Long Short Equity Fund
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| Fund Overview | In a typical environment the Fund will hold around 70 stocks comprising 35 pairs. Each pair contains one long and one short position each of which will have been thoroughly researched and are selected from the same market sector. Whilst in an ideal environment each stock's position will make a positive return, it is the relative performance of the pair that is important. As a result the Fund can make positive returns when each stock moves in the same direction provided the long position outperforms the short one in relative terms. However, if neither side of the trade is profitable, strict controls are required to ensure losses are limited. The Fund uses no derivatives and has no currency exposure. The Fund has no hard stop loss limits, instead relying on the small average position size per stock (1.5%) and per pair (3%) to limit exposure. Where practical pairs are always held within the same sector to limit cross sector risk, and positions can be held for months or years. |
| Manager Comments | Performance was broad-based with 20 pairs generating a profit versus 10 negative pairs. Short positions were key to performance during the month with each of the top three pairs driven by the short side. Two specific names thatworked well on the short side were Nine Entertainment Co (-27.9%) and Flight Centre (-26.7%) as both companies issued material profit warnings during the month. Click below to read the Fund Manager's complete commentary and future market outlook. |
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14 Jul 2015 - Fund Review: Monash Absolute Investment Fund June 2015
MONASH ABSOLUTE INVESTMENT FUND
- The Fund is a research driven, active equity long/short strategy investing in listed ASX companies.
- The Fund seeks to identify opportunities in the share market to make positive returns (long and short) irrespective of market conditions. It is style agnostic, as compelling investment opportunities exist across all investment styles from time to time. The Fund places a high priority on capital preservation, and has an absolute return focus in accepting market risk.
Monash Absolute Investment Fund Review June 2015 (pdf format)
14 Jul 2015 - 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 June included Yowie, Adairs, Senetas, St. Barbara and short positions in Wesfarmers and Origin. These were offset by the Fund's net positive equity exposure, and holdings in Orocobre, IOOF, and Fortescue (FMG sold for a small overall gain). At the end of the month the Fund had 28 long positions and 15 short positions. Click below to read the latest Fund Manager's commentary. |
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13 Jul 2015 - Allard Investment Fund
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| Manager Comments | The Fund portfolio was invested 76.5% in equities and 23.5% in cash and fixed income. The Fund continues to be most exposed to Financial Services at 18.30%, Conglomerates at 11.30% and Telco's at 10.60%. The geographic breakdown was Hong Kong / China at 42.50%, Singapore 11.20% and Korea 9.60%. The top 5 holdings had 39.9% concentration of the portfolio and 17.0% in the next 5 holdings. Click below to review the latest Fund Manager's Report. |
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11 Jul 2015 - Hedge Clippings
Chinese authorities treading a dangerous path
The news that the China Securities Regulatory Commission was prohibiting investors who own more than 5% of a publicly traded company from selling shares for six months is likely to do more to damage their market than save it. The ban will include foreign investors who hold shares that trade on the Shanghai and Shenzhen exchanges, and comes after Chinese equities lost more than 25% of their value since mid-June.
If anyone can pull off what the Chinese authorities are trying to do, they can, but we doubt they'll succeed. They might be able to control their own citizens from selling shares in smaller caps, or freezing parcels of 5% or more of a publicly listed companies for six months, but the longer term damage to their reputation, and the confidence of traders, investors, and market participants at home and abroad, will be difficult to overcome.
What the Chinese authorities are doing is freezing liquidity, and in this regard it seems they haven't learned from the lessons of 2008 when central banks, governments, and regulators around the world tried to ban short selling, close markets, and in a word, panic. And if governments and the authorities panic, that's exactly what investors are likely to do as well.
Rudyard Kipling put it quite clearly: "If you can keep your head when all around you are losing theirs and blaming it on you" but it seems the Chinese authorities didn't listen, or haven't read Kipling.
By stopping investors selling smaller stocks, they're going to be forced to sell larger ones, and possibly the better ones, to cover their liquidity requirements, margin calls, their need for cash, or just to stuff under the mattress. While western authorities have probably learned from their mistakes of 2008 and might not make the same ones again in a panic, they also succeeded in restricting longer term liquidity through regulations on banks and other market participants in an effort to avoid another too big to fail scenario.
China threatens to make the Greek tragedy just a pimple by comparison. Whatever eventuates in Greece has largely been anticipated by most savvy investors over the past few years, and if a three year moratorium is agreed to it will probably only extend the agony further. There seems no way that the Greek economy, about the same size as that of the State of New South Wales, is ever going to be able to repay the levels of debt.
And so on to fund performance in June.
It was obviously a rocky ride on global markets in June, initially in response to Greece, but more recently as a result of China's problems. The ASX 200 Accumulation Index fell by 5.3%, and July has seen a continuation of the volatility since. Over the 12 months to the end of June the ASX200 rose only 1.17%, or 5.68% on an accumulation basis. By comparison and based on the 25% of fund returns received to date, equity-based hedge funds fell by only 1.41% in June, an outperformance of almost 4%, with 87% of those outperforming the ASX 200 Accumulation Index. Over the past 12 months equity-based funds have returned 11.57%, double the return of the accumulation index.
In addition to the performance updates below, results of note include Kentgrove Capital, (+4.1%) Totus Alpha Fund, (+6.3% (e)) QATO (+1.89%) Bennelong Long Short (+4.86%).
Specific results received this week include the following PERFORMANCE UPDATES:
Monash Absolute Investment Fund fell 1.9% in June in a weak Australian equity market, but still taking the Fund's annualised return since inception to 14.11% p.a.
FUND REVIEWS released this week: Totus Alpha Fund; Insync Global Titans Fund; Supervised High Yield Fund
20 - 21 August 2015 -The 2nd Superannuation Fund Investment Operations Forum 2015 is a two day forum providing invaluable technological, regulatory compliant and best practice insights into improving back and middle office efficiency to drive member loyalty, bottom line profitability and a competitive edge
26 - 28 August 2015 -The 15th Annual Wraps, Platforms & Masterfunds Conference will provide solutions for succeeding in a distribution world of endless possibilities, showcasing strategies to help business achieve the biggest bite of market share, use innovation to overcome problems and support opportunities. Australian Fund Monitors is pleased to offer a discount of $300to all investors and advisors using coupon codepromoFMon registration.
15 September 2015 -The AIMA Australia Hedge Fund Forum 2015 is the annual non-profit hedge fund conference organised by the industry for the industry.
And finally best wishes for a happy and healthy week-end ahead,
Chris
CEO, AUSTRALIAN FUND MONITORS
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10 Jul 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 | The Fund has been running unusually low net market exposure in recent months, and added risk into initial market weakness in June. The Fund's short positions did well, with attribution of +3.3% (on average short exposure of 25% of NAV). However the long positions negatively contributed -4.5% (on average long exposure of 67%. A bias towards low valuations and strong balance sheet quality within the long stocks made little difference in such a weak market. Click below to read the latest Fund Manager's commentary on the Fund and market outlook. |
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9 Jul 2015 - Fund Review: Supervised High Yield Fund May 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 33 years, 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.
