OPTIMAL AUSTRALIA ABSOLUTE TRUST

AFM have released the most recently updated Fund Review on the Optimal Australia Absolute Trust.

CPD Points are now available for all AFM Fund Reviews. Read the review and answer 5 questions to earn half a point toward your continuing professional development.

We would like to highlight the following:

• 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 Fund's approach to risk is shown by the Sharpe ratio of 1.72, Sortino ratio of 4.87, both of which are well above the ASX 200 Acc Index, and volatility of 3.44%. The Fund has also recorded 84% positive months.
• The investment team comprising George Colman, Peter Whiting supported by Stephen Nicholls and Justin Hay have over 100 years combined experience in equity markets.

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

Sean Webster
Research and Database Manager
Australian Fund Monitors

ATTACHED FILESOptimal Australia Absolute Trust AFM Fund Review Oct 2014 (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 25.89% since inception in March 2012 as compared to 14.71% for the ASX 200 Accumulation Index. The standard deviation has been higher than the Index at 13.23% as compared to 11.11% and the Sharpe ratio is 1.60.  

ATTACHED FILESTotus Alpha Fund AFM Review Oct 2014 (pdf format)

Potential is one thing, reality is a greater challenge.

A recent research report by ANZ Bank [entitled "Caged Tiger: the Transformation of the Asian Financial System"] forecast that Asia's share of the global economy will move from 25% currently to 35% in 2030, and then to 50% by 2050.

ANZ's report noted that with the exception of Japan and the newly industrialised economies, Asia's rapid industrialisation of the past 2 decades has not been matched by an extensive development of its financial system. Many Asian countries have relatively closed and highly regulated financial systems, with a dominant banking sector and heavily managed exchange rates.

But in order to move to the next stage of development the financial systems of many Asian economies must be reformed, opened and become less regulated.

The development of the financial system is one part of what is need to move these economies through middle income levels, with other factors including other economic reforms and improved legal structures.

Policy responses to the Asian Crisis in 1997 led to the situation whereby countries built up large foreign exchange reserves, with this surplus recycled back into the international system through the purchase of government bonds. However as these countries liberalise their financial systems they will play a much bigger role in allocating Asian savings to a far broader set of markets and investments.

ANZ modelling estimated that Asian bond markets will grow seven times over the next 15 years, and the capitalisation of equity markets will move from $9 trillion to almost $55 trillion by 2030.

Turning to Australia, in 2010 around 2.5% of China's total foreign investment was invested in Australia. Even if that percentage remains unchanged, the total level of Chinese investment into Australia could reach over A$200 billion, or according to ANZ's estimate, about 15% of Australia's forecast GDP by 2030.

Where are we headed with all this?

In the financial services and fund management sector, currently less than 20% of Australia's funds under management is sourced from offshore. This will continue to grow as Asia's transformation progresses, with Sydney likely to be the largest beneficiary. However it is not clear if the benefits to all capital market activities will flow equally, with debt, trade finance and insurance likely to face competition from other Asian financial centres such as Singapore and Hong Kong, and no doubt Shanghai at some stage in the future.

The point is that in spite of the opportunities facing Australia's banking and financial sector, it must be remembered that opportunity and reality are often significantly different. Australia has a wealth of educated talent in place, with plenty more experienced expats keen to return home, a regulatory system that is generally first class, and passably sound infrastructure (NBNCo notwithstanding).

The key will be the Government's role, and those who know Hedge Clipping's views will not be surprised that this is where potential and reality can come unstuck. The government - of whichever persuasion - needs to put the correct tax, structural and regulatory policies in place to ensure the framework is created to allow Australia to compete in the Asian, and global financial marketplace.

In the next week or so David Murray's Financial System Inquiry (FSI) report is due to be released. We can only hope that this government grasps that opportunity, and not waste it in the way the previous Henry Tax Review, or Mark Johnson's 2009 report were squandered.

Specific results received this week include the following PERFORMANCE UPDATES:

The Auscap Long Short Australian Equities Fund recorded a return of 2.25% in October with the annual return 29.93% and a volatility of 6.95%.

Alpha Beta Asian Fund returned -0.51% during October with annualised performance since inception of 7.58% with volatility of 5.24%.

The Aurora Fortitude Absolute Return Fund returned -0.29% during October bringing annualised performance since inception to 7.55%.

Allard Investment Fund recorded a performance of 0.60% during October bringing the annual return to 13.30%.

FUND REVIEWS released this week, all with the potential for earning CPD points:

Microequities Deep Value Microcap Fund; Bennelong Kardinia Absolute Return Fund; Supervised High Yield Fund

Best wishes for a happy and healthy weekend,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

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.

INVESTMENT ADMINISTRATION CONFERENCE

Efficiency in a Regulated World

18 February 2015, Ivy Ballroom Sydney

This industry-leading event will bring together those shaping the future of investment fund administration in Australia to explore the key issues defining investment operations over the next five years.

The event will showcase the latest developments in efficiency, technology, strategy, reporting, processes, compliance and custodian relationships, with a focus on reducing costs and increasing returns for your fund.

This is a must attend for chief executive officers, chief operating officers, and senior operations staff from superannuation funds, funds managers, custodians and other providers.

Key issues to be examined include:

View the full AGENDA and REGISTER before 15 December 2014 for early bird pricing.

For further information regarding registration please contact Elena Chatz, Conference Operations Manager.

ATTACHED FILESEfficiency in a Regulated World (pdf format)

• The Fund is long biased, research driven, active equity long/short strategy investing in listed ASX companies with an eight year track record. 

• The Fund has significantly outperformed the ASX200 Accumulation Index since its inception in April 2006 and also has significantly lower risk KPI's. The Bennelong Kardinia Absolute Return Fund returned 1.22% in October and has volatility of 7.52% pa, compared to the ASX200 Accumulation's 14.31%.

• The Fund also has a strong focus on capital protection in negative markets. Portfolio Managers Mark Burgess and Kristiaan Rehder have significant market experience, while the Bennelong Group provide infrastructure, operational, compliance and distribution capabilities.

ATTACHED FILESBennelong Long Short Equity Fund AFM Review - Oct 2014 (pdf format)

MICROEQUITIES DEEP VALUE FUND

Attached is our most recently updated Fund Review on the Microequities Deep Value Fund.

• The Microequities Deep Value Fund has a 5 year track record investing in ASX listed equities.  The Fund is a fundamental, research-driven Fund investing in equities with a market cap below $250m. The Fund uses a value philosophy based on the view that microcaps are often under-researched and under-valued.CIO Carlos Gil has over 15 years financial market experience across a broad range of equities.
• The Fund does not short, use derivatives or borrow i.e., it is long  only and is concentrated; usually with 15 to 20 companies across industrial sectors.
• Resource stocks are avoided.

If you have any questions in relation to the Fund Review or the CPD points, please do not hesitate to contact us.

ATTACHED FILESMicroequities Deep Value Microcap Fund Oct 2014 (pdf format)