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 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 1.36, Sortino ratio of 3.02, 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.

Sean Webster
Research and Database Manager
Australian Fund Monitors

ATTACHED FILESFund Review: Optimal Australia Absolute Trust February 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 27.45% since inception in March 2012 as compared to 15.79% for the ASX 200 Accumulation Index. The standard deviation has been higher than the Index at 13.06% as compared to 11.22% and the Sharpe ratio is 1.72.  

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

• The Fund is long biased, research driven, active equity long/short strategy investing in listed ASX companies with an nine 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 1.24% in March and has volatility of 7.35% pa, compared to the ASX200 Accumulation's 14.23%.

• 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 FILESFund Review: Bennelong Kardinia Absolute Return Fund March 2015 (pdf format)

Superannuation: Time to go back to basics?

It is a sad reality that from a great concept, Australia's superannuation system, much admired by many governments around the world, has become a dog's breakfast - complicated, messy and not really recognisable from its origins. And without going into graphic details of what happens to a dog's breakfast when it is repeatedly consumed, and then regurgitated - well, I think you understand the picture.

Our understanding of the original concept of superannuation was that the government of the day recognised that looking into the future, funding the ageing population was going to impose significant budgetary issues.

By forcing either employees or their employers to pay a proportion of all wages into a compulsory retirement scheme the intention was that, coupled with the magic of compounding returns, after 40 years a large proportion of the population would be self-sufficient in their retirement, thereby reducing the drain on the public purse.

Understanding that there are two sure ways to try to alter behaviour - generally known as the carrot or the stick approach - Keating's concept was quite simple: Legislate to enforce a basic level of compulsory contribution (the stick) and then provide attractive taxation benefits (the carrot) to encourage those able to do so to make additional contributions.

To gain acceptance, and to ensure both individuals and their employers could get used to the process, the Superannuation Guarantee Levy or SGL commenced at 3%, and has steadily risen since to 9.5%. Most economists understand that to be really effective the SGL should be 15%, but at least at 9.5% it is getting there.

So far so good.

Unfortunately for whatever reason successive governments have comprehensively tinkered around the edges, making the taxation rules, processes and conditions associated with superannuation unbelievably complicated. At the same time they have created an uneven playing field, making superannuation significantly more attractive for some in the community than others.

This is probably par for the course for all governments and bureaucrats, and it may well be far-fetched to think that this or any other government will return to the basic concepts while making superannuation simpler fairer and as a result more economical for both retirees and the country as a whole.

By all means provide the carrot of a concessional tax rate for super contributions, and to encourage people to make additional contributions, but either at the time of making a contribution or when eventually in retirement. However having a concessional tax rate when making the contribution and a zero tax rate in retirement seems unnecessarily generous.

Equally allowing retirees to take 100% of their superannuation as a lump sum on retirement, rather than as an annuity to replace or supplement the aged pension defies logic.

While Australia has a poor record when it comes to the complexity of its taxation system, it is disappointing that when introducing something as well-meaning and logical as self-funded retirement they didn't take the opportunity of making it both effective and simple. Added to the problem of complexity (as noted above)is the constant change introduced by successive governments, each in turn further complicating the system.

And in case you think this is just Hedge Clippings having a typical Friday afternoon whinge, here's a link to the Charter of Superannuation Adequacy and Sustainability and Counsellors Superannuation Custodians (itself a monumental mouthful) report to the government in 2013, Chapter 3, entitled Constant Change.

Specific results received this week include the following MARCH PERFORMANCE UPDATES:

The Aurora Fortitude Absolute Return Fund returned 0.55% to bring its annual performance since inception to 7.32%.

Avenir Value Fund rose 0.78% in a down equities market (-0.09%).

The Bennelong Kardinia Absolute Return Fund returned 1.24% bringing the Fund's annual performance since inception to 13.29% compared to the ASX200 Accumulation benchmark's 5.87%.

Morphic Global Opportunities Fund rose 1.61% in March as its benchmark (MSCI AC World Total Return in AUD) rose 0.87%, resulting in out-performance of 0.74%.

Totus Alpha Fund had a strong performance in March of 5.50%, compared to the ASX200 Accumulation Index of -0.09%.

Chris
CEO, AUSTRALIAN FUND MONITORS

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