NEWS
19 Nov 2014 - Avenir Value Fund
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| Fund Overview | The Fund will invest in securities where Avenir believes the company is simply mis-priced and deeply undervalued and offers significant potential for revaluation. The Fund will also invest in companies that are subject to specific corporate events such as mergers, acquisitions, restructurings, recapitalisations, spin-offs, demergers, management change, distressed situations, and other sharply delineated corporate events. The Fund will also selectively invest in short positions in companies where Avenir believes the company is significantly overvalued or where the company's business model is broken or structurally challenged. |
| Manager Comments | The Fund's annual Up and Down Capture ratios are notable at 0.41 and -0.92 respectively with the Sharpe ratio 1.69 (Index 0.41). At month-end the Fund's geographic exposure was US 43%, W. Europe 16% Asia 13% Australia 1%, Other 18% with cash at 8%. |
| More Information | » View detailed profile of this fund |
19 Nov 2014 - Fund Review: Morphic Global Opportunities Fund October 2014
MORPHIC GLOBAL OPPORTUNITIES FUND
Attached is our most recently updated Fund Review on the Morphic Global Opportunities Fund.
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.
Key points include:
- The Fund is a global equity long/short manager with a long bias and a macro-economic overlay. The mandate allows the Fund to short sell, use derivatives and invest in assets such as commodities & currencies.
- Morphic's philosophy is that only funds with flexible investment and hedging strategies will be able to deliver acceptable, steady, real, absolute returns over the investment cycle.
- The Fund is an early stage, boutique, Sydney-based fund established in 2012 with experienced CIO's, and an investment team of 6 including a risk manager.
- The Board has a majority of independent members with significant risk and investment experience.
For further details on the Fund, please do not hesitate to contact us.
Sean Webster
Research Manager
Australian Fund Monitors
Morphic Global Opportunities AFM Monthly Review October 201418 Nov 2014 - Totus Alpha Fund
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| Fund Overview | The Fund is a long/short investment fund principally investing in listed entities, commodities, futures and options in Australia and internationally. The Fund is not a market neutral fund and accordingly may switch between net long positions and net short positions. The Fund may use short sales and derivatives. Gearing may be used to enhance returns and the Fund may be geared in excess of 100% of the Fund's Net Asset Value. There is a limit to net exposure of 150%. |
| Manager Comments | The Sharpe and Sortino ratios over the last year are 1.40 (0.41) and 2.95 (0.55) respectively with the Up and Down Capture ratios 0.59 and -0.36. At month-end the Fund had a net exposure of 5.9% and a gross exposure of 211%. We discussed the reasons for our cautious portfolio positioning in our last monthly (the end of QE in the USA, pressure on emerging market currency and commodity markets, US $ and Bond market strength) and despite the sharp rebound in some equity markets (particularly the US) many of these conditions are still in place (or intensifying) as we sit here in mid-November. Volumes (and share prices) in the mid cap space appear to be sliding with investors increasingly gravitating to a small number of (extremely expensive) growth stocks while at the large cap end banks and yield plays have been bid back up aggressively. |
| More Information | » View detailed profile of this fund |
17 Nov 2014 - The Paragon Fund
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| Fund Overview | Paragon accepts that markets are not always efficient in pricing information into securities and that no one investment style works in every stage of the investment cycle. Subsequently Paragon adopts a top down thematic led approach to identify companies exhibiting sustainable or improving returns on capital driven by volume growth, pricing power and competitive advantages. Paragon utilises both quantitative analysis to provide probability weighted high/low/base case valuations and qualitative analysis in assessing management, the business model and likely direction of returns. Paragon will allocate assets to each investment opportunity based on a risk/reward profile. Positions have defined investment parameters and risk limits, which are then monitored on an ongoing basis. |
| Manager Comments | The since inception (Feb 2013) Up and Down Capture ratios are notable at 0.82 and -0.65. Key drivers of the Paragon Fund performance for October included solid returns from Regis Healthcare and our short position in Syrah Resources, offset by falls in LNG Ltd, TFS Corp and our short position in Transfield Services. At the end of October the fund had 26 long positions and 5 short positions with a net exposure of 72.8% and a gross exposure 91.8%. |
| More Information | » View detailed profile of this fund |
14 Nov 2014 - Hedge Clippings
In this week's clippings: Not the G20, ASX top 20 concentration, Bank Valuations, the Property Market, and a new Fund in Focus video interview.
We'll leave any comment on the G20 well alone this week (apart from mentioning that we won't go there, either physically or metaphorically) firstly because it hasn't happened yet, and secondly because it has little to do with absolute return. Unless we could find an analogy with Tony "Shirt Front" Abbott's comments on Vladimir Putin and things making an absolute return bite you.
But we will spare you that.
Instead we'll draw on more words of wisdom from Optimal Australia's CEO George Colman who noted in his October performance report that the ASX top 20 index now represents 68% of the ASX200, compared the with 55% just prior to the 2007 market peak. Within that banks are now 31% of the ASX 200 index and the financial sector overall represent 47% - an all-time high.
Optimal's view is that investors in the Australian stock-market are assuming concentration risk of unprecedented levels, and that this skew in index concentration typically occurs at market extremes. However his view also is that he should save his breath, as YAAP, or yield at any price, continues to push these stocks up irrespective of the risk.
Other factors also highlight that bank prices possibly represent an "as good as it gets" scenario at current levels irrespective of the attractiveness of their yields. What was interesting in the recent round of bank results was that two thirds of their growth in earnings came from reductions in bad and doubtful debts, to record low levels of just 0.15% of gross loans.
As we said, it might look as if bank prices are as good as they get, so maybe Gail Kelly's departure from the top job at Westpac is smart indeed.
Bank prices are obviously closely tied into the current property market, and we took the opportunity of bouncing this off a well respected and trusted developer who knows much more about these things than we do. His view was that whilst the market is undoubtedly buoyant he thinks Armageddon is unlikely, rather that there are more likely to be long periods of low growth than the doomsday outlook of a property crash.
His logic was that affordability significantly drives property prices, and this in turn is driven by two key factors, namely unemployment and interest rates. Provided the former remains at reasonable levels, homeowners and borrowers will go to extraordinary lengths to maintain ownership of their home.
It's not only the banks that are enjoying the current property boom, with real estate agents, whose commission rates don't seem to have been trimmed in spite of the significant increase in prices, also enjoying the flow. State and local governments must be loving it too, with our favoured developer estimating that on a 20 unit block of two-bedroom apartments in Brisbane he is paying a total of well over $1 million in stamp duty, fees and taxes, and net GST to governments of various hues, on top of which the buyers also have to pay stamp duty.
Elsewhere this week we interviewed Jack Lowenstein from the Morphic Global Opportunities Fund, who gave an interesting overview of the fund's performance in October's global markets, which he described as the most difficult environment he had experienced since launching the fund two and a half years ago. You can view the video by selecting the image below, or the Fund's profile and the AFM Fund Review are here.
25-27 March 2015 Digital Marketing for Banking and Financial Services Summit.
Specific results received this last fortnight include the following PERFORMANCE UPDATES:
Morphic Global Opportunities Fund returned 1.12% during October bringing the annual return to 15.62% with a volatility of 8.62%.
The Bennelong Alpha 200 Fund returned -2.49% during October with a net exposure of 1.2%.
Optimal Australia Absolute Trust returned -0.71% in October with annual returns at 5.42%, with a volatility of 2.08%.
The Cor Capital Fund returned -0.13% during October bringing the annual return to 1.72% with a volatility of 3.43%.
Best wishes for a happy and healthy weekend,
Chris
CEO, AUSTRALIAN FUND MONITORS
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14 Nov 2014 - Fund In Focus - Morphic Global Opportunities Fund
Jack Lowenstein, the Joint CIO of the Morphic Global Opportunities Fund talks about how the
Fund performed in October 2014 and was positioned at the end of the month.
Watch AFM's other videos.
13 Nov 2014 - Cor Capital Fund
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| Fund Overview | The Cor Capital Fund is a Multi- Asset Fund which combines a pre-determined strategic asset allocation with active but systemised rebalancing to generate returns and manage volatility whilst maintaining transparency and liquidity. The Fund strategy is not reliant on accurate market predictions, forecasts or timing for success. Returns are generated in a number of ways; 1) by maintaining sufficiently large positions in a diverse group of asset classes, 2) via the 'volatility harvesting' consequences of active rebalancing, and 3) from the offsetting behaviour of certain asset classes under specific conditions. The combined portfolio is expected to exhibit relatively low volatility and low turnover. In the interests of avoiding complexity, maintaining liquidity, and minimising reliance on third parties, the Fund strategy does not employ gearing, derivatives or short-selling. |
| Manager Comments | Equities continued to be volatile, with the ASX200 Accum Index making up most of September's fall (+4.43%). Strong bond (+0.97%) and equities (+2.2%) performance within the Fund portfolio was offset by a weaker gold bullion price (-3.56%). The recent increase in volatility has not been sufficient to cause a breach in any of the Fund's defined asset class limits and so there were no changes during the last month. |
| More Information | » View detailed profile of this fund |
12 Nov 2014 - 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 recorded 83% positive months over the last year and a maximum draw-down of -0.71% as compared to the Index at 5.38%. Not only did the market post a solid rebound, but the stocks leading that recovery were exactly the same group of yield-based so-called 'defensive' industrials and financials which so dominate index construction. The stats here are instructive: the ASX 20 stock index now represents 68% of the ASX 200 index, compared with 55% just prior to the 2007 market peak. Banks are now 31% of the ASX 200 index, and the financials overall represent 47% ― an all-time high. So: investors in the Australian stock market are assuming concentration risk of unprecedented proportions, and this skew in index concentration typically occurs at market extremes. |
| More Information | » View detailed profile of this fund |
11 Nov 2014 - Bennelong Alpha 200 Fund
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| Fund Overview | The core investment strategy of the Fund consists of the active selection of a series of paired long/short investments in Australian listed equities based upon the Investment Manager's fundamental research. The strategy seeks to capture stock Alpha whilst limiting portfolio exposure to market risk by adopting a dollar neutral portfolio market exposure position with the tactical capability to take net exposure of up to +/- 20% of gross assets. Stock selection is based on fundamental analysis to derive a view of a pair of individual stocks. The Investment Manager is style neutral in determining the stock's positioning. This primary 'pairs' strategy may be enhanced by other complementary strategies, including event driven, security and takeover arbitrage, thematic and momentum trading. The paired stock positions comprise long and short correlated securities that are in most cases simultaneously opened. A portfolio of approximately 30-100 stocks will be selected and actively managed in 15-50 pairs to comprise the core minimum (60%) of the Gross Asset Value. Up to a maximum of 40% of the portfolio's Gross Asset Value may be invested in uncorrelated securities and/or uncovered (long and/or short) positions. These 'satellite' positions are intended to enhance returns and to balance overall portfolio risk. In this regard, the Investment Manager recognises that it is not always possible to achieve a suitable paired profile within the S&P/ASX 200, and that a high conviction long or short stock idea might not always have a suitable pair. |
| Manager Comments | The fund had a very disappointing month in October. Our long book contributed positively but was overwhelmed by the negative contribution from the short book. At the sector level Consumer Discretionary and Financials dragged on performance, with iProperty /Trade Me and Cedar Woods / Stockland the main culprits. The three best performing pairs (Kathmandu / The Reject Shop & Pacific Brands, Carsales / Automotive Holdings, CSL / Primary Healthcare) all benefited from being on the right side of AGM comments. There was no common theme to our poor performing pairs. |
| More Information | » View detailed profile of this fund |
10 Nov 2014 - Morphic Global Opportunities Fund
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| Manager Comments | The Fund's since inception (Aug 2012) Sharpe and Sortino ratios are 2.34 and 7.29 with 78% positive months. The Fund is not as heavily invested in Japan as it has been, but stocks there still contributed significantly to performance. This was thanks to continued strong gains in the Japanese Drug Stores basket, and currency hedging put in place early in the month, which paid off substantially when the BOJ launched its last day of the month surprise and the Yen fell nearly 3% in a few hours. The Fund closed the month fully invested, reflecting confidence the worst macro economic shocks are probably behind us for the balance of the year. The Fund has hedged most of its Japanese stock exposure to protect against further Yen weakness. |
| More Information | » View detailed profile of this fund |
