NEWS
7 Oct 2014 - Nanuk Global Alpha Fund
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| Fund Overview | In 2013 Nanuk started to expand the focus of the fund away from just energy and include other industries related to the overarching theme of environmental sustainability, specifically water, waste, recycling, pollution control and agriculture. Nanuk is now investing across a universe in excess of 600 stocks and an aggregate market capitalisation over US$2 trillion. This was a logical move because, while the industries themselves are different, their characteristics and long term drivers are very similar. Nanuk has identified a large, diverse global universe of companies positively exposed to these shifts. Nanuk combines deep fundamental research into these companies with detailed analysis of technological development, policy direction and related economics within each of the relevant sectors to identify profitable trends and opportunities suitable for inclusion in the Fund. Nanuk's principal strategy is to invest, long and short, in securities that are mis-priced on an absolute or relative basis. The Fund aims to achieve long term capital appreciation while reducing volatility of returns and risk of capital loss through appropriate hedging and risk management strategies. |
| Manager Comments | The Fund was 43% long and 39% short at month-end with 83 positions and the top 5 long positions comprising 12 % of the portfolio. The Fund was up 0.5% with the long book contributing positively and the short book flat for the month. The major contributors to performance were long positions in US listed Chinese solar companies Canadian Solar and JinkoSolar, and Taiwanese LED stock Lextar Electronics, all positions that the Fund has held for most of this year in anticipation of improving financial performance in the second half of the year. |
| More Information | » View detailed profile of this 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.
6 Oct 2014 - Fund Review: Supervised High Yield Fund August 2014
We would like to highlight the following aspects of the Fund:
- The Supervised High Yield Fund (SHYF) has a 5 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 32 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.
Research and Database Manager
Australian Fund Monitors
Supervised High Yield Fund Review August 2014 (pdf format)
6 Oct 2014 - 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 | Overall our long book contribution to return was outweighed by a negative contribution from our short book. The fund experienced a strong contribution from healthcare but this was overshadowed by a larger negative contribution from financials. Other sector exposure returns largely balanced each other. Within financials, the trend to increase payout ratios and dividends with reported results was a major negative factor in two of our short positions (Suncorp +8.0% and AMP +7.1%) which re-rated substantially more than their respective paired longs (QBE +4.7% and Henderson -9.2%). Fund activity was limited for the month; we participated in two placements in existing long positions and adjusted weightings in some pairs but did not add new positions or close any existing holdings. |
| More Information | » View detailed profile of this fund |
0.56% in August. Net equity market exposure (including derivatives) averaged around 55% during the month, but was reduced to 36% at month end. CPD Points are now available
3 Oct 2014 - Fund Review: Bennelong Kardinia Absolute Return Fund August 2014
Bennelong Kardinia Fund Review August 2014 (pdf format)
3 Oct 2014 - Hedge Clippings
The volatility that had been threatening Australian equities for the past few months, but which had stubbornly refused to be reflected in the market, hit home severely in September with the ASX 200 Accumulation Index down -5.4%.
To put that into context, it's the worst performance by the Australian market since May 2012 (-6.64%) and the first time since August 2012 that the rolling 12 month return (+5.93%) has dipped into single figures. On a year-to-date basis the accumulated return of the ASX 200 is now just 2.42%.
At the same time, and undoubtedly connected, the Aussie dollar also took a bath (or at least a cold shower) as a combination of poor commodity prices, particularly iron ore as China's buying slowed, a resurgence in the US dollar on the back of the end of QE, and the threat of impending increases in US interest rates saw capital outflow across the Pacific.
The funds in the best position are likely to be those with offshore and US dollar exposure in particular, provided they had limited currency hedging in place.
None of this was particularly surprising, and in fact to many fund managers it was somewhat inevitable. Investor's incessant chase for yield, particularly in the banking sector, had seen valuations stretched, with more than a few managers struggling to outperform while staying true to type. While it is early days yet for accurate indications for September returns, those that we have seen indicate the manager's ability to outperform in falling markets.
For hedge funds in particular the past two years have not been the easiest of times, and whilst none will particularly like the falling market, the increase in volatility, and their general ability to protect capital will reinforce their value to investors.
Specific results received this week include the following PERFORMANCE UPDATES:
The Allard Investment Fund (Asian equity) returned 0.40% during August and 9.35% over the preceding year with a volatility of 5.46%.
During August, the Morphic Global Opportunities Fund delivered a return of 1.28% and 14.57% over the previous 12 months with a volatility of 8.23%.
CPD points are available for all FUND REVIEWS released this week including:
Insync Global Titans Fund; Bennelong Kardinia Absolute Return Fund;
15-17 October Grace Hotel, Sydney - Investment Performance Measurement, Attribution & Risk Management Forum will have leading experts sharing up-to-date, cutting edge ideas and insight on frontiers of recent developments in performance measurement.
21-22 October in Sydney Post-Retirement Australia 2014 conference. Comprehensive two day forum for high profile cross industry participants to provide updates, insights and ongoing discussion into the key issues central to achieving optimal financial outcomes.
Friday 24 October in Sydney Financial and Media Markets Charity Regatta Day out of Middle Harbour Yacht Club. Promises to be a fantastic day.
5-6 November, Grace Hotel, Sydney. Alternative Investments Conference - Investigating the rise of non-traditional high yield and low risk investment products, strategies and allocation in an era of prolonged volatility and low returns.
This week's Now For Something Completely Different... with a long weekend approaching, double demerit points are in force, so whatever you do, drive safely or take alternative forms of transport. This clip is quite sobering, but should be watched by everyone to remind us that we aren't invincible.
Best wishes for a happy and healthy weekend,
Chris
CEO, AUSTRALIAN FUND MONITORS
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| Registration to AFM is free and provides general information and performance data on Absolute Return, Hedge Funds and Alternative Investments. | Fund Managers and paid Subscribers have access to details on Individual Managers and Funds, with historical results, key performance indicators, latest news and performance reports. | Prism Select provides self-directed investors and their advisors with factual information, performance data and opportunity to apply for funds online using OLIVIA123. | Tune into Sky Business on Foxtel every week on Monday at 2:15 pm for AFM's weekly comment. |
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.
2 Oct 2014 - Fund Review: Insync Global Titans Fund August 2014
INSYNC GLOBAL TITANS FUND
Attached is our most recently updated Fund Review on the Insync Global Titans 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.
We would like to highlight the following:
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The Fund?s unit price increased by 0.8% in August. Key positive contributors for the month came from our holdings in Express Scripts, Sanofi, Gilead Sciences, Nestle and Disney. The main negative contributors were Reckitt Benckiser, Zimmer, Deutsche Boerse, Rolls-Royce and BSkyB. 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.
Sean Webster
Research Manager
Australian Fund Monitors
Insync Global Titans Fund August 2014 (pdf format)
2 Oct 2014 - Morphic Global Opportunities Fund
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| Manager Comments | The fund's top active positions were Japanese Drug Stores, US banks and UK water utilities. The Fund's best contributor was one of our longest-term holdings, US chip design services firm Mentor Graphics, which rose almost 10% as the company reported a solid quarterly earnings beat on exceptional sales to its automotive design clients. On a PE of 12 Mentor remains too cheap for a business with such a robust oligopoly industry structure and compared to its peers. The Fund continues to position itself for a bull market. Europe appears to be joining the liquidity party and trends in many emerging markets are showing signs of having bottomed. The Fund is fully invested with some option positions to profit from any further surge. The fund has hedged some of its euro exposure into sterling and USD, and some of its yen back into Australian dollars. |
| More Information | » View detailed profile of this fund |
1 Oct 2014 - Allard Investment Fund
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| Manager Comments | Since inception in July 2003 the Fund has delivered a return of 8.8% pa as compared to teh MSCI Asia Pacific (ex Japan) Index of 10.6% with around 60% of the Index volatility with Fund volatility of 7.9% as compared to 13.5%. The Fund geographical exposure was HK/China 42.9%, Singapore 12.6%, Korea 8.1% and Cash and Fixed Income holdings of 22.5%. In terms of industry breakdown the three largest sectors were Financial Services 19.3%, Conglomerates 12.6% and Telcos 8.8%. |
| More Information | » View detailed profile of this fund |
29 Sep 2014 - Hedge Clippings
And now for something completely different to start with. Hedge Clippings on a Monday.
The past couple of weeks have seen two "exit" news items out of the USA which have caught the attention of the absolute return sector. Firstly CalPERS, (California Public Employees' Retirement System) a significant and longstanding hedge fund investor, decided to exit their entire $4 billion exposure to the sector, followed last week by the news that investment manager Bill Gross, frequently cited as one of the industry's gurus and a founder and 40 year veteran of PIMCO, with a total of $2 trillion in FUM had quit to join the much smaller Janus Capital Group.
As this article from Forbes explains, while CalPERS' $4 billion seems a significant chunk of capital, it represented only a small portion of the $300 billion they manage in total. If one used the Australian Future Fund's hedge fund exposure of 16% as an example, CalPERS would have to increase their allocations by a massive $44 billion to match it.
CalPERS cited fees, performance and complexity as being amongst the reasons for their exit from hedge funds, and we have no doubt all are a significant factor. But with only just over 1% of their assets allocated to any one sector, it made it difficult (and expensive) to make a significant difference to their overall performance, which incidentally hadn't been too good.
The problem comes down to the trade-off between size and performance. It has long been understood that while the majority of institutional investors' capital flows into the largest 10% of funds, it is equally accepted that this is not where the best returns are to be found.
Take Bill Gross' fund at PIMCO for example. Over the past 15 years he provided returns in the top 12% of his peers, but over the past 12 months he has lagged to be in the bottom 20%. At his new home, Janus Capital Group, he will reportedly have just $13 million in FUM, and be in a significantly better position to outperform once again.
Anecdotal evidence suggests that there were other issues in his exit from Pimco, including differences of opinion over management. While his new fund won't have the luxury of the management fees he was earning, he will have the flexibility and freedom to return to being a nimble investor, one of the key drivers of small to medium funds' out performance of their larger competitors.
It seems size isn't just important, it just matters.
Specific results received this week include the following PERFORMANCEUPDATES:
KIS Asia Long Short Fund returned -0.1% during August and 9.57% over the prior twelve months with a low volatility of 2.65%.
Results for August show the Laminar Credit Opportunities Fund returned 0.53% for a 12 month return of 9.64% (RBA Cash Rate average 2.50%) with a volatility of 0.59%.
The Auscap Long Short Australian Equities Fund returned 5.24% during August, a strong out-performance of the equity market return of 0.62%, with a 12 month performance of 44.87% and a volatility of 6.55%.
Pengana Absolute Return Asia Pacific Fund returned 0.60% in August and 7.57% for the year with a volatility of 2.85% and a Sharpe ratio of 1.72.
During August, the Totus Alpha Fund delivered 2.02% bringing the 12 month performance to 37.96% with a volatility of 15.63%.
CPD points are available for all FUND REVIEWS released this week including:
Monash Absolute Investment Fund; Microequities Deep Value Microcap Fund; Optimal Australia Absolute Trust; Alpha Beta Asian Fund
15-17 October Grace Hotel, Sydney - Investment Performance Measurement, Attribution & Risk Management Forum will have leading experts sharing up-to-date, cutting edge ideas and insight on frontiers of recent developments in performance measurement.
21-22 Octoberin Sydney Post-Retirement Australia 2014 conference. Comprehensive two day forum for high profile cross industry participants to provide updates, insights and ongoing discussion into the key issues central to achieving optimal financial outcomes.
Friday 24 Octoberin Sydney Financial and Media Markets Charity Regatta Day out of Middle Harbour Yacht Club. Promises to be a fantastic day.
5-6 November, Grace Hotel, Sydney. Alternative Investments Conference - Investigating the rise of non-traditional high yield and low risk investment products, strategies and allocation in an era of prolonged volatility and low returns.
This week's Now For Something Completely Different, this guy should buy a lottery ticket, he wasn't even wearing a helmet.
Best wishes for a happy and healthy week ahead,
Chris
Connect with me on LinkedIn Twitter Facebook
| Registration to AFM is free and provides general information and performance data on Absolute Return, Hedge Funds and Alternative Investments. | Fund Managers and paid Subscribers have access to details on Individual Managers and Funds, with historical results, key performance indicators, latest news and performance reports. | Prism Select provides self-directed investors and their advisors with factual information, performance data and opportunity to apply for funds online using OLIVIA123. | Tune into Sky Business on Foxtel every week on Monday at 2:15 pm for AFM's weekly comment. |
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.
29 Sep 2014 - Fund Review: Alpha Beta Asian Fund AFM Fund Review August 2014
ALPHA BETA ASIAN FUND
AFM has updated the Fund Review on the Alpha Beta Asian 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 The Alpha Beta Asian Fund invests in Asian listed equity markets with a focus on liquid companies in Australia, Japan, Hong Kong, Indonesia, Philippines and Thailand. The Fund uses a systematic approach to evaluate macroeconomic, company fundamental and price data, all of which are evaluated through a series of quantitative models.
- Sydney based Alpha Beta Capital was established by Andrew Barry and Ken Lewis in May 2012. Both Barry and Lewis have significant qualifications and international experience in funds management, including working together at Coronation International, a global multi-strategy hedge fund group in London.
- The Strategy relies on a number of core beliefs: Firstly that a well designed systematic investment process, operating within a multi-strategy framework will be able to extract consistent returns, on average, with low volatility. Secondly, by utilising holding periods substantially shorter than the industry-norm, profit opportunities consistently arise. Finally, a strategy that holds a large number of small positions versus a small number of concentrated positions, will remove much of the emotional angst of trading, and the investment process becomes repeatable.
- In keeping with the Manager's overall systematic approach the Risk Management includes real time monitoring of positions and market exposure, and is combined into a proprietary and automated system called PARMS (Portfolio and Risk Management System). PARMS is a centralised and integrated system which provides full functionality including stress testing.
For further details on the Fund, please do not hesitate to contact us.
Sean Webster
Research Manager
Alpha Beta Asian Fund August 2014 (pdf format)
