History might not always repeat itself, but it frequently rhymes

This week saw the 29^th anniversary of the 1987 stock market crash. For those that can't remember, (or choose not to) or weren't around to experience it, on "Black Tuesday" October 20^th the Australian market fell by 25%, following the DJIA's fall of 22% in the US the previous night ("Black Monday"). By the end of October '87 the local market had fallen by over 40%, and at its lows had recorded an overall drawdown of 50% (exciting the followers of Fibonacci along the way) from the highs it had reached in August of that year.

The actual catalyst for the crash can be traced back to a number of individual and varied events, including a storm in the UK the previous Friday which closed the London exchange and increasing tensions in the Middle East between the USA and Iran. However, the underlying causes were a combination of over-inflated valuations, excessive leverage, and debt, exaggerated by program trading during the crash itself.

Of course human traits such as fear and greed also exaggerated the problem, as they have in every boom and bust before and since, and no doubt will do so again in the future.

The problem in Australia was further exaggerated by the likes of Bond Corporation, Quintex, and Rothwells, where greed was alive and well, along with a complete lack of fear (at least when it came to playing with other people's money).

The same happened in 2008 and will happen again next time. In 2008 the local market fell over 45% between September and March 2009, and one could argue that the QE and easy credit response of central banks we have seen since could well be setting the scene for the bursting of the resultant asset bubbles.

Interestingly, or importantly, in 2008 almost one in four Australian hedge funds produced a positive annual result, with the average of all funds falling by less than half of the ASX 200.

The reality is that when asset prices become unreasonably inflated, for whatever reason, a series of potentially unrelated events can act as a catalyst for the end of the game. Whether the asset bubble is in equities, or real estate, or caused by corporate actions or central bank policy, the bigger the bubble, the louder the bang.

PERFORMANCE NEWS 

Bennelong Twenty20 Australian Equities Fund returned 0.07% in September to take latest 6-months return to 9.06%. 

APN Asian REIT Fund returned -0.70% in September, outperforming the Bloomberg Asia REIT Index which returned -1.53%, by 0.83%.

QATO Capital Market Neutral Long/Short Fund returned +1.23% for September, outperforming the ASX-100 by +1.21%, which returned +0.02%.

NWQ Fiduciary Fund returned +0.16% in September and +13.69% over the latest 24-months. 

Touchstone Index Unaware Fund rose 0.47% in September to take latest 6-months return to 8.26%.

Affluence Investment Fund rose 0.59% in September to take the annualised performance since inception to 10.95% p.a.

KIS Asia Long Short Fund rose 1.45% in September taking the return for the most recent 12 months to 16.55%. 

FUND REVIEWS released this week: Optimal Australia Absolute Trust; Bennelong Kardinia Absolute Return Fund; Pengana Absolute Return Asia Pacific Fund;  

And on that note, have a great weekend.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

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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.

PENGANA ABSOLUTE RETURN ASIA PACIFIC FUND

Attached is our most recently updated Fund Review on the Pengana Absolute Return Asia Pacific Fund.

• The Pengana Absolute Return Asia Pacific Fund ("PARAP") was established in 2008 by portfolio managers Antonio Meroni and Vikas Kumra. The Fund is a feeder fund into a Cayman Islands AUD share class fund.
• The Fund invests both long and short in Asia Pacific equities, including in Australian and New Zealand, after a stock specific "event" has either occurred or been announced and the portfolio aims to be uncorrelated to the underlying equity markets. A combination of the Manager's experience, thorough research and continuous back- testing identify the most attractive of these events.
• Risk controls include limits on individual positions as well as gross and net exposure. Limits are in place for option exposure and cash borrowing, with stop loss limits on individual positions. Overall the manager is looking to derive returns from the event strategies as opposed to any currency or market exposures.
• Since inception, the Fund has an annualised return of 8.96% p.a., compared to the MSCI ACWI Asia Pacific Price Index's return of 3.90% p.a.

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

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - September 2016 (pdf format)

BENNELONG KARDINIA ABSOLUTE RETURN FUND

Attached is our most recently updated Fund Review. You are also able to view the Fund's Profile.

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

• The Fund has significantly outperformed the ASX200 Accumulation Index since its inception in May 2006 and also has significantly lower risk KPIs. The Fund has an annualised return of 11.59% p.a. with a volatility of 7.23%, compared to the ASX200 Accumulation's return of 4.88% p.a. with a volatility of 14.14%.

• 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 Bennelong Funds Management provide infrastructure, operational, compliance and distribution capabilities.

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

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - September 2016 (pdf format)

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.

• In September, the Fund rose 0.56%, to take annualised return since inception to 8.60% p.a. The Fund's approach to risk is shown by the Sharpe ratio of 1.37 (Index 0.21), Sortino ratio of 2.87 (Index 0.19), both of which are well above the ASX 200 Accumulation Index and has recorded 79% positive months.

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

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - September 2016 (pdf format)