NEWS
Pengana Australian Equities Market Neutral Fund
23 Jan 2015 - Australian Fund Monitors
Pengana Australian Equities Market Neutral Fund returned -3.90% during December compared to the ASX200 Accum Indx 2.06%, bringing 2014 return to -13.53% (Index 5.61%)
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23 Jan 2015 - Pengana Australian Equities Market Neutral Fund
By: Australian Fund Monitors
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| Fund Overview | Following a review, Pengana Capital Limited have decided to change the investment team for the Pengana Australian Equities Market Neutral Fund. The new investment team will continue to manage the Fund in accordance with the Fund's current investment objectives. We expect to be able to advise the details of the new investment team within the next 2 to 3 weeks. Investors will not be exposed to investment performance risk during the transitionary phase. The assets of the Fund will be liquidated into cash pending the appointment of the new investment team. Following the appointment of the new investment team, the cash will then be reinvested into equities. Pengana Capital will issue an updated Product Disclosure Statement when the new investment team is formally appointed which we estimate to be in 2 to 3 weeks. There will be no change to the product features other than the investment team change and we envisage only minor refinements to the investment process and investment guidelines of the Fund, which will be disclosed in an updated Product Disclosure Statement. The Fund's Product Disclosure Statement has been withdrawn and, until the updated Product Disclosure Statement is issued, the Fund is closed to all applications. Any application requests received after 2pm on Thursday 15 January 2015 will not be processed and will be returned with all application monies. Withdrawals will continue to be processed as normal and payment made in accordance with instructions. Existing investors do not need to take any action at this time. We will advise them once the new investment team is appointed and the updated Product Disclosure Statement is issued. Should you require any further information at this time, please contact your Financial Adviser or Pengana's Client Services team: Phone: 02 8524 9900 Email: [email protected] |
| Manager Comments | Value was the worst performing factor over the quarter followed by Momentum, Quality and Revisions. Falling risk appetite continued to gather momentum over the quarter and was accentuated by falling market volatility and trade volumes over December. The fund benefitted from its short position in the iron ore exposed names of Arrium and Mount Gibson and its net short to the energy sector with Santos and AWE in particular adding value, however the long exposure to Lonestar Energy detracted value from the portfolio. The net short to mining services companies detracted value for the quarter in spite of their deteriorating outlook as miners and now oil and gas companies look to lower CAPEX budgets. Sharp falls, followed by strong rallies from the likes RCR Tomlinson and Skilled group were examples of a sector where performance was highly variable and volatile. The Consumer discretionary sector was a poor performer with the fund exposed to both Flight centre and STW communications at the time of both their profit downgrades. The model has identified Harvey Norman, Nine Entertainment and Dick Smith as core long positions representing both value and positive earnings momentum within the consumer sector. Peet is one of the fund's top holdings as it trades at a 13% discount to NTA, is exposed to the improving development market in Queensland and delivered solid margin expansion and EPS growth in FY14. It screens positively across most of our metrics especially within the property sector. Paladin energy now screens very poorly across all our Valuation and Quality metrics and is one of the largest short positions in the fund. |
| More Information | » View detailed profile of this fund |
Fund Review: Morphic Global Opportunities Fund December 2014
23 Jan 2015 - Australian Fund Monitors
The December Fund Review shows performance at 2.62% for the Morphic Global Opportunities Fund ahead of the Global Equity Index (2.03%) and a 12 month Sharpe ratio of 1.42. CPD Points available.
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23 Jan 2015 - Fund Review: Morphic Global Opportunities Fund December 2014
By: Australian Fund Monitors
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
Totus Alpha Fund
23 Jan 2015 - Australian Fund Monitors
Totus Alpha Fund returned -2.30% during December bringing year to date return for 2014 to 12.85% with a volatility 9.14%.
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23 Jan 2015 - Totus Alpha Fund
By: Australian Fund Monitors
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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 | This annualised return was comfortably ahead of the broader Australian market return of 5.3% including dividends. In a year in which many asset classes experienced an uptick in volatility it is pleasing that the fund was able to deliver absolute returns from both the long (+7%) and short (+6%) side of the book. It is also pleasing that the contribution to returns was relatively broad based with no single stock or theme impacting returns by >5% during the year. Top contributors to performance in December were the short positions in LNG Limited +1.42% (Promoter) and Metcash +1.09% (Structural Change). Long position in 1-Page added 0.69% (Online). Biggest detractors from performance were long positions in Estia Health -3.62% (Ageing Population) and Flight Centre -0.57% (Scarce Growth), whilst the short position in a litigious stock promoter detracted -1.30%. |
| More Information | » View detailed profile of this fund |
Fund Review: Monash Absolute Investment Fund Dec 2014
22 Jan 2015 - Australian Fund Monitors
Monash Absolute Investment Fund improved 0.80% in December and returned 5.40% for the previous 12 months. The Monash Absolute Investment Fund is a long/short equity fund, with a home bias to investing in Australia. The Fund places a high...
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22 Jan 2015 - Fund Review: Monash Absolute Investment Fund Dec 2014
By: Australian Fund Monitors
MONASH ABSOLUTE INVESTMENT 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 aspects of the Fund:
- The Fund is a research driven, active equity long/short strategy investing in listed ASX companies.
- The Fund seeks to identify opportunities in the share market to make positive returns (long and short) irrespective of market conditions. It is style agnostic, as compelling investment opportunities exist across all investment styles from time to time. The Fund places a high priority on capital preservation, and has an absolute return focus in accepting market risk.
If you have any questions in relation to the Fund Review, please do not hesitate to contact us.
Sean Webster
Research and Database Manager
Australian Fund Monitors
Laminar Credit Opportunities Fund
22 Jan 2015 - Australian Fund Monitors
Laminar Credit Opportunities Fund returned 0.64% over the month of December bringing 2014 return to 9.04% (compared to the ASX200 Accum Index return at 5.61%) and volatility of 0.63% (Index 10.95%).
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22 Jan 2015 - Laminar Credit Opportunities Fund
By: Australian Fund Monitors
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| Fund Overview | The Fund may also invest in derivatives for hedging purposes. The portfolio of the Fund comprises primarily Investment Grade holding of 75% of the Fund's assets. Benchmark allocations are Australasia 50% to 100%, North America 0% to 50% and Europe 0% to 50%. Currency hedging may take place depending on benefits to the Fund. |
| Manager Comments | The portfolio composition of the Fund did see some change over the year. Although the allocation to residential mortgage backed securities (RMBS) was roughly the same, falling from 67% to 65%, the allocation to short dated loans increased from 10% to 19%. Laminar will continue to focus on short dated assets in 2015. These assets are a major contributor to the low credit duration of the Fund (2.2 years as at 31 December) and have provided stability to the unit price when market volatility increased in late 2014 and other assets experienced some negative returns. |
| More Information | » View detailed profile of this fund |
Fund Review: Bennelong Alpha 200 Fund Dec 2014
21 Jan 2015 - Australian Fund Monitors
The Alpha 200 Fund primarily invests within the top 200 by market capitalisation, using a similar "pairs trading" approach while remaining broadly market neutral on a cost basis. The Fund returned -0.13% in October and 2.26% since...
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21 Jan 2015 - Fund Review: Bennelong Alpha 200 Fund Dec 2014
By: Australian Fund Monitors
Bennelong Alpha 200 Fund Fund Review - December 2014 (pdf format)
BENNELONG ALPHA 200 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 aspects of the Fund:
- The Bennelong Alpha 200 Fund is a new fund opened in December 2013. The Fund is broadly modelled on the strategy used for Bennelong's original Equity Long Short Fund which uses a market neutral "pairs trading" approach to invest in Top 100 stocks, and which has been managed by Richard Fish since the inception of BLSEM in 2002.
- The Alpha 200 Fund however primarily invests within the top 200 by market capitalisation, using a similar "pairs trading" approach while remaining broadly market neutral on a cost basis.
- The Fund will hold 70 - 90 stocks comprising 35 to 45 pairs,although it can hold up to 100 stocks and 50 pairs. Each pair contains one long and one short position each of which is thoroughly researched and,where possible, from the same market sector. The pair positions are dollar neutral at cost, limited in terms of sector exposure, and give theportfolio a target beta of zero over time.
- In addition to Richard Fish, the team is composed of Sam Shepherd who joined BLESM from Credit Suisse, where he ran the Melbourne institutional equities desk. Shepherd's 20 year experience also covers JP Morgan and Norwich Investment Management. Tim Hall recently joined BLSEM as a specialist mid and small-cap portfolio manager to work on the expanded universe of the 200 Alpha Fund. The team is supported by experienced investment analyst, Sam Taylor.
If you have any questions in relation to the Fund Review, please do not hesitate to contact us.
Sean Webster
Research and Database Manager
Australian Fund Monitors
Bennelong Alpha 200 Fund Fund Review - December 2014 (pdf format)
Optimal Australia Absolute Trust
21 Jan 2015 - Australian Fund Monitors
Optimal Australia Absolute Trust returned -1.53% in December, resulting in a 2014 annual return of 3.24% (ASX200 Accum Index 5.61%) and volatility of 2.80% (Index 10.95%).
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21 Jan 2015 - Optimal Australia Absolute Trust
By: Australian Fund Monitors
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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 | Two key macro factors took the fund's return down, being the surprising collapse in energy prices and unprecedented decline in bond yields. Extreme volatility in the energy sector continued in December, and led to some contagion in the wider commodity complex. Specifically, a broad range of positive long positions were overwhelmed by losses from small exposure to energy and metals. Elsewhere, the fund realised solid gains in a number of non-bank financials, but hedging these against banks proved too costly, despite the implications of the Murray report for bank sector capital and forward ROE being essentially negative. |
| More Information | » View detailed profile of this fund |
Aurora Fortitude Absolute Return Fund
20 Jan 2015 - Australian Fund Monitors
Aurora Fortitude Absolute Return Fund returned -0.74% during December, bringing 2014 annual return to 0.71% (ASX200 Total Return 5.61%) with a volatility of 1.23% (Index 10.95%).
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20 Jan 2015 - Aurora Fortitude Absolute Return Fund
By: Australian Fund Monitors
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| Fund Overview | The Fund aims to produce positive returns irrespective of the direction of the share market. For each investment the manager considers the risk, the timeline of that risk occurring and then the potential return. Low transaction costs and liquidity are other important factors in the success and implementation of the strategies. |
| Manager Comments | The month's performance was again strongly dictated through Long/Short trading (-1.26%) largely caused by the collapse of a planned asset sale by Stonewall Resources. The Initial Public Offer (IPO) of Australian Careers Network was also a drawdown within the Long/Short strategy as the market became more cautious of vocational education and training businesses after a competitor had a major downgrade. As part of the ongoing risk management process, the Manager has continued to unwind some of the smaller, less liquid positions where price and time stop losses have been triggered. Mergers and Acquisitions was the most profitable strategy for the month (+0.25%). The Option overlay was profitable (+0.19%) due to increasing levels of volatility. The strong moves in industrial names provided positive returns from Wesfarmers, Westpac, Stockland and Macquarie Group. Rio Tinto and Newcrest were the best of the resources positions against some under-performance from Woodside Petroleum Ltd and BHP Biliton. |
| More Information | » View detailed profile of this fund |
Monash Absolute Investment Fund
19 Jan 2015 - Australian Fund Monitors
Monash Absolute Investment Fund returned 0.80% during December bringing the 2014 return to 5.40% (ASX 200 Accum 5.61%) and a volatility of 8.10% (Index 10.95%).
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19 Jan 2015 - Monash Absolute Investment Fund
By: Australian Fund Monitors
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| Fund Overview | The fund seeks to identify opportunities in the share market to make positive returns (long and short) irrespective of market conditions. It is style agnostic, as compelling investment opportunities exist across all investment styles from time to time. The Fund places a high priority on capital preservation, and has an absolute return focus in accepting market risk. The Manager's experience across value, growth and discounted cash flow styles allows them to use a comprehensive approach to investment decisions that applies all three. They also have the patience to seek out only compelling opportunities, rather than settling for relative value. The portfolio is somewhat concentrated, looking to diversify across industries and themes, rather than by trying to stay near an index. The portfolio may at times have a large amount of cash or other protection. However once investments are made turnover may be relatively high in order to lock in gains and avoid losses. |
| Manager Comments | The Manager notes that the portfolio has been close to flat over the last 6 months, however the stocks continue to operate very well with the expectation that strong performance will be reflected in the share prices soon enough. For example, Lend Lease (EML) rose 7.0% in December. Despite its share price run over the year, it is only on a P/E of 13.4x for FY16. With almost half of its earnings coming from overseas it is a beneficiary of the Australian Dollar fall. Nonetheless, Yowie Group (YOW) fell 13.5% this month, although the Manager notes that the company's products have had a great deal of interest by US retailers due to a lack of market competition. NetComm Wireless (NTC) also fell 14.3%. |
| More Information | » View detailed profile of this fund |
Hedge Clippings
16 Jan 2015 - Australian Fund Monitors
Welcome back to Friday afternoons, and Hedge Clippings. Even if you're still on holiday, languishing on the beach, or quietly sipping a glass of something cool and refreshing, you'll be pleased to know that some of us at least are back at...
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16 Jan 2015 - Hedge Clippings
By: Australian Fund Monitors
Here we go again...
Welcome back to Friday afternoons, and Hedge Clippings. Even if you're still on holiday, languishing on the beach, or quietly sipping a glass of something cool and refreshing, you'll be pleased to know that some of us at least are back at the grindstone for another year.
So to kick off the year ahead let's look at the performance of funds and strategies over the past 12 months, and also preview some of the major themes or issues facing markets in 2015.
We need to be a bit careful on some of the numbers below but with just over 59% of December's results in to date, there's a pretty strong trend:
| Sector/Index | 2014 Performance |
|---|---|
| Equity hedge funds | +7.77% |
| Non Equity hedge funds | +4.07% |
| ASX200 accumulation index | +5.61% |
| S&P500 accumulation index | +13.69% |
| % of funds outperforming the ASX200 | 59% |
| % of funds with positive returns | 89% |
At the individual fund level 12 month performances ranged from -22% through to +54%. The ASX200 itself only rose 1.1% for the 12 months to 31 December, so dividends etc. added 4.5% to investors' returns, and that probably explained the strength of the yield chasing that was going on with interest rates so low - particularly in the banks and stocks such as Telstra.
Overall from an anecdotal perspective most managers found 2015 pretty tough - in fact a number have confided that they found it one of the hardest years they'd experienced. In particular low equity market volatility, although with some notable spikes at specific times, along with the punishment handed out to companies that disappointed analysts and investors, made it a difficult year.
Certainly the best performing funds were either the stock pickers (provided they got their picks right) or those funds investing overseas which had the double benefit of stronger offshore markets, and the A$ as it finally declined in the second half of the year.
Strategy wise there was the usual dispersion of returns, but not as extreme as in previous years, with only Currency (-1.04%) and Commodities/CTA's (-4.29%) posting negative numbers:
| Sector/Index | 2014 Performance |
|---|---|
| Equity Long | +9.33% |
| Event Driven | +8.50% |
| Equity Long/Short | +8.02% |
| Equity Buy/Write | +6.39% |
| Fixed Income | +6.21% |
| Equity Market Neutral | +2.09% |
Of course the big themes for the year were the slump in commodity prices, record low interest rates, and towards the end of the year the oil price heading towards $50 per barrel.
Overseas the US saw off QE and seems to be prepared for rates to rise, Europe remains a dog's breakfast, and China remains a question mark.
So the big themes - or questions - for 2015?
- Will the US equity markets actually handle a rate rise without too much of a rush for the exit sign? Valuations are pretty rich, so volatility could rise if the transition isn't smooth.
- How will the oil price affect global economies - including Russia?
- Can Europe pull itself out of the doldrums, and will Greece - or perhaps Portugal - exit the EU and create volatility.
- Will RBA Governor Glen Stevens get his way, and will the A$ continue towards his $0.75c target, possibly driven by a further rate cut?
- Locally 2014 was a year of missed opportunities and fumbles for the government, and although an expanded and increased GST is being discussed, it's unlikely for the time being. So what's in store for the budget and politics in general?
All these questions and more will be covered at AFM and Deloitte's "Looking Forward, Looking Back" lunchtime seminar on Thursday 12 February in Sydney. We'll have four of the best and brightest fund managers on hand, including Simon Shields, George Colman, John Corr and Monik Kotetcha to give you the benefit of their opinion, so if you would like to attend, please register your interest here.
Specific results received this week include the following PERFORMANCE UPDATES:
Bennelong Kardinia Absolute Return Fund returned 1.53% during December, bringing 2014 performance to 5.77% (ASX 200 Acc 5.61%) with volatility at 4.17% (Index 10.95%).
The Morphic Global Opportunities Fund 2.62% in December bringing the annual return to 13.99% (Global Equity Index 12.57%) with a volatility of 7.75%.
Bennelong Alpha 200 Fund returned -0.13% during December, bringing returns to 2.26% over 2014 (ASX Accum Index 5.61%).
Thursday 12 February 2015 in conjunction with Deloitte, AFM are pleased to be holding a lunch time presentation in Sydney entitled 2015 Market Outlook:"Looking Forward, Looking Back" featuring the opinions and experience of some of Australia's best fund managers. RSVP and reserve your place here.
18 February 2015 in Sydney - Efficiency in a Regulated World
25-27 March 2015 - Digital Marketing for Banking and Financial Services Summit
Meanwhile, back to the beach, and some liquid refreshment. Here's to a happy and healthy week-end to you all.
Kind regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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