MORPHIC GLOBAL OPPORTUNITIES FUND

ATTACHED FILESMorphic Global Opportunities AFM Monthly Review April 2014 (pdf format)

Having given the Treasurer a break in last week's Hedge Clippings, we're going to do the same again this week. After all this missive is called "Hedge Clippings", not "Head Kickings", and however tempting, there's not much that we can add to the debate. Even Clive Palmer is helping to distract attention from the budget.

So back to last week's topic, and the difficult investment markets that hedge funds both in Australia and overseas are currently navigating. While the averages have improved marginally now that most funds have reported, the reality remains that the sector as a whole lost 0.08% in April, while equity-based funds lost 0.17%, against the ASX 200 accumulation index which rose 1.77% for an outperformance of almost 2%.

Although specific corporate action caused some damage to crowded short positions in the likes of Goodman Fielder and Treasury Wine Estates, the broader feedback from a number of hedge funds managers was that the rotation out of quality stocks, and into poorer ones (or as one manager more simply put it "the crap") was making life particularly difficult.

This is also borne out by an interesting chart we saw from Goldman Sachs Global Investment Research in the US which showed the relative long/short performance of those companies with strong balance sheets, versus those with weak balance sheets - in other words "quality versus crap".

Normally one would expect quality to outperform, but given the effects of QE and easy credit, that position has reversed over the past two years to the point where there has been a steady increase (now in the region of 50%) in the outperformance of companies with weak balance sheets. Equally companies that are paying high dividends, as opposed to those reinvesting their profits in building their business, are understandably becoming more attractive given investors' the alternative of leaving money in the bank.

What was apparent talking to fund managers this week was that long/short investing is not nearly as straightforward as simply buying companies you like, and selling those you don't, particularly in the short term when the companies you don't like are sold down to such an extent (and often for a very good reason) that they become compelling or more attractive to private equity players or other corporate activity.

Life, as one ex-prime minister once remarked to his regret, "wasn't meant to be easy", particularly for a hedge fund manager.

Specific results received this week include the following PERFORMANCE and NEWS UPDATES:

In a volatile market for it's sectors, the Nanuk Global Alpha Fund returned -2.93% during April with annual performance standing at 17.11%.

Allard's Investment Fund returned 8.84% for the last year with a vol of 6.68%.

The Auscap Long Short Australian Equities Fund returned 0.29% in a volatile month, with annual performance 44.01% to April 2014.

With a very low volatility of 3.3%, the KIS Asia Long Short Fund returned -0.77% during April and 14.33% for the preceding 12 months.

The Pengana Australian Equities Market Neutral Fund returned -1.20% during April with twelve month performance of 12.29% and volatility of 8.43%, while it's Australian Equities Fund had a positive month, returning 1.24%.

Although it had a negative April, the annual performance of Avenir's Value Fund is very strong at 40.16% with a volatility of 8.50%..

FUND REVIEWS updated this week included: 

Optimal Australia Absolute Trust - Insync Global Titans Fund - Monash Absolute Investment Fund

FUTURE EVENTS:

18 June in Sydney: MAX: the Marketing, Advertising and Sales Excellence Forum and Awards. Forum 8am - 4:30pm; Awards dinner 7-10pm.

14-15 August in Sydney: Alternative Investments Conference - Investigating the rise and rise of non-traditional high yield and low risk investment products, strategies and allocation in an era of prolonged volatility and low returns.

If you would like your Event listed in our calendar, please contact us.

And now for something completely different this week,.. although he passed away in 1989, it would have been Mel Blanc's birthday today, the man of a thousand voices, we thought you might enjoy this clip from the Jack Benny show, it's an oldie but a goodie.

On that note, I hope you have a safe and happy weekend.

Best wishes,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

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.

Attached is our most recently updated Fund Review on the Optimal Australia Absolute Trust.  

We would like to highlight the following:

• 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 Fund returned 0.57% in April with an annual return of 4.62% and a very low standard deviation of 1.60% (ASX 200 Acc 10.48%).
• The Fund has recorded out-performance of the market since inception in September 2008 with approximately 84% of monthly performances having positive returns and the largest drawdown was -1.38% (Index -33.11%). 
• The Fund has sound Sharpe and Sortino ratios at 1.74 and 5.08 since inception, as compared to the Index ratios of 0.20 and 0.18 respectively.
• The investment team comprising George Colman, Peter Whiting supported by Stephen Nicholls and Justin Hay have over 100 years combined experience in equity markets.

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

Sean Webster

Research and Database Manager
Australian Fund Monitors

ATTACHED FILESOptimal Australia Absolute Trust April 2014 Performance Report (pdf format)

INSYNC GLOBAL TITANS FUND

ATTACHED FILESInsync Global Titans Fund AFM Review - April 2014 (pdf format)