NEWS
8 Aug 2014 - Hedge Clippings
This week's Clippings is going to attempt to multi-task, (not your scribe's strongest point) or at least cover a number of different topics. Feedback (positive or negative) is welcome.
Firstly AFM's Research Manager, Sean Webster has taken a look below the surface of yesterday's poor employment numbers (6.4% against the market expectation of 6.1%) which helped trigger a fall of almost 1c in the Aussie dollar, and led to further expectations of the RBA easing official rates by Christmas. RBA Governor Glen Stevens came out today and tried to pour cold water on that view, but it would certainly seem that any rate rise might be further off than previously expected.
Sean's piece, 'Lies, damn lies and statistics' is not suggesting there was any fiddling of the books, just that the ABS has made some significant changes to its data collection and survey methodology, and yesterday's numbers are the first example of the resultant numbers. For those wondering why the numbers were such a surprise it makes excellent reading.
What might also have impacted the unemployment rate was the never ending budget saga, which three months after budget night is still being debated in the media at least, as debate in parliament has been interrupted by Federal MP's winter overseas holidays (apologies, "fact finding tours"). Business hates uncertainty, almost as much as a bad budget. With the final budget outcome yet to be determined by negotiation with the minor parties in the Senate, including the uncertain Clive Palmer, business confidence and patience might be running as low as Treasurer Joe Hockey's.
Elsewhere Sean also unearthed this excellent article entitled The Great Fee Debate - Resetting Manager and Investor Expectations. If there's one subject guaranteed to generate ill feelings, let alone a debate, it is the quantum and structure of fund manager's fees. We have raised this issue before, and it was front and centre in David Murray's interim FSI report a few weeks ago, but Jonathan Rochford of Narrow Road Capital has some excellent points to make - most of all his number one factor when choosing a manager: Integrity. At AFM we often ask ourselves a rhetorical question when speaking with managers: Do they see managing other people's money as an opportunity, or a responsibility? Only after that can one analyse the value for money the Manager is providing.
Finally ASIC has today released its clarification on how it will apply the wholesale investor test to self-managed superannuation funds (SMSF's). As ASIC says: "This has long been an area of ongoing legal uncertainty" (and therefore probably quite a lucrative area of advice for the legal fraternity) where SMSF's were not necessarily judged to be wholesale investors even though their trustees were.
ASIC's revised approach can be viewed here, and as the previous approach (QFS 150) was issued ten years ago, and the SMSF sector has since grown dramatically to number over 500,000 funds, representing over one third of Australia's retirement pool by value, the clarity will be welcomed. As we read it, ASIC's new approach means that it is the Trustee's status as a wholesale investor which determines the wholesale status of their super fund. Maybe we should get a legal opinion on that. Or two just to be sure.
Specific results received this week include the following PERFORMANCE UPDATES:
Microequities Deep Value Microcap Fund recorded a return of 5.94% during July and 34.46% for the previous twelve months.
Returning a performance result of 3.20% in July, the Monash Absolute Investment Fund is now at 20.24% over the prior year with a volatility of 8.62% in line with the Index.
AFM are now accredited by the Financial Planning Association of Australia to issue CPD points for FUND REVIEWS.
This week's new reviews include:
Optimal Australia Absolute Trust, Aurora Fortitude Absolute Return Fund and also Insync Global Titans Fund
Read the most recent Fund Review for any of our research clients, and then answer 5 straightforward questions, these are presented in multiple choice format. An 80% or more success score will provide 0.5 CPD points, with a certificate provided as proof of completion. There is no charge for this service.
Tuesday 12th August 2014, from 12pm to 4.30pm - ARRIA is hosting a round table discussion in Sydney, providing a valuable opportunity to meet with like-minded advisers. No cost to participants. Also in Melbourne on Tuesday 26 August and Brisbane on Tuesday 9 September.
Wednesday 13 August 2014 - Perth and Thursday 14 August - Melbourne: Financial System Inquiry - Public Forums to raise issues and discuss the inquiry. Brisbane and Sydney next week. Click here to see dates in your capital city and register.
Thursday 14th August in Sydney: AIMA Australia Education Forum. The forum will discuss regulatory, tax and other issues, as well as current observations and insights associated with a range of hedge fund investment products, including Australian unit trusts, Cayman funds, UCITS and listed investment companies. It is a "must attend" event for hedge fund managers reviewing their current products or considering development of new products.
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.
Wednesday 27 - Friday 29 August Money Management's Platforms and Wraps conference in the beautiful Hunter Valley, NSW. Covers the latest industry trends and innovation, while also exploring technology iniatives, client segmentation, data ownership, analytics, marketing and distribution, regulatory reform and consolidation. Pre-conference golf and wine tour of Hope Estate included. Special rate for fundmonitors.com members.
If you would like your Event listed in our calendar, please contact us.
This week's Now For Something Completely Different should either put to rest the argument that children are not influenced by what they see on TV, or that cats are more intelligent than dogs. Enjoy, and wishing you a safe and happy week-end.
Best wishes,
Chris
CEO, AUSTRALIAN FUND MONITORS
Connect with me on LinkedIn Twitter Facebook
Registration to AFM is free and provides information and performance data on Absolute Return, Hedge Funds and Alternative Investments, plus detailed infomation on Featured Funds. | Fund Managers and paid Subscribers also have access to details on Individual Managers and Funds, with historical results, key performance indicators, latest news and performance reports. | Tune into Sky Business on Foxtel every week on Monday at 2:10pm for AFM's weekly comment on Hedge Funds. |
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.
8 Aug 2014 - Fund Review: Insync Global Titans Fund June 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:
- Global markets continued to record moderate gains over the month of June. Despite Q1 US real GDP estimates being revised down to -2.9% year on year, the US S&P 500 Index recorded its 6th straight quarterly gain supported by the Fed?s commitment to maintaining low interest rates despite signs of higher inflation. The news in Europe was less than rosy as markets slid on deflation concerns, thus far not taking much comfort in the ECB?s fresh round of measures to encourage bank lending.
- 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

7 Aug 2014 - Monash Absolute Investment Fund
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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's month-end exposure was net 81% and gross 82% and the VAR 1.1%. The Month-End Note discusses Fund holdings and is available on the AFM website. |
More Information | » View detailed profile of this fund |
6 Aug 2014 - Fund Review: Aurora Fortitude Absolute Return Fund June 2014
- The Aurora Fortitude Absolute Return Fund (AFARF) has a 8 year track record investing in ASX listed equities. A Market Neutral overlay is used across a multi strategy approach which allows for flexible asset allocation to maximise returns and minimise risk under a variety of market conditions and cycles.CIO John Corr has over 20 years financial market experience with a strong focus on risk.
- Significant use of low risk "long" derivatives and option overlays has provided positive returns with low volatility during periods of market dislocation. Risk statistics are impressive and shows the Funds risk philosophy; over 88% of monthly performances have been positive with no losing months in 2008, the Fund's largest drawdown is -2.09% and the Sharpe ratio 1.16.
- ASX listed Aurora Funds Limited was established on the merger of three existing fund management businesses, managing approx. $230m on behalf of more than 2,500 retail and wholesale investors.
Sean Webster
Research and Database Manager
Australian Fund Monitors

5 Aug 2014 - Microequities Deep Value Microcap Fund
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Fund Overview | The objective of the Fund is to identify undervalued Microcap companies, invest in them and, through a medium to long term commitment, attempt to deliver superior investment returns. The Fund invests primarily in ASX listed Microcap companies, which at the time of initial investment are generally below a market capitalisation of A$250 million. The Fund may also invest in companies with a higher market capitalisation, but these will be limited to no more than 20% of the assets of the Fund. At times the Fund may invest in pre-IPO securities that are due to be listed on the ASX within 3-6 months, and have lodged a prospectus with ASIC. These investments will also be limited to no more than 10% of the assets of the Fund. The Fund will be limited to investing no more than 20% of the Fund's assets in any one security or company. The Fund will make investments with a medium to long term time horizon of between 3-5+ years. The Fund will not speculate in derivatives. It will be permitted to hold other securities that are directly associated with a particular investment such as options granted with a specific company issue etc. The Fund will not engage in short selling or stock lending. The Fund will not hold financial debt of any kind. |
Manager Comments | Two months ago we alluded to the particular anomalies that have contributed to the US negative GDP number for the 1st quarter of 2014. We expected the second quarter number to be much more representative of the underlying strength of the US economic resurgence. That prognosis was affirmed earlier during the week when the US reported second quarter GDP growth of 4%, with firmer labor market conditions and solid consumer spending underpinning the growth rate. The outlook for the second half remains positive as the drivers for consumer confidence should contribute to a more appeasing environment for the US consumer to spend. |
More Information | » View detailed profile of this fund |
4 Aug 2014 - Fund Review: Optimal Australia Absolute Trust June 2014
AFM have released the most recently updated Fund Review on the Optimal Australia Absolute Trust.
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:
- 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 0.63% in June with an annual return of 5.66%.
- The Fund's low risk profile is shown by 84% of monthly performances to date being positive with the largest drawdown of -1.38%.
- The Fund's Sharpe Ratio is 1.79 and Sortino ratio of 5.25 compared to the ASX200 Accumulation Index.
- 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.
Research and Database Manager
Australian Fund Monitors

1 Aug 2014 - Fund Review: Microequities Deep Value Microcap Fund May 2014
- The Microequities Deep Value Fund has a 5 year track record investing in ASX listed equities. The Fund is a fundamental, research-driven Fund investing in equities with a market cap below $250m. The Fund uses a value philosophy based on the view that microcaps are often under-researched and under-valued.CIO Carlos Gil has over 15 years financial market experience across a broad range of equities.
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The Fund has delivered very strong performance since inception with a 29.63% annualised return compared to the ASX 200 IndexAccum return of 14.32%. Volatility has been somewhat higher than the Index at 14.97% (ASX 200 Accum 12.59%) however theSharpe ratio at 1.58 (0.84) reflects the high incremental returns for taking on the extra volatility/risk.
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The Fund does not short, use derivatives or borrow i.e., it is long only and is concentrated; usually with 15 to 20 companies acrossindustrial sectors. Resource stocks are avoided.
Sean Webster
Research and Database Manager
1 Aug 2014 - Pengana Absolute Return Asia Pacific Australian Fund
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Fund Overview | The Fund seeks to profit from trading securities which are primarily subject to corporate events or from trading-related securities which the Investment Manager believes are mispriced by the market. The Fund invests in securities that are listed on Asian stock markets and other markets where related securities may be listed and in securities which are listed on markets outside of Asia where more than 70% (by assets or earnings) of the underlying business originates from an Asian country. The Fund aims to generate consistently positive returns which have a low correlation to the Asian stock markets. The objective is to generate 10-20% pa with a standard deviation of 6-10% |
Manager Comments | Since inception in October 2008 the Fund has out-performed the ASX 200 Accumulation Index with a return of 11.23% pa as compared to 7.49%. The Fund's volatility was below that of the Index at 6.04% (Index 14.11%) while the Sharpe and Sortino ratios are 1.21 and 3.00 respectively with the Fund recording 80% positive months. The Fund's gross exposures by strategy (at month-end) were M&A 46%, Capital Management 23.3%, Stubs 14.3% and Index Futures 7.1%. |
More Information | » View detailed profile of this fund |
1 Aug 2014 - Hedge Clippings
Recently the news has been dominated by horrors and disasters in the Ukraine and Gaza, and an emerging global health threat from the Ebola virus in West Africa, none of which are necessarily relevant to Financial Markets or "Hedge Clippings", except we have been surprised at the lack of market volatility resulting from them. Maybe the markets have become hardened or become immune to the daily dose of visual horror we are presented with, or maybe they just won't affect the bottom line enough to matter.
Earnings are a different matter, particularly when the majority of experts have been talking of an over-priced market for some months, with investors also seemingly immune from the warnings. At first call that would seem to have changed overnight with the start of reporting season, as we suspected it might, with significant falls all round, with the exception of Abu Dhabi (+0.99%) and Dubai (+1.99%).
As a the time of writing the Australian market, although generally judged to not be as overvalued as the US, is down around 1.5%, having just completed its second best month for the past year. Timing is everything, and most fund managers will have closed July's books thankful to have booked a positive return, and at least happy they have another 30 days of the month to manage August's performance.
You will note we're not falling into the trap of predicting if this is an overdue correction, and therefore a buying opportunity, or the start of a more serious sell off as Tapering finishes tapering, and rates begin to rise. Ask me in a month or two's time and I should be able to give you a better idea!
On other fronts it's been thankfully quiet in Canberra, while David Murray's Financial System Inquiry has announced a series of upcoming public forums in four capital cities (not quite sure why Adelaide and Hobart missed out, Canberra I do understand) open for anyone to attend, to hear about the Inquiry, ask questions of the Committee, and raise issues for examination by the Inquiry. Those interested can register online or download two summaries of the FSI Interim Report from our library, one from Deloitte, and one from Ernst & Young.
Final round submissions to the Inquiry close on 26th August.
Prism Select and OLIVIA123
Closer to home, this week Australian Fund Monitors released two exiting new products, Prism Select and OLIVIA123.
Prism Select is an information only site which provides details on a small group of funds from our database, with significantly greater depth of information than available on AFM. However, using OLIVIA the significant factor is that investors have the ability to apply for each fund online, which makes completing lengthy and confusing paper based forms a thing of the past.
OLIVIA stand for "On Line Investor Verification & Interactive Applications". That's a mouthful, so OLIVIA seemed much easier. In fact we believe OLIVIA makes applying for a managed fund as easy as One, Two, Three.
There's no cost to investors, but they'll save time and effort, and OLIVIA includes an online AML and KYC module to confirm their identity in real time. We can't be sure, but we believe OLIVIA is not only a first of its kind in Australia, but also the world.
Should you have any questions please visit the site, or contact us for further details.
Specific results received this week include the following PERFORMANCE and NEWS UPDATES:
The Cor Capital Fund returned 7.82% for the 12 months to 30 June 2014 with a volatility of 5.85% and the one month return is 0.76%.
Laminar Credit Opportunities Fund returned 1.09% during June and 12.20% over the previous 12 months as compared to the RBA cash rate over that time of 2.54%.
Performance for the KIS Asia Long Short Fund was 0.95% during June and 11.89% for the previous 12 months with a low volatility of 2.69%.
The Forager Australian Shares Fund returned -0.15% during June and 17.72% over the year-ended June 2014 with a volatility of 11.48%..
Pengana Absolute Return Asia Pacific Australian Fund returned 1.04% during June and 7.93% for the prior 12 months with a low volatility of 2.86%.
FUND REVIEWS released this week include:
Morphic Global Opportunities Fund and also Microequities Deep Value Microcap Fund
Tuesday 12th August 2014, from 12pm to 4.30pm - ARRIA is hosting a round table discussion in Sydney, providing a valuable opportunity to meet with like-minded advisers.
Wednesday 13 - Wednesday 20 August: Financial System Inquiry - Public Forums to be held in Perth, Melbourne, Brisbane and Sydney. Click here to see dates in your capital city.
Thursday 14th August in Sydney: AIMA Australia Education Forum. The forum will discuss regulatory, tax and other issues, as well as current observations and insights associated with a range of hedge fund investment products, including Australian unit trusts, Cayman funds, UCITS and listed investment companies. It is a "must attend" event for hedge fund managers reviewing their current products or considering development of new products.
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.
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
Registration to AFM is free and provides information and performance data on Absolute Return, Hedge Funds and Alternative Investments, plus detailed infomation on Featured Funds. | Fund Managers and paid Subscribers also have access to details on Individual Managers and Funds, with historical results, key performance indicators, latest news and performance reports. | Tune into Sky Business on Foxtel every week on Monday at 2:10pm for AFM's weekly comment on Hedge Funds. |
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.
31 Jul 2014 - Forager Australian Shares Fund
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Manager Comments | The economic outlook in Australia, however, remains a concern. The boom in new mining investment has now clearly come to an end but, as the chart below shows, the impact on the economy has been cushioned so far by the completion of old projects. The contribution of business investment to gross domestic product (GDP), currently at record highs, is set to fall heavily. Investment from the last decade ensures Australia will export record tonnes of ore, but unlike investment and construction, the additional benefits to the wider economy are limited. So what does this mean for the portfolio? Luckily value investors do not have to play fair (the idea is pretty much to play as unfairly as possible) so the Fund can cherry pick areas it likes and avoid other ones entirely. It has been a theme for the past five years, but we are still focused on finding foreign currency exposure on the ASX. The trends highlighted above are likely to force the Australian dollar, which has appreciated 5% to US$0.943 this year, lower long term. The full text of the Fund's quarterly report is on the AFM website under the Fund's profile. |
More Information | » View detailed profile of this fund |