Based on 31% of single funds' results reported to date, AFM's index of absolute return and hedge funds returned 2.19% in April, to take year to date performance to +6.15%, and 12 month performance to 9.89%. Equity based funds have outperformed the broader average, up 2.27% in April, 7.41% YTD, and 12.22% over the past 12 months. 

By comparison, the ASX200 accumulation index rose 4.54% in April, 12.99% YTD and 23.58% over 12 months. 

As far as spread, or range of returns is concerned, the sector returns of the ASX provided some clue as to fund returns, particularly those focusing on the resources, and more specifically the small resources sector. The ASX Smallcap Resources Accumulation Index fell for the seventh consecutive month, with a fall of 20% in April alone, its third largest fall since inception in 1995 with gold stocks particularly affected.

As a result, the spread of fund returns for the month was wider than usual, ranging from -22% through to +22%, although 90% of results to date have been positive. The performance spread over the past year also ranges widely, from -57% through to +58%, again reinforcing the importance of strategy and fund selection. Full details are available on our index pages.

Next Tuesday sees the handing down of the federal budget, the last in the term of this parliament, and the last prior to the election in September. The Prime Minister and Treasurer have both been at pains to prepare everyone for bad news and a significant deficit, having been equally strident until comparatively recently that everything in the garden was rosy.  With apologies to Abraham Lincoln, "you can fool all of the people some of the time, some of the people all of the time, but you can't fool yourself forever".

So while the pain has been flagged, the medicine has yet to be prescribed. What is interesting is that short of a miracle, neither the PM or Treasurer will be around to administer the dosage.

Meanwhile yesterday the (current) Minister for Superannuation, Bill Shorten announced his plan to establish a Council of Superannuation Custodians with the intention it would oversee a "Charter of Superannuation Adequacy and Sustainability". That all sounds well and good, but where was the Council over the past 5 years as the rules affecting Super have been chopped and changed with monotonous regularity?

Performance and News Updates on www.fundmonitors.com this week:

The Bennelong Kardinia Absolute Return Fund recorded 1.34% for April 2013 bringing since inception (May 2006) performance to 14.47% pa.  We also released the latest Fund Review for April 2013, which you may read here.

Platinum Japan Fund had an exceptional April 2013 with a performance of 13.75%, well ahead of its benchmark and bringing the six month return to 45.83%.

The Bennelong Long Short Equity Fund had a flat month in April 2013 recording a return of 0.01% bringing their since inception return (January 2003) to 20.16%.  Their most recent Fund Review for April 2013, is here.

Aurora Fortitude Absolute Return Fund had a sound April 2013 with a return of 1.68% bringing the twelve month return to 5.24%. The Fund's volatility is notable at 2.84% annualised since inception.

The CSAG Long Only Program delivered -0.16% for the month and -4.39% for the year to end March 2013.

Continuing our successful Meet the Manager presentation series, on Thursday 16 May, AFM is holding a city lunch time briefing featuring Jack Lowenstein from Morphic Asset Management. The Morphic Global Opportunities Fund is a global equity long/short manager with a macro-economic overlay. The Fund's portfolio construction has a long bias and favours value based and momentum strategies, with a strong emphasis on risk management. If you would like to join us for the presentation, please reply to this email.

And finally, for something completely different, short and sweet this week.

On that note, I hope you have a happy and healthy weekend!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

BENNELONG KARDINIA ABSOLUTE RETURN FUND

Attached is our most recently updated Fund Review on the Bennelong Kardinia Absolute Return Fund.  

We would like to highlight the following aspects of the Fund:

• Kardinia is a boutique Australian based Fund Manager established in August 2011 in conjunction with the Bennelong Group to continue the management of the Herschel Absolute Return Fund.
• Long biased, research driven, active equity long/short strategy investing in listed ASX companies with a six year track record and an annualised return of 14% net of fees.
• Portfolio Managers Mark Burgess and Kristiaan Rehder have significant market experience, while the Bennelong Group provide infrastructure, operational, compliance and distribution capabilities.
• Consistent top decile long short equity sector performance. Key Performance and Risk Statistics indicate an attractive risk/reward profile, and a strong focus on capital protection in negative markets.

Sean Webster

Research and Database Manager
Australian Fund Monitors

ATTACHED FILESFund Review: Bennelong Kardinia Absolute Return Fund (pdf format)

News article from Investor Daily today is a worthwhile read.

The implication of this is potentially significant for Australia's absolute return and hedge funds sector - assuming they qualify under the SIV rules, and assuming they are sufficiently well organised to market to the UHNW Chinese market.

There still appears to be some question marks around the use of derivatives which might make qualifying difficult for many hedge funds, and the sector has never had the benefit of an industry wide marketing or communications plan which it needs.

Read the entire article here.

Further details of the new MySuper rules emerged this week, even if drowned out somewhat by other announcements from Canberra. However in principal the thrust of MySuper is admirable, if the stated objectives are achieved:

• creation of a simple, low cost default superannuation product
• cheaper and easier processing of transactions, and
• strengthen the governance, integrity and regulatory settings of the superannuation system, including SMSF's.

Anything that simplifies Super, or creates a lower cost structure, particularly for super accounts with lower balances, is to be applauded. In this regard, the push for more transparency can only assist. However the risk is that the focus falls more on the fee structure than the actual risk adjusted returns after fees.

While it is easy to point to high fees as a destroyer of an investment's value, performance has a far greater effect, particularly in negative markets. Hopefully the new MySuper transparency and reporting regime will recognise this.

Elsewhere, we noticed a good article in InvestorDaily quoting Pengana's CEO Russel Pillemer, who (correctly in our view) points to the flawed logic of placing many hedge and absolute return funds into the "alternatives" bucket. All too often anything that can't be categorised easily ends up as an alternative, with no real analysis of its return profile or correlation to other asset classes.

Russel's suggestion is to allocate to a category called "uncorrelated", as that is what most investors are seeking from a true alternative investment. In our opinion, the majority of equity long/short strategies might then more correctly fit in the equities bucket, or at least active equities.

At the end of the day simply having a low correlation to equities doesn't really work 100% of the time. What investors want, or need, is an asymmetric return profile where the fund captures the market's upside (a high up capture ratio) and avoids the downside (a low downside capture ratio).

Easier said than done in a single fund, and not always easy when constructing a portfolio, but worth the effort. 

Performance and News Updates on www.fundmonitors.com this week:

The Pengana Australian Equities Market Neutral Fund had a good March 2013 returning 3.2% bringing it's since inception (September 2008) return to 9.21% pa with a zero correlation to the market of -0.02.

BlackRock Multi Opportunity Fund had a sound March 2013 with a return of 1.09% and a twelve month return of 9.70% with positive returns in each of the 3 months of the quarter.

The Pengana Asia Special Events (Onshore) Fund returned 0.83% for March 2013 and 3.28% for the quarter to end-March.  Notably the Fund has a volatility of 6.7% as compared to its benchmark volatility of 17.8% (since inception).

Pengana Australian Equities Fund had a flat March with a return of 0.0% but strong 12 and 24 month returns, delivering 22.5% and 33.06% respectively to the end of March 2013. At month-end cash (including notes and preference shares) represented 32% of the Fund.

The K2 Australian Absolute Return Fund had a strong April 2013 delivering 4.54% with its annual return to the end of April, 23.99%.

Continuing our successful Meet the Manager presentation series, on Thursday 16 May, AFM is holding a city lunch time briefing featuring Jack Lowenstein from Morphic Asset Management. The Morphic Global Opportunities Fund is a global equity long/short manager with a macro-economic overlay. The Fund's portfolio construction has a long bias and favours value based and momentum strategies, with a strong emphasis on risk management. If you would like to join us for the presentation, please reply to this email.

And finally, for something completely different, we bring you a short clip from Cancer Council NSW on Relay for Life.  This weekend our Administration Manager Alexis will be camping out and walking for 24 hours out at the Sutherland Shire Relay and we support her in this worthy cause.  

On that note, I hope you have a happy and healthy weekend!

Regards,

Chris Gosselin
CEO, AUSTRALIAN FUND MONITORS