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 seven year track record. The Bennelong Kardinia Absolute Return Fund rose 0.93% in September.

Long positions in Bank of Queensland, Seek and JB Hi-Fi were all meaningful positive contributors. The largest detractors from performance were Share Price Index Futures contracts (hedging long positions), CSL and BHP. Net equity market exposure including derivatives was increased slightly to 29.6% (67.7% long and 38.1% short).

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 the Bennelong Group provide infrastructure, operational, compliance and distribution capabilities.

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

Australian Fund Monitors

ATTACHED FILESBennelong Kardinia Absolute Return Fund (pdf format)

Wiser heads than mine (and the market) all predicted that the US debt ceiling debacle would be resolved prior to the deadline simply because the option of not finding a resolution was going to be completely unacceptable. I have to admit to not being as confident based on the view that Obama was intent on defining his presidency on Obamacare, and he had to draw a line in the sand somewhere, having compromised previously. I think I got that part right.

What I failed on was the view that the Tea Party hardheads would cave in as they did, making somewhat of a mockery of their previous rhetoric and arguments.

As it came to pass they (the wiser heads) were correct, but there still seems to be the issue that we are likely to have to go through the whole exercise again early in the new year. That's not to say that the Tea Party minority might not wake up to themselves in the meantime, who knows.  What does seem certain is that Obama scored a major victory, and will be encouraged to continue to stand his ground next time around.

What is interesting is that in spite of the world's largest economy going to the brink of defaulting, the S&P500 was still within a whisker of all-time highs even if volatility did increase over the previous few weeks. That presumably is a reflection on the market's view that QE3 is unlikely to be tapered any time soon under new Treasury Secretary Janet Yellen.

On a different note there was an article in last Friday's Financial Times entitled "Population growth and the labour market" from 1950 through to 2100 which, if you are a student of demographics as an indicator for economic growth and activity, made for interesting reading. In total the global working age population has grown from  1.53 bn in 1950 to 4.54 bn today, and is forecast to reach 6.53 bn by the end of this century.

The breakdown by various countries however is of greater interest and significance with China (currently with a working age population of 1 bn, up from 332m in 1950) and India (800m, up from 223m) and to a lesser degree the US (210m up from 102m) dominating the numbers at present.  Looking forward to 2100 however China's working age population is forecast to decline to 614 million, while India's will increase to 1.1 bn by 2050 before declining to 930 million. The US will steadily increase to 261 million by 2100 with the real game changer being Nigeria, which having had a working age population of only 20 million in 1950, and has less than 100 million now, but is predicted to reach 600 million by 2100. 

Indonesia is currently in fourth place at somewhere north of 150 million, reinforcing the point made to me during the week by Wayne Peters of Allard Partners that 43% of the world's population currently live in China, India and Indonesia, and hence their focus on investing in those three countries. The interesting question of course is not only the growth of each country and region, but as the FT article points out how to find jobs for those of working age, and how to support their variously expanding aging populations. 

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

The Optimal Australia Absolute Trust recorded 0.43% in September bringing it's since inception (Sept 2008) return to 10.85% vs 5.00% for the ASX 200 Accum. The Fund's risk controls are indicated by the very low annualised volatility of 3.62% vs 15.37% for the Index over the same time frame. 

Despite very rich valuations, defensive yield and financials still seem to attract the majority of fresh money flows in our market, and the Fed's recent actions may continue to limit the perceived utility of valuation for a while longer, dangerous as that is. In this environment, hedging risk has been a frustrating and expensive exercise, although in the Manager's view, an increasingly essential one. Risk still strikes the Manager as being asymmetrically priced, with only low single-digit returns on offer from equity and debt securities if things hold together, and the prospect of much more substantial losses if they do not.

Insync Global Titans Fund has just completed its fourth year with a return of 9.26% (ASX 200 Accumulation 7.03%) and annualised volatility of 8.34% (Index 12.35%) since inception. The main detractors for the month were GlaxoSmithKline, General Mills and SAP. The largest positive contributions came from our holdings in Reckitt Benckiser, British Sky Broadcasting, Safran and Nestle. Safran has more than a 75% market share in narrow-body aircraft engines, an industry with very high barriers to entry.

The Morphic Global Opportunities Fund  returned 0.26% during September and 29.91% for the last 12 months achieved with a notable Sharpe ratio of 2.91. The Fund had a net exposure of 98% and gross exposure of 139% at month-end. The Fund ended the month underweight the US and overweight Japan, Europe and Emerging Markets; reflecting the view that a trend that began in April of industrial and cyclical stocks outperforming more defensive equities is set to continue.

BlackRock Australian Equity Market Neutral Fund has a low overall risk profile with an annualised volatility of 5.69% (13.19% for the Index) since inception in Sept 2001. The Fund returned -0.64% during September.

The Fund had little net exposure to the global risk sentiment effects, with offsetting long mining and short mining services positions. Stock picking within the domestic sectors added value, especially during the lead up to the August reporting season, when many companies made pre-emptive announcements to foreshadow poor results.

FUND REVIEWS that have been updated this week include:

The Bennelong Kardinia Absolute Return Fund The Bennelong Kardinia Absolute Return Fund rose 0.93% in September. Long positions in Bank of Queensland, Seek and JB Hi-Fi were all meaningful positive contributors. The largest detractors from performance were Share Price Index Futures contracts (hedging long positions), CSL and BHP. Net equity market exposure including derivatives was increased slightly to 29.6% (67.7% long and 38.1% short).

EVENTS

An upcoming event that may be of interest for Superannuation member administration and investment operation service providers is the Superannuation Fund Back Office conference coming up on 21-22 October. Visit the International Business Review Conferences website for more details.

A free event being held for Fund Managers next Friday 25 October at KPMG Sydney offices that may be of interest is the HFA Australia Charter Symposium. Register here.

The Asset Allocation Conference is also coming up from 30th October to 1 November 2013 at the Grace Hotel in Sydney. Details are here.

Hedgeopolis New York is being held on 4 November at the Metropolitan Club. Use AFM's discount code "fundmo" to obtain a discount, or contact Adriana Costov for additional information.

Back in Hong Kong, the 26th Annual AVCJ Private Equity and Venture Form is at the Four Seasons Hotel from 12-14 November 2013.

IPARM Australia 2013 is being held in Sydney on 18-19 November on Investment Performance Measurement Attribution and Risk. Speakers include Dr Thomas Gillespie from Aurora Funds Management.

Also on 19 November, at the Renaissance Hotel in Hong Kong - the Art of Asset Management - free for senior asset management professionals from both global and local asset management firms. View the agenda here.

And now for something completely different, a good example of why you should not stop to assist stranded vehicles.

On that note, enjoy the week-end!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

BLACKROCK AUSTRALIAN EQUITY MARKET NEUTRAL FUND

ATTACHED FILESBlackRock Australian Equity Market Neutral Fund August 2013 (pdf format)

Rally on what?

The overnight rally on Wall Street, and the follow on today from the ASX200 would indicate that the "market" is confident that the political stalemate in the US is going to be resolved without, or before, the US defaults on its debt at the end of next week.

While most people would desire that to be the outcome, it would seem to stem more from hope than certainty.  The two sides appear to be coming from the opposite ends of the spectrum, and there seems little goodwill between them. If anything, toes have been dug in on both sides, and talk of a six week debt extension to the ceiling wouldn't seem to justify the market's overnight rally.

Maybe the confirmation of Janet Yellen's appointment had something to do with it, but following Larry Summers's previous withdrawal that was a forgone conclusion anyway.  Yellen's more likely to extend QE than start any early move to taper, but that would still not justify the extent of the Dow's overnight movement.

Meanwhile at home there seems to be improved confidence at the big end of town that is yet to filter down to small business and consumers. As yet there's no clarity on where earnings improvements are going to come from to replace the mining capex and investment boom, and no clarity on how the government will manage its minority in the Senate. What does seem clear is that the Palmer United Party, now with an effective four senators from next July, will have significant influence on any outcomes.

Equally clear is that Palmer himself will certainly liven things up.  Hopefully both he and his senators will be more constructive and flexible than the members of the Tea Party within the Republicans in the US.  

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

The Insync Global Titans Fund has just completed it's fourth year with a return of 9.26% (ASX 200 Accumulation 7.03%) and annualised volatility of 8.34% (index 12.35%) since inception.

Bennelong Kardinia Absolute Return Fund returned 0.93% for September bringing it's since inception (May 2006) return to 14.08% pa as compared to the ASX 200 Accumulation return of 4.44% pa. The Fund's annualised volatility is 7.85% which is low compared to the Index?s volatility of 14.79%, over the same time frame.

Updated FUND REVIEWS this week included the following Fund Managers:

The AFM Prism Active Equity Fund comprises a portfolio of 5 to 10 underlying Australian absolute return managers each investing in ASX listed equities with the objective of achieving double-digit annualised returns with significantly lower volatility than the underlying equity markets, and a focus on capital protection. To date the Fund has delivered 5.59% and, in keeping with the low volatility mandate, has an annualised standard deviation of 2.48% (since inception in October 2012). The Fund's maximum drawdown is 1.42% as compared to 6.72% for the ASX 200 Acc Index.

Bennelong Long Short Equity Fund is a research driven, market and sector neutral, "pairs" trading strategy investing primarily in large cap stocks from the ASX/S&P100 Index, with a ten year track record and annualised net returns of over 20%. The Fund has had positive annual returns each year, including an 11.95% return in 2008 and 20.6% in 2011, both of which were negative years for the ASX200. The Fund's risk statistics are also sound with maximum drawdown of 12.22% and 71% positive months. Both the Sharpe Ratio at 1.27 and the Sortino ratio at 2.21, indicate a high reward-to-risk ratio.

The BlackRock Australian Equity Market Neutral Fund portfolio consists of approx. 180 stocks in equally weighted long and short portfolios to maximise potential returns while minimising market volatility. The strategy has recorded a return of 12.14% since inception (Sept 2001) as compared to the ASX 200 Accumulation Index return of 8.37% and with a volatility less than one-half that of the Index at 5.7% pa as compared to 13.23% pa. The Fund has also recorded a maximum drawdown of 12.41% as compared to 47.19% for the Index and has had 78% positive months since inception.

EVENTS

An upcoming event that may be of interest for Superannuation member administration and investment operation service providers is the Superannuation Fund Back Office conference coming up on 21-22 October. Visit the International Business Review Conferences website for more details.

If you are visiting Hong Kong, the UCITS Asia 2013 Conference is on 9-10 October. AFM have a 10% discount coupon available, more details here.

The Asset Allocation Conference is also coming up from 30th October to 1 November 2013 at the Grace Hotel in Sydney. Details are here.

Back in Hong Kong, the 26th Annual AVCJ Private Equity and Venture Form is at the Four Seasons Hotel from 12-14 November 2013.

IPARM Australia 2013 is being held in Sydney on 18-19 November on Investment Performance Measurement Attribution and Risk. Speakers include Dr Thomas Gillespie from Aurora Funds Management.

Also on 19 November, is the Art of Asset Management industry event for the asset management community, being held in Hong Kong, more here.

On that note, enjoy the week-end!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

BENNELONG LONG SHORT EQUITY FUND

Attached is our most recently updated Fund Review on the Bennelong Long Short Equity Fund.  

• The Fund is a research driven, market and sector neutral, "pairs" trading strategy investing primarily in large cap stocks from the ASX/S&P100 Index, with a ten year track record and annualised net returns of over 20%.
• Since inception in January 2002 the Fund has had positive annual returns each year, including an 11.95% return in 2008 and 20.6% in 2011, both of which were negative years for the ASX200.
•  The Fund's risk statistics are also sound with maximum drawdown of 12.22% and 71% positive months. Both the Sharpe Ratio at 1.27 and the Sortino ratio at 2.21, indicate a high reward-to-risk ratio.
• The consistent returns across the investment history indicates the Fund's ability to provide positive returns in volatile and negative markets and significantly outperform the broader market.

Sean Webster

Research and Database Manager
Australian Fund Monitors

ATTACHED FILESBennelong Long Short Equity Fund September 2013 (pdf format)