INSYNC GLOBAL TITANS FUND

ATTACHED FILESInsync Global Titans Fund Review - May 2013 (pdf format)

QE's has to end sooner or later.

Nothing lasts forever (except true love, so they say) and QE3 will be no different. The question of course is whether Dr Bernanke, or his successor, can manage the taper from the US $85 billion a month of QE life support through to a reasonably healthy and self supporting economy without investors pulling the rug out from underneath the market?

Based on last night's performance from New York and Europe, it seems not, but surely any reasonably sensible market participant would be able to work out that sooner or later the QE theme tune has to end as the US economy recovers.  However, investors being what they are, history shows that nearly everyone hangs around thinking they'll be able to exit painlessly.  Memories of '87, the "tech wreck" of 2000, and even the great credit bubble leading up to 2008 don't seem to last too long.

China seems to be following the same way, and although the staunch believers are committed to the "stronger for longer" theme, it's worth reminding them again that nothing lasts forever, at least not without some imbalances being created along the way.

Japan, the world's third largest economy, is learning the hard lessons of trying to kick start a moribund economy to life. For a start Japan's demographics will create significant difficulties, with its workforce forecast to fall to just half the population by 2050, down from 70% in 1990.  Japan's experiment is just starting, and it may well work, but the risks along the way are significant.

And finally on the "nothing lasts forever" theme the Aussie dollar's flirt with parity against the US$ seems to have come to an end, in spite of some still believing the current fall is just a temporary blip. Falling interest rates at home, rising one's in the US, a slowdown in resources (price and volume) and repatriation of capital from the carry trade of the past few years make any meaningful rally unlikely.

Volatility is back, and as we suggested back on February 22 when we warned of the historically low levels of the VIX, that's often an indication of the lull before the storm.

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

Aurora Fortitude Absolute Return Fund returned 0.78% during May and 5.79% over the last 12 months. The Fund is characterised by it's very low volatility at 2.84% pa (since inception) as compared to the S&P/ASX 200AI volatility of 14.58%.

The Pengana Australian Equities Fund recorded -1.3% during May and 25.66% for the last twelve months. As at 31st May, cash (including notes and preference shares) represented 31% of the Fund. The top five holdings by value were: DUET Group, Caltex, ANZ Bank, Telstra and Resmed.

Pengana Asia Special Events Fund recorded 1.63% during May and has a twelve month performance record of 11.79%.

The Monash Absolute Investment Fund returned -1.1% during May and 13.87% for the last six months. Despite a difficult month for stocks in Australia the portfolio fell only 1.1% in May and is up 17.3% for the financial year.

And finally there is no "for something completely different" this week as we mentioned above, nothing lasts forever (except as we noted true love, so they say).

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

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

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Research and Database Manager
Australian Fund Monitors

ATTACHED FILESFund Review: Aurora Fortitude Absolute Return Fund (pdf format)

Last week's "Hedge Clippings" included some comments defending hedge and absolute return funds against some of the broader criticism they receive, particularly when the market is rising strongly. Our logic was twofold:

Firstly the sector, often included as part of the "alternative" asset bucket, is made up of such a diverse range of strategies that comparison (apart from bottom line performance) is nigh on impossible. It's also worth noting that many equity long short strategies should, in our opinion, not be categorised as alternative at all, but rather should be termed active equities.

Secondly the diversity of performances are equally large, even between funds with similar strategies or geographic mandates. Taking May's single funds' performance numbers to date (based on 45% of those received so far) they range from -12.44% through to +15%, with an average of +0.92%, against the ASX200 Accumulation index which fell -4.50%.

Over 12 months the range becomes even greater: -62% through to +75% with an average of +14.22% against the cumulative return of the ASX200 of +26.41%.

As we've noted many times before, with diversity such as that, it's easy to prove your hedge fund point of view, positive or negative.

Taking a look at May performance numbers also proves the point that while volatility normally leads to negative market returns, it provides the opportunity for hedge funds (or at least the best of them) to show their defensive characteristics in falling markets. While there is a way to go yet, the ASX200 accumulation index is down a further 4.67% in June, taking it almost 10% off the high reached just a month ago.  Year to date (January) the Index is up only 2.92% while hedge funds, which had been lagging, are up 6.85%.

Having said that of course, we're falling into our own problem of calculating averages from a significantly diverse set of numbers.

Moving on, we were pleased to be able to host Opalesque's founder and CEO, Matthias Knab, along with a selected group of local fund managers to the 2013 Opalesque Australian Round Table to discuss issues affecting the local industry. The full transcript is available here.

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

Optimal Australia Absolute Trust achieved 1.22% during May with a since inception (September '08) return of 11.48% pa.  Major contributors to the Trust's return for the month were driven by a return from both long investments (+0.22% attribution) and shorts (+1.25% attribution).

The Allard Investment Fund returned 6.30% during May with its twelve month return standing at 14.59%.  At the end of May the Fund was 67.3% invested and in terms of country exposures the largest was HK/China 31.4%, followed by Singapore at 13.0% and Korea at 10.3%.

Morphic Global Opportunities Fund recorded 6.77% for May bringing its since inception (Aug 2012) return to 28.70%.  Taken as a whole, global stocks in local currency terms were volatile, but largely unchanged by month end.

The Insync Global Titans Fund delivered 4.8% during May bringing it's since inception (October 2009) return to 9.5% pa.  However, the main driver of the Fund's return in May came from the 7.7% depreciation of the Australian dollar against the US dollar.

And finally, for something completely different, how the power of words can make a significant change.

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

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

MORPHIC GLOBAL OPPORTUNITIES FUND

ATTACHED FILESMorphic Global Opportunities Fund AFM Review - May 2013 (pdf format)