NEWS
10 May 2013 - Aurora Fortitude Absolute Return Fund
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| Manager Comments | Investors searching for dividend income aggressively bought Finance, Telco and Consumer related companies which resulted in a 6.7% rally in the All Industrials Index. Ongoing concerns regarding slowing Chinese growth and the impact on commodity prices saw the All Resources Index fall 3.7%. The net result was a 4.5% return for the S&P/ASX 200 Accumulation Index. The most significant contribution (0.77%) came from the recovery in the Australian Infrastructure Fund. The fund released an update on the completion of asset sales and the timing of capital returns to unit holders. A standout among larger resources companies was the 8.3% total return from Woodside Petroleum. This was largely in response to the announcement of a special dividend and increased dividend payout ratio which was music to the ears of yield hunters. There continues to be some supply of short dated hybrid instruments as investors continue to switch into new issues and ordinary shares. The manager continues to seek alpha in this area with the knowledge that returns will accelerate as maturity approaches. |
| More Information | » View detailed profile of this fund |
9 May 2013 - Bennelong Long Short Equity Fund
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| Manager Comments | Global equity markets had a strong month in April, fuelled mainly by the Bank of Japan’s announcement of a massive expansion of money supply in an effort to stimulate inflation. The S&P/ASX 200 got caught up in the excitement and ended up 4.5%. The focus of the local market rally was primarily dividend yield which drove Telcos up 10%, Financials up 9%, REITs up 8% and Staples up 7% whilst Resources were sold off heavily. Gains in Health Care and Consumer Staples were equally offset by losses in Consumer Discretionary and Utilities. The Fund's long portfolio was up over 6% for the month but the short portfolio losses neutralised the net position. This was a disappointing outcome as the fund continues to be impacted by exogenous factors rather than fundamental factors. The manager is conscious that some investors have disregarded the equity risk premium concept resulting in valuation premiums in some stocks being unjustified in the manager's opinion. Further the manager regards the current market conditions as challenging for fundamental investors but expects that the Fund have by now withstood the majority of thematic headwinds and expect an element of reversion to be forthcoming, enabling the Fund to regain lost ground. Locally, the economy is marked by weak business and consumer confidence which is reflected in some recent downgrades and softer outlook commentaries. Equity markets are looking through FY 2013 earnings and the market is starting to see some earnings softness occurring in the FY 2014 outlook. |
| More Information | » View detailed profile of this fund |
8 May 2013 - Platinum Japan Fund - AUD
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| Manager Comments | The Fund holdings were 85.6% Japan, 3.4% Korea (net) and 11.0% cash with 50.4% of the Fund hedged back into $US. By sector the largest holdings were in Industrials 23.7%, Consumer Discretionary 21.6% and Financials 11.5%. Lowest sector holding was in consumer staples at 2.4%. The three largest holdings were Toyota, SBI Holdings (Telecomms) and Mitsubishi UFJ. |
| More Information | » View detailed profile of this fund |
7 May 2013 - Fund Review: Bennelong Kardinia Absolute Return Fund
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.
Research and Database Manager
Australian Fund Monitors
Fund Review: Bennelong Kardinia Absolute Return Fund (pdf format)
7 May 2013 - Milestone for Significant Investor Visa program
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.
7 May 2013 - Bennelong Kardinia Absolute Return Fund
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| Fund Overview | The Fund consists of a concentrated long/short portfolio typically comprising 30 to 40 ASX300 listed stocks, generally with a long bias aligned to the overall market direction. There is a slight bias to large cap stocks in the long side of the portfolio, although in a rising market the portfolio will tend to hold smaller caps, including resource stocks, more frequently. The Fund was launched on 17th August 2011 following the resignation of Portfolio Managers Mark Burgess and Kristiaan Rehder from Herschel Asset Management in late July 2011. While at Herschel Burgess and Rehder had managed the Fund under the name of the Herschel Absolute Return Fund. As a result management of the Fund was transferred to Kardinia Capital, a new boutique fund manager 65% owned by Burgess and Rehder, with the balance owned by Bennelong Funds Management. The Fund's investment strategy and prior track record remains intact. |
| Manager Comments | Global equity markets continued to rally in April despite weakness in economic data from China and the US. A reasonable start to the first quarter earnings season in the US helped drive the S&P500 Index to a new record high. The Australian equity market outperformed as investors chased yield with the All Ordinaries Accumulation Index rising 3.8%. National Australia Bank, ANZ, Telstra and Commonwealth Bank were all large positive contributors to performance, whilst Share Price Index futures contracts (hedging long exposures), Sirius Resources, Rio Tinto and MACA were the largest detractors. The Fund’s net equity market exposure (including derivatives) was kept fairly stable around 35.2% (58.8% long and 23.6% short). |
| More Information | » View detailed profile of this fund |
6 May 2013 - CSAG Long Only Program
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| Manager Comments | The Fund's 8.1% pa compares well with the Fund's benchmark (Dow Jones-UBS Commodity Index Total Return) return of 4.01% pa over the same time. The Fund's Sharpe and Sortino ratio are also in excess of the benchmark while its annualised volatility is also notable at 13.32% as against 17.38%. |
| More Information | » View detailed profile of this fund |
3 May 2013 - Hedge Clippings
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
3 May 2013 - K2 Australian Absolute Return Fund
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| Fund Overview | - The Fund is managed 'opportunistically'. Investments are made throughout Australia and New Zealand across sectors that the investment team believes will add greatest value. - Typically the Fund will hold between 50 and 70 listed equities. - If deemed appropriate, the Fund may be 100% invested in cash. - To implement the Fund's Long/Short investment strategy, K2 is able to use leverage or gear the Fund. However, the net invested position of the Fund shall not exceed the Net Asset Value (NAV) of the Fund. |
| Manager Comments | The manager's view is that the low point in the Australian earning cycle has now been past. Even during April analysts reduced forward estimates for just 6% of Australian top 100 companies; the lowest level in 20 years. This is an encouraging trend and the manager expects that this will continue throughout the year and that cost out programs will be the dominant earnings driver for at least the next 6 months. The manager was surprised that 40% of Australia’s leading stocks fell on average by 6% during April. Accordingly, excess performance was all about what you didn’t own. Given that the manager had anticipated declining inflation and subsequently lower interest rates, they had tilted the portfolio towards industrial stocks that exhibit appreciating dividend streams. The manager was particularly pleased when the Fund's largest holding, ANZ Bank, announced in its 1H’13 profit release that it would be lifting its dividend pay-out ratio from 60% to about 70%. As a result, ANZ’s interim dividend per share for 2013 was 10.6% ahead of last year. As always, “sell in May and go away” echoes through financial markets. However, the Fund's equity exposure will only change near term if some of the important lead indicators that are due to be released within the next 2 weeks turn unfavourable. Specifically, prior to the RBA interest rate decision on 7th of May, the manager expects ANZ job advertisements to remain weak, retail sales to remain below trend and trade data to be relatively weak. Hence the RBA could justify cutting the official cash rate by 25 bpts. |
| More Information | » View detailed profile of this fund |
2 May 2013 - Super Funds to Disclose Dollar Value of Fees
"MySuper product providers will be required to disclose investment risk, the dollar value of fees and their investment performance in an easy to read way, the Minister for Financial Services and Superannuation, Bill Shorten revealed today.
The Government has issued draft regulations that represent the final stage of the Government?s MySuper reforms and are aimed at helping Australians better understand how their fund is performing".
You can read Mr Shorten's comments here. And the draft Regulation is published on the Treasury site.
