Hedge Clippings | 18 October 2019

18 Oct 2019 - Australian Fund Monitors

Regular readers of Hedge Clippings would probably understand that we don't - or didn't - rate Boris Johnson's chances of pulling a Brexit rabbit out of his hat very highly. Well, that shows how much we know - or knew - as it...

18 Oct 2019 - Hedge Clippings | 18 October 2019

By: Australian Fund Monitors

Hedge Clippings | Friday 18 October, 2019

Regular readers of Hedge Clippings would probably understand that we don't - or didn't - rate Boris Johnson's chances of pulling a Brexit rabbit out of his hat very highly.

Well, that shows how much we know - or knew - as it looks as if the irrepressible and unstoppable UK PM has somehow convinced his EU counterparts to agree to a "deal". Far from us understanding what the details are, or what compromises were reached - or threats used - the fact he has achieved what seemed to be unthinkable a couple of weeks ago is impressive.

Of course, he has yet to gain the approval of parliament, or the wily Scots (probably still smarting from no longer being involved in the RWC fun and games in Japan) so it's not all over yet. And even if it is, the challenges ahead will be significant as he tries to implement the deal, and the complications it will involve.

As we oft say: Watch this space, there's a long way to go yet.

Meanwhile, closer to home, the government's Retirement Income Inquiry announced a few weeks ago hasn't escaped our gaze - or concerns. Strange strange things could happen, and the result could be a simplification of the system and an increased alignment of interest between the government, the economy, and the retirement benefits of an ageing population.

Perhaps, at the risk of repeating ourselves, watch this space, there's a long way to go yet.

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Performance Report: 4D Global Infrastructure Fund

18 Oct 2019 - Australian Fund Monitors

The 4D Global Infrastructure Fund rose +2.22% in September, outperforming its benchmark (OECD G7 Inflation Index +5.5%) by +1.75% and taking annualised performance since inception in March 2016 to +14.68%.

18 Oct 2019 - Performance Report: 4D Global Infrastructure Fund

By: Australian Fund Monitors

Report Date	18 October 2019
Manager	4D Infrastructure, a Bennelong boutique
Fund Name	4D Global Infrastructure Fund
Strategy	Infrastructure
Latest Return Date	September 2019
Latest Return	2.22%
Latest 6 Months	12.15%
Latest 12 Months	25.72%
Latest 24 Months (pa)	15.05%
Annualised Since Inception	14.68%
Inception Date	07 March 2016
FUM (millions)	AU$59.41
Fund Overview	The 4D Global Infrastructure Fund aims to outperform the OECD G7 Inflation Index +5.5% p.a. over the long term by identifying quality listed global infrastructure securities, trading at or below fair value with sustainable, growing earning combined with sustainable, growing dividends. The fund will be managed as a single portfolio of listed global infrastructure securities including regulated utilities in gas, electricity and water, transport infrastructure such as airports, ports, road and rail as well as communication assets such as the towers and satellite sectors. The portfolio is intended to have exposure to both developed and emerging market opportunities, with country risk assessed internally before any investment is considered. The maximum absolute position of an individual stock is 7% of the fund.
Manager Comments	The 4D Global Infrastructure Fund rose +2.22% in September, outperforming its benchmark (OECD G7 Inflation Index +5.5%) by +1.75% and taking annualised performance since inception in March 2016 to +14.68% with an annualised volatility of 9.06%. The strongest portfolio performer in September was Brazilian toll road operator Ecorodovias, up +13.7% following finalisation of the Leniency Agreement in Parana state in August as well as a month-end auction win of the BR364/365 toll road which extends their growth pipeline. The weakest performer was Chinese gas distributor ENN Energy, down -9.4% due to a planned stakeholder change in the Group which raised concerns on governance. 4D noted that, despite a slowing global macro environment, it remains supportive of their overweight positioning to user pay assets. However, ongoing geo-political issues see them limiting exposure to certain regions (e.g. UK).
More Information	Fund Profile Manager's Report

Japan as a Safe Haven for Equity Investors

17 Oct 2019 - Kevin Smith, Delft Partners

We have maintained a positive view regarding Japanese equities for the past year and we express that view with an asset allocation in favour of Japan in excess of 50% in our Asian regional portfolio, whereas many of our competitors...

Fund Review: Insync Global Capital Aware Fund September 2019

16 Oct 2019 - Australian Fund Monitors

Latest Fund Review on Insync Global Capital Aware Fund is now available. The Global Capital Aware Fund invests in a concentrated portfolio of 15-30 stocks, targeting exceptional, large cap global companies with a strong focus on dividend...

Recession O'Clock, Australia?

15 Oct 2019 - Marcel von Pfyffer, Arminius Capital

The biggest drivers of GDP growth in Australia are "houses and holes", i.e. residential construction and resource exports. Residential construction is driven by factors internal to the Australian economy, whereas resource exports depend on...

Performance Report: Bennelong Kardinia Absolute Return Fund

14 Oct 2019 - Australian Fund Monitors

The Bennelong Kardinia Absolute Return Fund has returned +9.04% p.a. with an annualised volatility of 7.01%. By contrast, the ASX200 Accumulation Index has returned +6.41% p.a. with an annualised volatility of 13.14%.

14 Oct 2019 - Performance Report: Bennelong Kardinia Absolute Return Fund

By: Australian Fund Monitors

Report Date	14 October 2019
Manager	Kardinia Capital, a Bennelong boutique
Fund Name	Bennelong Kardinia Absolute Return Fund
Strategy	Equity Long/Short
Latest Return Date	September 2019
Latest Return	-0.35%
Latest 6 Months	2.56%
Latest 12 Months	-3.88%
Latest 24 Months (pa)	0.20%
Annualised Since Inception	9.04%
Inception Date	01 May 2006
FUM (millions)	AU$95.58
Fund Overview	The Fund consists of a concentrated long/short portfolio typically comprising 20 to 50 ASX300 listed stocks, generally with a long bias aligned to the overall market direction. On average since inception the Fund's exposure has averaged 40% net long. There is a slight bias to large cap stocks on the long side of the portfolio, although in a rising market the portfolio will tend to hold smaller caps, including resource stocks, more frequently. On the short side, the portfolio is particularly concentrated, with stock selection limited by both liquidity and the difficulty of borrowing stock in smaller cap companies. Short positions are only taken when there is a high conviction view on the specific stock. The Fund uses derivatives in a limited way, mainly selling short dated covered call options to generate additional income. These typically have less than 30 days to expiry, and are usually 5% to 10% out of the money. ASX SPI futures and index put options can be used to hedge the portfolio's overall net position. The Fund's discretionary investment strategy commences with a macro view of the economy and direction to establish the portfolio's desired market exposure. Following this detailed sector and company research is gathered from knowledge of the individual stocks in the Fund's universe, with widespread use of broker research. Company visits, presentations and discussions with management at CEO and CFO level are used wherever possible to assess management quality across a range of criteria. Detailed analysis of company valuations using financial statements and forecasts, particularly focusing on free cash flow, is conducted. Technical analysis is used to validate the Manager's fundamental research and valuations and to manage market timing. A significant portion of the Fund's overall performance can be attributed to the attention and importance given to the macro economic outlook and the ability and willingness to adjust the Fund's market risk.
Manager Comments	The Bennelong Kardinia Absolute Return Fund has returned +9.04% p.a. with an annualised volatility of 7.01%. By contrast, the ASX200 Accumulation Index has returned +6.41% p.a. with an annualised volatility of 13.14%. The Fund's Sortino ratio of 1.35 versus the Index's 0.29, average negative return of -1.37% versus the Index's -3.24% and down-capture ratio of 40.60% highlight the Fund's strong focus on protecting investor capital in falling markets over the long-term. The Fund returned -0.35% in September, with the short book dragging on performance. Top contributors included Paradigm Biopharmaceuticals (+25bp contribution), City Chic (+21bp), Westpac (+19bp), Nickel Mines (+17bp) and Independence Group (+17bp). Detractors included Appen (-16bp), Evolution (-15bp), Atlas Arteria (-14bp) and Charter Hall (-14bp). The largest detractor was the individual short book (-44bp), with Bellamy's the subject of a takeover bid and shorts in technology, oil and gold stocks impacting performance. Net equity market exposure was increased from 20.3% to 47.9% (51.5% long and 3.6% short), with the key changes being new positions in Boral, Corporate Travel, Cleanaway and Woodside Petroleum, increased weightings in Macquarie Group, James Hardie and Aristocrat, the closure of the Fund's short position in Share Price Index Futures, partially offset by the sale of Westpac and Telstra.
More Information	Fund Profile Manager's Report AFM Research Reports

Hedge Clippings | 11 October 2019

11 Oct 2019 - Australian Fund Monitors

Diversification - the key to good performance and reducing risk. Given the overall sideways nature of the market (albeit with some day to day volatility) and the dominance of the top 20 or 50 stocks, outperformance is likely to...

11 Oct 2019 - Hedge Clippings | 11 October 2019

By: Australian Fund Monitors

Hedge Clippings | Friday 11 October, 2019

Diversification - the key to good performance and reducing risk.

Given the overall sideways nature of the market (albeit with some day to day volatility) and the dominance of the top 20 or 50 stocks, outperformance is likely to come from stock picking at the smaller end of the market.

While it's early days for September fund performance, with just under 20% of funds having reported to date, at first glance those funds focusing on the small cap end of the market provided their investors with some stellar returns last month. While the ASX200 accumulation index returned 1.84% for the month, a number of funds returned over 4%, with the top 3 to date, Bennelong's Emerging Companies Fund, Cyan's CG3, and Celeste's Australian Small Company's Fund reporting 9.92%, 8.62% and 5.40% respectively.

Obviously one month's performance is not an end unto itself, and a longer-term analysis is required, but with the ASX200 up around 12% over 12 months - assisted by falling interest rates - 15% of the funds in AFM's database are outperforming, and within that group some returning over twice that amount.

Regular followers of Hedge Clippings would know that our preferred approach is to invest in funds by creating a diversified portfolio of funds, thereby reducing risk without necessarily reducing performance. In fact, by selecting funds with a low correlation to each other, performance can actually increase whilst volatility, and risk of capital loss, decreases.

Going forward we will be discussing this - with examples - in more detail. Watch this space.

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Performance Report: DS Capital Growth Fund

11 Oct 2019 - Australian Fund Monitors

The DS Capital Growth Fund rose +2.45% in September, outperforming the ASX200 Accumulation Index by +0.61%. Since inception in December 2012, the Fund has returned +15.28% p.a. versus the Index's +10.69%.

11 Oct 2019 - Performance Report: DS Capital Growth Fund

By: Australian Fund Monitors

Report Date	11 October 2019
Manager	DS Capital
Fund Name	DS Capital Growth Fund
Strategy	Equity Long
Latest Return Date	September 2019
Latest Return	2.45%
Latest 6 Months	13.17%
Latest 12 Months	11.79%
Latest 24 Months (pa)	12.24%
Annualised Since Inception	15.28%
Inception Date	01 January 2013
FUM (millions)	AU$233
Fund Overview	The Fund aims to deliver an average return of at least 10% p.a. through the economic cycle, with a focus on capital preservation. The Fund will comprise a concentrated portfolio of small and mid-cap investments selected through a process of quantitative and qualitative analysis. The investment team looks for industrial businesses that are simple to understand; they generally avoid large caps, pure mining, biotech and start-ups. They also look for: - Access to management; - Businesses with a competitive edge; - Profitable companies with good margins, organic growth prospects, strong market position and a track record of healthy dividend growth; - Sectors with structural advantage and barriers to entry; - 15% p.a. pre-tax compound return on each holding; and - A history of stable and predictable cash flows that DS Capital can understand and value.
Manager Comments	The DS Capital Growth Fund rose +2.45% in September, outperforming the ASX200 Accumulation Index by +0.61%. Since inception in December 2012, the Fund has returned +15.28% p.a. with an annualised volatility of 7.18%. By contrast, the Index has returned +10.69% p.a. with an annualised volatility of 10.95% over the same period. The Fund's Sortino ratio of 3.66 versus the Index's 1.19 and down-capture ratio of 22% highlight the Fund's capacity to protect investor capital in falling markets over the long-term. Over the quarter the Fund rose +3.75% versus the Index's +2.37%. DS Capital noted the main influence on stock markets during the quarter continued to be interest rates, ongoing trade negotiations between the US and China and the slowdown in global economic growth. Most of the Fund's holdings delivered good results during reporting season that were in line with DS Capital's expectations. The Fund's cash level finished the quarter at 19%. DS Capital believe central banks will continue trying to stimulate growth by cutting rates, however, they noted, with most official rates at almost zero, rates are seemingly less effective at stimulating growth and therefore other forms of stimulus may be required. DS Capital are working on several new opportunities that they hope to progress to investments for the Fund and will provide more information on these in forthcoming updates.
More Information	Fund Profile Manager's Report

Three Seismic Tremors in September

10 Oct 2019 - Marcel von Pfyffer, Arminius Capital

The financial world was shaken by three seismic tremors during September 2019, but most people only noticed one of them, that being the drone attack on Saudi Arabia's oil processing plant. The other two, discussed in detail in this...

Performance Report: Cyan C3G Fund

8 Oct 2019 - Australian Fund Monitors

The Cyan C3G Fund rose +8.64% in September, outperforming the ASX200 Accumulation Index by +6.78% and taking annualised performance since inception in August 2014 to 21.23%.

8 Oct 2019 - Performance Report: Cyan C3G Fund

By: Australian Fund Monitors

Report Date	08 October 2019
Manager	Cyan Investment Management
Fund Name	Cyan C3G Fund
Strategy	Equity Long
Latest Return Date	September 2019
Latest Return	8.62%
Latest 6 Months	21.35%
Latest 12 Months	15.51%
Latest 24 Months (pa)	13.23%
Annualised Since Inception	21.23%
Inception Date	24 July 2014
FUM (millions)	AU$40
Fund Overview	The Cyan C3G Fund operates as a wholesale unregistered managed investment scheme under a unit trust structure. The Fund primarily invests in ASX listed companies outside the ASX 100 and typically holds between 15-35 stocks. Cyan C3G Fund is based on the investment philosophy which can be defined as a comprehensive, clear and considered process focused on delivering growth. These are identified through stringent filter criteria and a rigorous research process. The Manager uses a proprietary stock filter in order to eliminate a large proportion of investments due to both internal characteristics (such as gearing levels or cash flow) and external characteristics (such as exposure to commodity prices or customer concentration). Typically, the Fund looks for businesses that are one or more of: a) under researched, b) fundamentally undervalued, c) have a catalyst for re-rating. The Manager seeks to achieve this investment outcome by actively managing a portfolio of Australian listed securities. When the opportunity to invest in suitable securities cannot be found, the manager may reduce the level of equities exposure and accumulate a defensive cash position. Whilst it is the company's intention, there is no guarantee that any distributions or returns will be declared, or that if declared, the amount of any returns will remain constant or increase over time. The Fund does not invest in derivatives and does not use debt to leverage the Fund's performance. However, companies in which the Fund invests may be leveraged.
Manager Comments	The Cyan C3G Fund rose +8.64% in September, outperforming the ASX200 Accumulation Index by +6.78% and taking annualised performance since inception in August 2014 to 21.23%. By contrast, the Index has returned +8.14% p.a. over the same period with roughly the same level of volatility. The Fund's Sharpe ratio of 1.64 versus the Index's 0.62 indicates that the Fund has also achieved superior risk-adjusted performance to the market. In addition, the Fund's Sortino ratio of 3.43 versus the Index's 0.84, and down-capture ratio of -3.49%, highlight the Fund's capacity to significantly outperform in falling markets over the long term. There were numerous positive contributors to performance and few detractors in September. Seven of the Fund's holdings rose more than 30% over the course of the month and another 6 delivered impressive double-digit percentage gains. Top contributors included Alcidion (+65%), Oventus (+49%), Quickstep (+44) and Quickfee (+31%). Cyan noted external factors such as global political uncertainty and trade wars continue to cause bursts of volatility in equity markets. Their view is that, with historically low interest rates, investors are simply not being rewarded for conservative investment decisions. They added that, whilst the market may be trading at a slight premium to long term averages in terms of price to earnings ratios, low interest rates support company valuations and thus Cyan continue to see excellent investment opportunities at the smaller end of the market.
More Information	Fund Profile Manager's Report

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18 Oct 2019 - Hedge Clippings | 18 October 2019

18 Oct 2019 - Performance Report: 4D Global Infrastructure Fund

17 Oct 2019 - Japan as a Safe Haven for Equity Investors

16 Oct 2019 - Fund Review: Insync Global Capital Aware Fund September 2019

15 Oct 2019 - Recession O'Clock, Australia?

14 Oct 2019 - Performance Report: Bennelong Kardinia Absolute Return Fund

11 Oct 2019 - Hedge Clippings | 11 October 2019

11 Oct 2019 - Performance Report: DS Capital Growth Fund

10 Oct 2019 - Three Seismic Tremors in September

8 Oct 2019 - Performance Report: Cyan C3G Fund

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