INSYNC GLOBAL TITANS FUND

Attached is our most recently updated Fund Review on the Insync Global Titans Fund.

We would like to highlight the following:

• The Global Titans Fund invests in a concentrated portfolio of 15-30 stocks, targeting exceptional, large cap global companies with a strong focus on dividend growth and downside protection.

• Portfolio selection is driven by a core strategy of investing in companies with sustainable growth in dividends, high returns on capital, positive free cash flows and strong balance sheets.

• Emphasis on limiting downside risk is through extensive company research, the ability to hold cash and long protective index put options.

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

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - December 2017 (pdf format)

US fed signals the course for 2018 as Janet Yellen is set to hand over the reins...

Outgoing chair Janet Yellen presided over her last Fed meeting overnight with a unanimous decision to keep rates on hold, but sending a clear signal that they expect "inflation to pick up this year" albeit that they also indicated that it is likely to stabilise around their 2% target. From next week Jerome Powell takes over, and given there was no change to the central bank's December projection of three rate rises in 2018, and with US economic growth described as "solid", it would appear that there is every chance of a .25% rate rise in March.

With yields on the 10 year U.S. Treasury bonds having gradually risen this year to levels not seen since April 2014, the time is approaching for a seismic shift or tipping point in asset allocations, potentially destabilising the long-running equity bull market. Of course the phrase "the time is approaching" is deliberately vague, and covers every possibility from months to years, thereby giving Hedge Clippings the opportunity to claim to have forecast the move correctly, at the appropriate time, when it in fact was inevitable.

However as far as the immediate situation is concerned markets pretty much took things in their stride, no doubt in large part because investors are already pricing in a rate hike in March, and at least two, or possibly three, over the balance of the year if inflation fails to stabilise, but continues to rise. While it is been stubbornly low since the GFC on the back of economic weakness and low wages growth,Donald Trump's tax cuts and infrastructure spending plans provide the potential for it to overshoot the 2% target.

While it is inevitable that eventually the bull market in equities will come to an end at some future date, what has yet to play out is the investors' reaction and how this plays out. History tells us that bull markets rarely end in a whimper - as evidenced by the spectacular falls in 2008 and 1987 amongst others. The added known unknown this time around is the effect that the massive inflows of the past few years from passive investments (ETF's) will have on a falling market. Just as an incoming tide lifts all boats, so too does a falling tide, exposing hidden dangers on the way out.

Having said that there are those, possibly with more optimistic views, that next time round it will be different: That the steadying influences of solid economic growth, aided by tax cuts, with benign wages growth assisted by advances in technology, will balance supply and demand to allow central banks (and markets) to hold a steady course. There is no doubt this possibility exists, but it is not one to bet the house on.

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 over ten-year track record. 

• The Fund has significantly outperformed the ASX200 Accumulation Index since its inception in May 2006 and also has significantly lower risk KPIs. The Fund has an annualised return of 10.90% p.a. with a volatility of 7.00%, compared to the ASX200 Accumulation's return of 5.81% p.a. with a volatility of 13.62%.

• 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 Bennelong Funds Management provide infrastructure, operational, compliance and distribution capabilities.

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

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - December 2017 (pdf format)

Over the past couple of weeks Hedge Clippings has looked at the returns of Australian hedge funds over 2017 - particularly equity based funds which on average outperformed the market -  returning +13.02% against the ASX 200 Accumulation Index 11.8%. However we also noted that averages were sometimes misleading, with many funds significantly outperforming the average.

Looking at similar figures from Eureka Hedge (based in Singapore and whose focus is global funds rather than Australian), the average global fund was only up 8.25% for the year, with 79% of fund managers in positive territory, compared with Australian funds with almost 93% in positive territory. Comparing apples with apples on a strategy basis, Australian equity long/short funds returned 14.23% vs their global peers performance of +12.39%, while in the long only strategy the locals again outperformed returning 17.05% vs. 16.85%.

These results are even more impressive considering the local market's underperformance compared to the return of 21.83% by the S&P500 where the bulk of global equity managers invest. So not only did the locals outperform their overseas peers and the local market, but the global industry underperformed the global market.

There could be reasons for this of course, one being that the majority of funds in the www.fundmonitors.com database investing in Australia have limited FUM, and rarely above $1 billion, compared to the many larger $5bn+ US funds, with high FUM historically leading to lower returns. However to a great degree it is down to the depth of quality managers in Australia, and a market which is under researched - particularly outside the top 100 or 200 stocks, providing significant opportunities for managers investing in companies that are travelling under the brokers' research radar.

However the bottom line reality is that there are some outstanding local fund managers, large and small, who consistently perform on a global scale.

Moving away from the subject of hedge funds for a moment, and given that it is the day before Australia Day, Hedge Clippings has been pondering whether as a nation we are making the most of our opportunities. Australia is often considered to be the "lucky country" with its abundance of resources, a great climate, and a multicultural and generally tolerant society which most countries would be proud of.

For instance, take the ridiculous and distracting argument about the date upon which we celebrate Australia Day, and even what it should be called. All Nations and civilisations have aspects of their past they might prefer had not occurred. However, instead of arguing about the date or trying to airbrush history, surely we should be using the day to not only celebrate our successes, but also redoubling our efforts to ensure that we have a fairer and more inclusive society for all - irrespective of past wrongs.

And at the end of the day what event has shaped this nation, warts and all, more than the arrival of the First Fleet, on January 26, 1788?

Australia may well be the lucky country, but I'm not sure we are very smart. When in the UK recently (hardly renowned as one of the sunniest places in the world) I was struck by the number of fields alongside motorways in which there were rows and rows of solar panels. At the same time the UK, along with many other nations, are looking forward by planning for the end of the internal combustion engine.

Solar and alternative power and electric vehicles on just two examples of where the average Australian seems keen to move, but is being restricted by political dogma and vested interests, not only of certain industries, but also of an unsafe seat in Canberra.

There's an old saying: "Unless you embrace change before it occurs, you will be decimated by it when it does!"

And on that note, we wish all readers a Happy Australia Day, however you wish to spend it.