NEWS
19 Dec 2014 - Hedge Clippings
This is the last edition of Hedge Clippings for 2014, but rest assured (or should that "be afraid"?) that, barring unforeseen circumstances, we will return in 2015. Although our offices will be closed from Christmas through until 12 January, fund performances on www.fundmonitors.com will continue to be updated, and the phone and emails will be monitored and attended to as required.
Looking back over 2014, and particularly the predictions and forecasts we made last January, we think we got some things right, and hope we got nothing disastrously wrong. However there's no doubt we missed a few significant trends or events. At that time we said that the general view of managers we had spoken to was for a more subdued return from markets in 2014 than in 2013 (which has certainly been the case) but with higher volatility, which with the exception of a few isolated outbreaks, did not eventuate.
We did forecast (correctly) that the Aussie dollar appeared to have further downside potential, but as it had already fallen 16% at that stage, that was probably not too difficult to call. What did surprise us was the stubbornness of the local currency to take the hint from falling commodity prices for a large part of the year.
Our opinion that Australia's economy was likely to see headwinds was correct, although with commodity prices falling further than we had anticipated, we probably also under-estimated the strength of those headwinds. What we also failed to foresee was the difficulties that the government would encounter in the Senate, which were compounded in our opinion by a poorly constructed, or at least poorly marketed, budget.
We suggested that the US recovery would gradually gain pace, and that politicians and policy both locally and overseas would continue to take centre stage. We thought China may or may not avoid a hard or soft landing, which would appear to still be the case, perhaps suggesting that they will manage to avoid the former. Sadly we suggested that the Middle East would continue to hit turbulence, but we certainly could not have envisaged the level of brutality involved.
Having noted the above, there were a few other things we completely missed or managed to forecast. Who would have thought that by the end of the year the price of a barrel of oil would halve, thereby placing significant pressure on the Russian economy, which was of course compounded by the political and military situation in the Ukraine. As noted above we also failed to anticipate the speed at which the new Federal government could lose its political way, thus affecting business confidence, although internally we have divided opinions as to the degree of damage this is doing to consumer confidence.
Of course when looking backwards everything seems relatively clear, but the real challenge will come in January next year when we will gaze once again into our economic crystal ball and try to provide some clarity for the following 12 months. With that in mind we have organised a lunchtime seminar on Thursday February 12 in conjunction with Deloitte entitled "Looking Forward, Looking Back" where a panel of four of the best and brightest fund managers will provide the benefit of their expert opinions. If you haven't already registered, please click here.
Finally this week we have a further video interview with Jack Lowenstein, joint CIO of the Morphic Opportunities Fund discussing his fund and the market's recent performance.
Meanwhile all of us at AFM and Hedge Clippings would like to take this opportunity of wishing you and your families a Happy Christmas and a prosperous and healthy New Year. Stay safe over the holidays, and be kind to each other.
Specific results received this week include the following PERFORMANCE UPDATES:
Bennelong Long Short Equity Fund returned 3.12% in November, outperforming the ASX 200 Accum Index.
The Optimal Australia Absolute Trust returned -0.53% against the ASC 200 Accum Index -3.25% in November with annual returns at 5.41%, and volatility of 2.08%.
Returning 6.14% during November and 15.05% over the prior 12 months Totus Alpha Fund has a volatility of 8.61%.
The Aurora Fortitude Absolute Return Fund returned 0.38% during November and 2.22% for the previous 12 months with a volatility of 1.07%.
In a difficult month for equities the Insync Global Titans Fund returned 5.67%, bringing 12 month returns 12.88% with volatility 8.87%.
The Alpha Beta Asian Fund returned 2.10% during November with annual performance of 6.18% with a volatility of 4.31%.
Thursday 12 February 2015 in conjunction with Deloitte, AFM are pleased to be holding a lunch time presentation in Sydney entitled 2015 Market Outlook: "Looking Forward, Looking Back" featuring the opinions and experience of some of Australia's best fund managers. RSVP and reserve your place here.
18 February 2015 in Sydney - Efficiency in a Regulated World
25-27 March 2015 - Digital Marketing for Banking and Financial Services Summit.
For this week's "and now for something completely different", we bring you a blast from the past. We included this amazing footage of a Scotsman on his pushbike in our Hedge Clippings way back in August 2012. At that stage it had been viewed 22 million times, now it's up to 34 million. We hope you enjoy it as much the second time around.
Kind regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
Connect with me on LinkedIn Twitter Facebook
| Registration to AFM is free and provides general information and performance data on Absolute Return, Hedge Funds and Alternative Investments. | Fund Managers and paid Subscribers have access to details on Individual Managers and Funds, with historical results, key performance indicators, latest news and performance reports. | Prism Select provides self-directed investors and their advisors with factual information, performance data and opportunity to apply for funds online using OLIVIA123. | Tune into Sky Business on Foxtel every week on Monday at 2:15 pm for AFM's weekly comment. |
Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.
19 Dec 2014 - Insync Global Titans Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | |
| Manager Comments | The performance was driven by positive contributions from our holdings in Medtronic, Oracle, Sanofi, BAT and Sky as well as the weaker Australian dollar. The Fund continues to hedge its investments with the portfolio protection strategies currently employed and to also have no foreign currency hedging in place as we believe the risks to the Australian dollar are likely to be on the downside. Insync's philosophy is to invest in the more predictable growth companies and to include dynamic downside protection strategies. During previous periods of significant market falls and heightened volatility the fund has delivered positive absolute returns from, employing its downside protection strategies. The fund looks for exceptional businesses with high ROIC, strong free cash flow, solid balance sheets and a long track record of returning cash to shareholders through growing dividends and/or share buy-backs. |
| More Information | » View detailed profile of this fund |
19 Dec 2014 - Alpha Beta Asian Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | The investment objective of the Fund is to produce positive annual returns without excessive risk. This is achieved through the use of a quantitative approach to invest both long and short in large cap companies listed on Asian stock exchanges. The Fund may also use index futures to manage risk. Stock prices and company fundamental data are decomposed into directional and mean reverting components. Each of Alpha Beta's models are based on either of these known behaviours with capital management built into each model. The benefit of a quantitative approach is that it is both repeatable and unemotional, and allows a different source of returns to be extracted from a very noisy market environment. |
| Manager Comments | The has recorded 63% positive months since inception and a maximum draw-down of 2.90%. Fund beta is 0.09 mapped to the MSCI AC Asia Pacific Index (MXAP) with a correlation of 0.17 to the same Index. The Fund generated a return of +2.10% during November, with the strongest performance coming from our Quantamental models, in particular in Hong Kong (a contribution of +1.5%) and two of our new markets, Taiwan (+0.7%) and Malaysia (+0.3%). It seems that our recent addition of these markets has already borne fruit. |
| More Information | » View detailed profile of this fund |
19 Dec 2014 - Fund In Focus - Morphic Global Opportunities Fund
Jack Lowenstein, the Joint CIO of the Morphic Global Opportunities Fund discusses the Fund's performance in November 2014 and condition of the market.
Watch AFM's other videos.
18 Dec 2014 - Aurora Fortitude Absolute Return Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | The Fund aims to produce positive returns irrespective of the direction of the share market. For each investment the manager considers the risk, the timeline of that risk occurring and then the potential return. Low transaction costs and liquidity are other important factors in the success and implementation of the strategies. |
| Manager Comments | In November the fund's Option Strategy contributed significantly at 1.22%. Whilst the commodity names grabbed the headlines, positive contributions were also made concomitantly across the industrial sector, with the adjustment in the retail sector being the major factor. Following a disappointing sales update Woolworths Limited (WOW.ASX) fell 13.56%. Their major competitor Wesfarmers Limited (WES.ASX) fell a more modest 6.12%. The Fund was able to generate positive returns in both names. Other significant contributors were Woodside Petroleum (WPL.ASX), BHP Billiton (BHP.ASX) and Westpac Banking Corporation (WBC.ASX). The Long/Short trading was the most significant drawdown during the month (-0.77%). There was too much exposure to small capitalisation resources companies, which were generally entered int with the view to exiting post an 'event or catalyst' in a relatively short time period. However, the extent of market sell off and the lack of liquidity in these names has caused us to implement exit strategies for the bulk of these position and reassessing our approach in this space. |
| More Information | » View detailed profile of this fund |
17 Dec 2014 - Totus Alpha Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | The Fund is a long/short investment fund principally investing in listed entities, commodities, futures and options in Australia and internationally. The Fund is not a market neutral fund and accordingly may switch between net long positions and net short positions. The Fund may use short sales and derivatives. Gearing may be used to enhance returns and the Fund may be geared in excess of 100% of the Fund's Net Asset Value. There is a limit to net exposure of 150%. |
| Manager Comments | The Sharpe and Sortino ratios over the last year are 1.39 (0.21) and 2.83 (0.23) respectively with the Up and Down Capture ratios 0.59 and -0.27. As at 30 November, the fund had a net exposure of 39.40% and a gross exposure of 265.0%/ The fund held 112 positions (43 long and 69 short). The fund is active on both the long and short side but it is in periods of heightened market volatility (like November) that the ability to short sell really adds value. |
| More Information | » View detailed profile of this fund |
16 Dec 2014 - Optimal Australia Absolute Trust
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | The Fund's bias is likely to be net long under normal market conditions, with the core strategy being to construct a portfolio of listed equity securities priced at levels that do not adequately reflect their underlying value. The Fund will seek to boost returns and limit potential market downside by selective short selling of individual stocks which are priced at levels that are viewed as materially above their underlying value. The Fund will also use certain trading strategies both within its core portfolio (through rebalancing stock weights and overall market exposure in response to price movements) and in certain other situations (typically of a shorter-duration and/or opportunistic nature) with the objective of further increasing returns. |
| Manager Comments | The Fund recorded 83% positive months over the last year and a maximum draw-down of -0.71% as compared to the Index at -5.38%. The accelerating slide in energy prices was the big story of the month in the markets, and this dynamic also had a big influence on the Fund's return. Energy and materials stocks dominated our long return attribution of -1.91% on average long exposure of 48%. Similarly, energy and financials were the major source of gains in our short portfolio, with attribution of +1.37% on average short exposure of 31%. |
| More Information | » View detailed profile of this fund |
15 Dec 2014 - Bennelong Long Short Equity Fund November 2014
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | In a typical environment the Fund will hold around 70 stocks comprising 35 pairs. Each pair contains one long and one short position each of which will have been thoroughly researched and are selected from the same market sector. Whilst in an ideal environment each stock's position will make a positive return, it is the relative performance of the pair that is important. As a result the Fund can make positive returns when each stock moves in the same direction provided the long position outperforms the short one in relative terms. However, if neither side of the trade is profitable, strict controls are required to ensure losses are limited. The Fund uses no derivatives and has no currency exposure. The Fund has no hard stop loss limits, instead relying on the small average position size per stock (1.5%) and per pair (3%) to limit exposure. Where practical pairs are always held within the same sector to limit cross sector risk, and positions can be held for months or years. |
| Manager Comments | Long term performance remains sound with since inception (Jan 2003) returns at 17.12% pa (Index 7.99%) and a volatility of 11.94% (Index 12.91%). Sharpe and Sortino ratios are well ahead of the Index at 1.01 and 1.68 respectively. In November the fund performance stabilised with key pairs making solid contributions. Stock positions in Quantas and Challenger slightly offset these returns. At the industry level, Consumer Staples short, Health Care long and Consumer Discretionary short were outperformers whilst our Industrials long positions underperformed. We were relatively active during the month, taking advantage of price movements to adjust weightings in several pairs and we also introduced one new pair. |
| More Information | » View detailed profile of this fund |
12 Dec 2014 - Hedge Clippings
12 months ago the Reserve Bank Govenor Glenn Stevens was trying to talk the Aussie dollar down to US$0.85, and whilst it held stubbornly above that for some time, it looks like he's got his wish. Not content with that however he has now lowered his target to US $0.75 as he looks forward to 2015.
To be fair there has been a significant deterioration to commodity prices, particularly iron ore and coal, on the back of the outlook for Chinese growth, and is difficult to see any rapid rebound in these, certainly not back to the halcyon days of 24 months ago.
More recently of course the oil price has plunged, although driven by a different set of circumstances with the Saudis seemingly intent on spoiling the energy industry in the United States, while at the same time, intentionally or otherwise, putting even further pressure on Vladimir Putin.
It seems pretty obvious that the RBA would rather let commodities, along with some tough talking, push the Aussie dollar down to even more competitive levels rather than cut interest rates further and risk pushing property further upwards as a result. Having said that anecdotal evidence suggests that with Christmas just around the corner a fair amount of the exuberance in certain parts of the property market has already been taken care of.
None of this will necessarily help the Treasurer Joe Hockey as he wrestles with trying to get his May 2014 budget approved through the Senate before he needs to start drafting the next one. It's looking as if there are going to be some significant budget deficits for some time to come, with some forecasters thinking five years or more. Having lost a fair amount of political capital in the last 12 months, the available options, including taking a look at GST and negative gearing, would seem to be diminishing.
What will also be interesting to us next year will be the governments reaction, or at least their resolve, to do anything about David Murray's FSI released last Sunday. In our opinion we couldn't find much wrong with the 44 recommendations in the report, but as we have mentioned before recommendations are easy, implementation is another matter.
Meanwhile a reminder that next year on Thursday February 12th we are holding a lunchtime seminar for investors and advisers in conjunction with Deloitte entitled "Looking Forward, Looking Back" featuring the opinions and experience of some of Australia's best fund managers, including Simon Shields of Monash Investors, and George Colman from Optimal Australia. Save the date, and reserve your place here.
Next Friday will see the last edition of Hedge Clippings for 2014, and we will then be taking a short break over Christmas and the summer holidays for some welcome R&R. In case you're going away yourself before then, best wishes for a happy festive season, and we look forward to touching base again in 2015.
Specific results received this week include the following PERFORMANCE UPDATES:
November performance brings the Monash Absolute Investment Fund annual return to 4.08% with a volatility of 8.14%.
The Morphic Global Opportunities Fund returned 5.24%, bringing the annual return to 15.35% with a volatility of 8.85%.
Bennelong Kardinia Absolute Return Fund returned 1.31% during November and 5.33% over the previous 12 months with a volatility of 4.08%.
The Paragon Fund performance is in for November with annual returns at 16.72% (Index 4.30%) with a volatility 15.11% (Index 10.84%). .
18 February 2015 in Sydney - Efficiency in a Regulated World
25-27 March 2015 - Digital Marketing for Banking and Financial Services Summit.
For this week's "and now for something completely different", we aren't sure how much of this is live footage and how much is CGI but it's a great use of unbrellas and very clever.
Best wishes for a happy and healthy weekend,
Chris
CEO, AUSTRALIAN FUND MONITORS
Connect with me on LinkedIn Twitter Facebook
| Registration to AFM is free and provides general information and performance data on Absolute Return, Hedge Funds and Alternative Investments. | Fund Managers and paid Subscribers have access to details on Individual Managers and Funds, with historical results, key performance indicators, latest news and performance reports. | Prism Select provides self-directed investors and their advisors with factual information, performance data and opportunity to apply for funds online using OLIVIA123. | Tune into Sky Business on Foxtel every week on Monday at 2:15 pm for AFM's weekly comment. |
Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.
12 Dec 2014 - The Paragon Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | Paragon accepts that markets are not always efficient in pricing information into securities and that no one investment style works in every stage of the investment cycle. Subsequently Paragon adopts a top down thematic led approach to identify companies exhibiting sustainable or improving returns on capital driven by volume growth, pricing power and competitive advantages. Paragon utilises both quantitative analysis to provide probability weighted high/low/base case valuations and qualitative analysis in assessing management, the business model and likely direction of returns. Paragon will allocate assets to each investment opportunity based on a risk/reward profile. Positions have defined investment parameters and risk limits, which are then monitored on an ongoing basis. |
| Manager Comments | Key drivers of the Paragon Fund performance for November included solid returns from long positions in Qantas and Henderson Group and short positions in Woodside and Computershare, offset by falls in G8 Education, TFS Corp, Donaco and our resource holdings generally. At the end of November the fund had 29 long positions and 10 short positions. |
| More Information | » View detailed profile of this fund |
