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)

OPTIMAL AUSTRALIA ABSOLUTE FUND

Attached is our most recently updated Fund Review on the Optimal Australia Absolute Fund.  

We would like to highlight the following aspects of the Fund:

• Optimal Australia is a specialist Australian equity investment manager established in 2008.
• The Fund's long/short equity strategy portfolio typically has a low but variable net market exposure comprising 40 to 65 stock broadly selected from within the ASX200.
• The investment team comprising George Colman, Peter Whiting and Stephen Nicholls have close to 90 years combined experience in equity markets.
• Consistent out-performance of the market: Approximately 84 % of monthly performances have been positive with a largest drawdown of -1.38%.

Research and Database Manager
Australian Fund Monitors

ATTACHED FILESOptimal Australia Absolute Trust AFM Review - May 2013 (pdf format)