Hedge Clippings | Talking, talking, talking. Sooner or later you've got to walk...

15 Mar 2019 - Australian Fund Monitors

Is there any point in talking any more about Brexit? It would have contributed more column inches (that's how they measured media coverage prior to TV, the internet, and social media) on any subject since the end of WW2, but without a...

15 Mar 2019 - Hedge Clippings | Talking, talking, talking. Sooner or later you've got to walk the walk.

By: Australian Fund Monitors

Hedge Clippings | Friday 15 March, 2019

Talking, talking, talking. Sooner or later you've got to walk the walk.

Is there any point in talking any more about Brexit? It would have contributed more column inches (that's how they measured media coverage prior to TV, the internet, and social media) on any subject since the end of WW2, but without a victory, or a clear winner.

Whatever the outcome there are losers galore (UK, Ireland, Europe, and subsequently global trade and economic stability). Winners? A Pyrrhic victory ("a victory won at too great a cost to be worthwhile for the victor") for Boris maybe, but he went AWOL while the going was good and is either keeping his head down, or his powder dry, and will emerge after Mrs May - who must be one of the most resilient (even if not the most popular) leaders since Winston Churchill - meets her eventual end.

We actually thought we'd seen (or heard) the end of talking about, or at least the demise of, the phenomenon of negative yielding bonds last October. However it appears not, with Bloomberg reporting that there's been a 60% increase over 5 months with the Bloomberg Barclays Global Aggregate Negative-Yielding Debt Index increasing in value by over $3 trillion in that time to reach $9.3 trillion - albeit well below the all-time record of $12.2 trillion in June 2016.

The concept of negative yields seemed impossible a couple of decades ago, as would Australian 10 year yields below 2% as they are now. However, as an indicator of future economic growth they tell a story worth listening to, both globally and in Australia where we might just see a risk to the crown of 30 odd years of uninterrupted economic growth. Speculation that the next move in RBA rates will be downwards is mounting, which, while it may please the under pressure property industry, doesn't auger well for the economy as a whole.

Meanwhile, talking of China, another Bloomberg report we noted this week concerned the fact that their economic slowdown deepened in the first two months of 2019, with unemployment sharply higher, industrial output posting its worst start to a year since 2009, and retail sales expanding at the slowest pace since at least 2012 even though investment in real estate rose to its highest since 2014. We're not sure the Chinese slowdown is entirely due to the Trump/Xi negotiations, a resolution of which has been postponed further, but it certainly won't have helped. It could be the sign of a maturing economy, or a slowdown in the migration of the rural farm worker to the industrialised cities, or the overall global slowdown.

Then again these are Chinese economic figures based on the two months to the end of February, amazingly collated across a population of 1.2 billion, and released in just 14 days.

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Performance Report: Harvest Lane Asset Management Absolute Return Fund

15 Mar 2019 - Australian Fund Monitors

The Harvest Lane Absolute Return Fund has returned +13.05% over the past 12 months versus the ASX200 Accumulation Index's +7.05%. This return has been achieved with a volatility of only 7.40% versus the Index's 11.59%.

15 Mar 2019 - Performance Report: Harvest Lane Asset Management Absolute Return Fund

By: Australian Fund Monitors

Report Date	14 March 2019
Manager	Harvest Lane Asset Management
Fund Name	Harvest Lane Asset Management Absolute Return Fund
Strategy	Equity Market Neutral
Latest Return Date	February 2019
Latest Return	0.81%
Latest 6 Months	6.32%
Latest 12 Months	13.05%
Latest 24 Months	19.04%
Annualised Since Inception	9.13%
Inception Date	01 July 2013
FUM (millions)	AU$12
Fund Overview	The Fund aims to deliver a return of greater than 10% p.a. after all fees and charges over a 3 year period with low or no correlation to the Australian equity market. By focusing on select takeover and corporate activity the fund aims to achieve this whilst also exhibiting lower than average volatility than the market. Harvest Lane Asset Management employs a conservative, highly selective and opportunistic approach. Using their extensive knowledge in the area of corporate actions, the Fund's managers assess each opportunity based on a thoughtful, diligent and disciplined process and invest where they believe an opportunity exists to generate above average investment returns relative to the risk incurred. Investment decisions are made without speculating on market direction, with rigid risk controls enforced to minimise the risk of large losses of investor capital. The Fund invests in securities that are predominantly listed on the ASX and occasionally in those listed in other developed markets. Equity swaps and other derivatives may be used at times to reduce risk. The fund typically holds high levels of cash in the absence of sufficiently attractive opportunities to deploy investor capital in accordance with its objectives.
Manager Comments	The Harvest Lane Absolute Return Fund has returned +13.05% over the past 12 months versus the ASX200 Accumulation Index's +7.05%. This return has been achieved with a volatility of only 7.40% versus the Index's 11.59%. Since inception in July 2013, the Fund has returned +9.13% per annum versus the Index's 9.24% with an annualised volatility of 7.02% versus the Index's 11.01%. In line with the Fund's absolute return objective, its performance statistic demonstrate superior performance in negative markets over the long term; annualised volatility of 7.02% vs the Index's 11.01% since inception, Sortino ratio of 1.74 vs the Index's 0.98, average negative return of -1.44% vs the Index's -2.45%, largest drawdown of -6.46% vs the Index's -13.73% and down-capture ratio of -35.6% (a negative down-capture ratio indicates that, on average, the Fund has risen during the months the market has fallen). In addition, the Fund's Sharpe ratio of 1.02 vs the Index's 0.69 highlights its capacity to achieve superior risk-adjusted returns over the long term. The Fund returned 0.81% in February. Harvest Lane noted that, even as many of their positions steadily increase in price as their respective transaction endpoints approach, there remains sufficient implied discount in the portfolio for them to be optimistic about the Fund's performance over the remainder of the year. Overall, February was a relatively quiet month for the Fund. Two larger sized transactions in PropertyLink Group and Greencross Limited were concluded intra-month, allowing Harvest Lane to rotate capital straight back into new opportunities. In total, five new deals passed Harvest Lane's due diligence process, while several more are currently being monitored for inclusion in the portfolio at a later time.
More Information	Fund Profile Manager's Report

The company shaking up the U.S. healthcare system (NYSE: CVS)

14 Mar 2019 - Ted Franks, Pengana WHEB Sustainable Impact Fund

The American healthcare system is one of the world's largest markets, nearly 18% of the U.S. GDP is spent on healthcare compared with Australia's 9.6%, however their average life expectancy is 78.8 years vs. 80.7 - 83.9 years for other...

Opera in Beijing - The National People's Congress 2019

13 Mar 2019 - Marcel von Pfyffer, Arminius Capital

China's equivalent of Parliament meets in Beijing every year for a few days in March. This august body, officially called the National People's Congress, always passes every item of legislation put in front of it by the Communist Party...

Performance Report: Bennelong Long Short Equity Fund

12 Mar 2019 - Australian Fund Monitors

The Bennelong Long Short Equity Fund has returned +15.11% p.a. since inception in January 2003 versus the ASX200 Total Return's +8.05% p.a. over the same period.

12 Mar 2019 - Performance Report: Bennelong Long Short Equity Fund

By: Australian Fund Monitors

Report Date	12 March 2019
Manager	Bennelong Long Short Equity Management, a Bennelong boutique
Fund Name	Bennelong Long Short Equity Fund
Strategy	Equity Market Neutral
Latest Return Date	February 2019
Latest Return	-0.82%
Latest 6 Months	-15.35%
Latest 12 Months	-2.78%
Latest 24 Months	10.94%
Annualised Since Inception	15.11%
Inception Date	01 January 2003
FUM (millions)	AU$382.8
Fund Overview	Bennelong Long Short Equity Management applies a qualitative stock selection process to construct a diversified portfolio of paired securities based on relative value. The Bennelong Long Short Equity Management strategy invests primarily in the S&P/ASX 100 and is dollar neutral at cost. 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. The Bennelong Market Neutral Fund, with same strategy and liquidity is available for retail investors as a Listed Investment Company (LIC) on the ASX.
Manager Comments	The Bennelong Long Short Equity Fund has returned +15.11% p.a. since inception in January 2003 versus the ASX200 Total Return's +8.05% p.a. over the same period. The Fund's Sortino ratio of 1.45 versus the Index's 0.43, average negative return of -2.45% versus the Index's -3.07%, largest drawdown of -15.35% versus the Index's -47.19% and down-capture ratio of -163.51% collectively highlight the Fund's capacity to significantly outperform in negative markets over the long-term. In addition, the Fund's Sharpe ratio of 0.90 versus the Index's 0.38 highlights the Fund's ability to achieve superior risk-adjusted returns. The Fund's performance was modestly negative in February (-0.82%). Bennelong experienced a mix of winners and losers across the 31 pairs in the portfolio. They noted reporting season led to a slight downgrade to market earnings forecasts with resources positive and industrials negative. They were comfortable with their overall hit rate based on earnings revisions. By sector, the Fund saw positive contributions from Financials and Healthcare, while Mining/Resources and Energy lagged. Top contributors included long Macquarie / short Bendigo Bank and long Ramsay Health Care / short Healius. The worst pairs in the portfolio were long Challenger / short IOOF/ANZ and long Caltex / short Viva Energy. Bennelong noted the long portfolio continues to deliver superior earnings growth and return on equity/capital relative to the short portfolio.
More Information	Fund Profile Manager's Report AFM Research Reports

Performance Report: Cyan C3G Fund

12 Mar 2019 - Australian Fund Monitors

The Cyan C3G Fund has returned +18.29% since inception in July 2014 versus the ASX200 Accumulation Index's +6.70% over the same period. This return has been achieved with a similar level of volatility to the market.

12 Mar 2019 - Performance Report: Cyan C3G Fund

By: Australian Fund Monitors

Report Date	12 March 2019
Manager	Cyan Investment Management
Fund Name	Cyan C3G Fund
Strategy	Equity Long
Latest Return Date	February 2019
Latest Return	0.60%
Latest 6 Months	-9.76%
Latest 12 Months	-10.76%
Latest 24 Months	18.49%
Annualised Since Inception	18.29%
Inception Date	24 July 2014
FUM (millions)	AU$37
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 has returned +18.29% since inception in July 2014 versus the ASX200 Accumulation Index's +6.70% over the same period. This return has been achieved with a similar level of volatility to the market; 11.20% p.a. versus the Index's 11.39%. The Fund's performance and risk analytics indicate that historically the Fund has been successful in achieving superior upside and downside performance than the market; Sharpe and Sortino ratios of 1.47 and 2.77 respectively versus the Index's Sharpe of 0.47 and Sortino of 0.62, average monthly return of +1.46% versus the Index's +0.60%, and up-capture and down-capture ratios of 78.6% and -3.4% respectively. The Fund posted a modest gain of 0.6% in February following on from a 4.0% rise in January. 8 out of the Fund's 25 positions moved in excess of 20% during the month. Top contributors included Splitit (+58%), Experience Co (+22%) and Afterpay (+15%). Detractors included Murray River Group (-20%) and Motorcycle Holdings (-28%). Despite regretting not having participated in more of the market's upside in recent months, Cyan maintain that the market was too volatile to have been fully invested at the end of 2018. They noted they've added a couple of new and exciting positions to the portfolio and they feel that positive and unexpected (or undiscovered) company performances will be well-rewarded.
More Information	Fund Profile Manager's Report

Fund Review: Bennelong Long Short Equity Fund February 2019

11 Mar 2019 - Australian Fund Monitors

Latest Fund Review for the Bennelong Long Short Equity Fund is now available. The Fund is a research driven, market and sector neutral, "pairs" trading strategy investing primarily in large-caps from the ASX/S&P100 Index...

Hedge Clippings | 08 March 2019

8 Mar 2019 - Australian Fund Monitors

The see-saw equity market has been making things difficult for fund managers over the past 6 months - they found the last quarter of 2018 tough enough as the market tanked under the pressure of US investors' reaction to 10-year bond rates...

8 Mar 2019 - Hedge Clippings | 08 March 2019

By: Australian Fund Monitors

The see-saw equity market has been making things difficult for fund managers over the past 6 months - they found the last quarter of 2018 tough enough as the market tanked under the pressure of US investors' reaction to 10-year bond rates at 3.25%, and locally the side effects Hayne Royal Commission. Subsequently the ASX rebounded 6% in February as 10-year US bond returns retreated to yield 2.75%, just as many fund managers reset their portfolios to be more defensive and risk averse.

Of course not helping markets are the multiple geopolitical and associated economic issues they're facing: Brexit is getting closer and closer to the wire without a solution; Europe's economy is slowing partly as a result of Brexit, and partly due to China's slowdown; Trump's mega arm wrestle with Xi isn't going as well as he'd like to tweet, with evidence that it is hurting the US economy as well and possibly as much as China's; and finally the Donald might be realising that negotiating with Korea is not as easy as simply comparing and bragging about the size of his button.

While on the subject of China, an article today on Bloomberg's "Five Things To Start Your Day" (well recommended if you don't already receive it) citing the exodus of Chinese property buyers as the main cause of the property downturn in Australia (having bid it up in the first place), and elsewhere around the globe. Whilst that may be a major reason, so is the banks' tightening of loan eligibility (or possibly just applying what was there in the first place) along with the impending end of 5-year fixed-term interest-only mortgages being switched to principal and interest loans; low wages growth, in turn leading to poor retail sales figures as consumers' confidence is eroded and they pull their collective heads in.

For the property market it is somewhat of a perfect storm, and coming at the end of an extended period of double digit annual growth, bound to fall further. Whilst not property experts, Hedge Clippings would suggest the worst for the property market is not over yet, particularly with the imminent potential of a change in government, and with it the introduction of restrictive negative gearing rules amongst other goodies.

Fund Review: Bennelong Kardinia Absolute Return Fund February 2019

8 Mar 2019 - Australian Fund Monitors

The latest Fund Review for the Bennelong Kardinia Absolute Return Fund is now available. The Fund is a long-biased, research driven, active equity long/short strategy which invests in listed ASX companies with track records greater than 10 years.

Bennelong Twenty20 Australian Equities Fund February 2019

7 Mar 2019 - Australian Fund Monitors

The latest Fund Review on Bennelong Twenty20 Australian Equities Fund is now available. The Fund invests in ASX listed stocks, combining an indexed position in the Top 20 stocks with an actively managed portfolio of ex-20 stocks.

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15 Mar 2019 - Hedge Clippings | Talking, talking, talking. Sooner or later you've got to walk the walk.

15 Mar 2019 - Performance Report: Harvest Lane Asset Management Absolute Return Fund

14 Mar 2019 - The company shaking up the U.S. healthcare system (NYSE: CVS)

13 Mar 2019 - Opera in Beijing - The National People's Congress 2019

12 Mar 2019 - Performance Report: Bennelong Long Short Equity Fund

12 Mar 2019 - Performance Report: Cyan C3G Fund

11 Mar 2019 - Fund Review: Bennelong Long Short Equity Fund February 2019

8 Mar 2019 - Hedge Clippings | 08 March 2019

8 Mar 2019 - Fund Review: Bennelong Kardinia Absolute Return Fund February 2019

7 Mar 2019 - Bennelong Twenty20 Australian Equities Fund February 2019

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