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Performance Report: KIS Asia Long Short Fund
29 Nov 2018 - Australian Fund Monitors
The KIS Asia Long Short Fund returned -0.15% in October, outperforming the ASX200 Accumulation Index by +5.9% and taking annualised performance since inception in October 2009 to +12.74%.
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29 Nov 2018 - Performance Report: KIS Asia Long Short Fund
By: Australian Fund Monitors
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| Fund Overview | Whilst the Fund's primary strategy is focused on long/short equities, the ability to retain discretionary powers to allocate across a number of other investment strategies is reserved. These strategies may include, but not be limited to: convertible bond investments, portfolio hedging, equity related arbitrage, special situations (e.g. merger arbitrage, rights offerings, participation in international public offerings and placements, etc.). The Fund's geographic focus is Asia excluding Japan, but including Australia). The Fund may invest outside of this region to the extent that: 1. The investment decision is driven from the Asian region or; 2. The exposure is intended to mitigate risk or enhance return from factors external to the Asian region. |
| Manager Comments | October's volatility saw KIS reduce gross exposure and increase activity. Long exposure to gold companies such as Evolution Mining and Newcrest mining helped, contributing 29bp and 14bp respectively. The Fund's smaller companies impacted negatively, detracting -283bp across all names. This was mostly offset by a short bias across large caps (+94bp) and index hedges (+134bp). KIS noted October presented investors with one of the toughest months since 2008. They believe we are entering a corporate buyback period in the US equity market and that the higher yields in the US will temper further borrowing to fund these buy backs. KIS don't expect yields to increase any further over the short to medium term. |
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Performance Report: Bennelong Kardinia Absolute Return Fund
29 Nov 2018 - Australian Fund Monitors
The Bennelong Kardinia Absolute Return Fund has returned +9.57% p.a. with an annualised volatility of only 7.11% since inception in May 2006. By contrast, the ASX200 Accumulation Index has returned +5.37% p.a. with an annualised volatility...
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29 Nov 2018 - Performance Report: Bennelong Kardinia Absolute Return Fund
By: Australian Fund Monitors
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| Fund Overview | 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 | Kardinia Capital noted October was a brutal month for equity markets and the Fund. The Fund fell -5.71%, with performance impacted primarily by the Fund's Resources exposure (which they believe will be a primary beneficiary of the merging global reflationary environment) and core holdings in quality growth stocks like Aristocrat, CSL and Macquarie. However, fundamental stock-specific news flow was positive. Other detractors included WorleyParsons, Seven Group, Nine Entertainment, and a short position in MYOB. The Fund's shorts performed well overall, with Share Price Index Futures contracts adding 95bp for the month and individual stock shorts, led by financials, IT and bond proxy stocks, adding 44bp. In addition, during the sell-off Kardinia Capital added to their highest conviction positions, building net exposure to 55% (72.4% long and 17.4% short) from 30% on their expectation that this is a short but violent pullback rather than the beginning of a bear market. The key changes to the portfolio included new positions in Westpac, NAB and ANZ, as well as increased weightings in Macquarie Group, CSL and Aristocrat Leisure. Kardinia noted this was partly offset by the sale of Bluescope, Nine Entertainment, Services Stream and WorleyParsons. |
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Performance Report: Quay Global Real Estate Fund
28 Nov 2018 - Australian Fund Monitors
The Quay Global Real Estate Fund returned -0.8% in October, outperforming its benchmark (FTSE/EPRA NAREIT Developed Index Net TR AUD) by +0.9% and taking 12-month performance to +13.13%.
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28 Nov 2018 - Performance Report: Quay Global Real Estate Fund
By: Australian Fund Monitors
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| Fund Overview | The Fund will invest in a number of global listed real estate companies, groups or funds. The investment strategy is to make investments in real estate securities at a price that will deliver a real, after inflation, total return of 5% per annum (before costs and fees), inclusive of distributions over a longer-term period. The Investment Strategy is indifferent to the constraints of any index benchmarks and is relatively concentrated in its number of investments. The Fund is expected to own between 20 and 40 securities, and from time to time up to 20% of the portfolio maybe invested in cash. The Fund is $A un-hedged. |
| Manager Comments | Quay noted almost all of the Fund's investees reported earnings in line with or better than their expectations in October, with many lifting full year guidance. They believe improving earnings outlook (especially in the USA) is the flip-side to higher interest rates; i.e. if higher interest rates are the result of a strong economy then that strength will be felt in rental growth and earnings. This, Quay noted, is particularly evident in the Fund's multifamily exposure, which in simple terms is apartments to rent. Quay also mentioned that the US reported new homes sales fell -5.5% to a new two-year low, which they believe the market's reaction suggests investors could be equating soft new home sales with another financial crises event. Quay believe, on this occasion, weak new home sales don't suggest a poor economy but instead an affordability issue. They noted housing affordability around the world has been one of their key themes, pointing to high levels of students debt, rising construction costs, weak wage growth and a 200bp increase in mortgage rates in the US keeping more young Americans from home ownership and living at home with their parents for longer. Quay added that new homes in the US are still needed and total new housing supply remains relatively low by historic standards. Consequently, the Fund's US residential investees continue to report very robust leasing demand and 'better-than-inflation' rental growth. By contrast with the residential environment in Australia today where supply of new dwellings is at a record high and banks continue to tighten lending standards, Quay believe the relative income stability of off-shore residential property to be a better alternative. |
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Performance Report: 4D Global Infrastructure Fund
28 Nov 2018 - Australian Fund Monitors
The 4D Global Infrastructure Fund has returned +9.96% p.a. since inception in March 2016 versus its benchmark (OECD G7 Inflation Index +5.5%) which has returned +7.42% p.a. over the same period.
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28 Nov 2018 - Performance Report: 4D Global Infrastructure Fund
By: Australian Fund Monitors
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| Fund Overview | 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 | In October, the Fund returned -0.97%. The strongest performers throughout the month were Brazilian toll road operators CCR (+34.7%) and Ecorodovias (+32%) following a positive outcome in the Brazilian elections which saw investors find favour in Brazil again. 4D noted these stocks had been considerably oversold over the past few months and they expect further re-rating as the market gains comfort with Bolsonaro. The weakest performer in October was Mexican airport operator GAP (-17.9%), following AMLCO's cancellation of the Mexican City Airport after a farce referendum which raised concerns about his leadership and influence over the infrastructure sector. 4D noted that, given the generally positive global macro environment, they remain overweight user pay assets which have a direct correlation to macro strength. However, due to ongoing geopolitical concerns they're maintaining core exposure to quality defensive utilities. |
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Performance Report: Bennelong Australian Equities Fund
27 Nov 2018 - Australian Fund Monitors
The Bennelong Australian Equities Fund has risen +5.39% over the past 12 months, outperforming the ASX200 Accumulation Index by +2.45% and taking annualised performance since inception in February 2009 to +13.01%.
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27 Nov 2018 - Performance Report: Bennelong Australian Equities Fund
By: Australian Fund Monitors
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| Fund Overview | The Bennelong Australian Equities Fund seeks quality investment opportunities which are under-appreciated and have the potential to deliver positive earnings. The investment process combines bottom-up fundamental analysis with proprietary investment tools that are used to build and maintain high quality portfolios that are risk aware. The investment team manages an extensive company/industry contact program which helps identify and verify various investment opportunities. The companies within the portfolio are primarily selected from, but not limited to, the S&P/ASX 300 Index. The Fund may invest in securities listed on other exchanges where such securities relate to the ASX-listed securities. The Fund typically holds between 25-60 stocks with a maximum net targeted position of an individual stock of 6%. |
| Manager Comments | As at the end of October, the Fund's weightings had been increased in the Communication, Industrials, Materials, REIT's and Financials sectors, and decreased in the Discretionary and Consumer Staples sectors whilst the Fund's Health Care sector weighting remained unchanged at 20.7% of the portfolio. The Fund's cash weighting increased to 0.9% from 0.7% at the end of September. The Fund aims to invest in high quality companies with strong growth outlooks and underestimated earnings momentum. By comparison with the ASX300 Accumulation Index, the Fund's holdings, on average, have a higher Return on Equity and lower Debt/Equity (Premium Quality), higher sales growth and higher EPS growth (Superior Growth), and higher Price/Earnings and lower dividend yield (Reasonable Valuation). This indicates that the Fund's portfolio is in line with Bennelong's objective. |
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Performance Report: Spectrum Strategic Income Fund
27 Nov 2018 - Australian Fund Monitors
The Spectrum Strategic Income Fund rose +0.19% in October, taking 12-month performance to +3.71% and annualised performance since inception in June 2009 to +8.19%.
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27 Nov 2018 - Performance Report: Spectrum Strategic Income Fund
By: Australian Fund Monitors
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| Manager Comments | Spectrum noted that for many in the market there were few places to hide in October. Not only did equities retreat but so too bond prices at times. In the U.S., bond indices recorded the third steepest decline since 1970 (BoA), which mean that bonds did not provide a sufficient flight to safety from declining equity prices. They believe the decline in bond indices is partly due to increasing issuance of government bonds by central banks; as their weights have increased in the index, so too has duration. They noted that in a rising yield environment this will lead to falls in those bond indices. The Fund holds a diversified portfolio of debt and income securities with a view to minimising any loss of income and capital of the Fund. Issuers may be government bodies, banks, corporations and, to a limited extent, specialist financing vehicles. To maintain a diversified portfolio structure, certain limits are imposed on security type, credit risk, industry and issuers. |
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Performance Report: Cyan C3G Fund
26 Nov 2018 - Australian Fund Monitors
The Cyan C3G Fund has returned +20.33% per annum since inception in August 2018 versus the ASX200 Accumulation Index's +5.43%. This return has been achieved with slightly lower volatility than the market.
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26 Nov 2018 - Performance Report: Cyan C3G Fund
By: Australian Fund Monitors
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| Fund Overview | 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 | In October the Fund returned -6.2%, falling roughly in line with the market. Broadly, the impact of the market correction was felt across the Fund. Key detractors included Afterpay (-30%) and Readcloud (-30%). There were approximately 20 other positions which all fell by various amounts and, in total, contributed around 5% of the Fund's underperformance. The major positive was Freelancer (+37%). In addition, Cyan added Murray River Organics (MRG) to the portfolio in October. Cyan noted the Fund has remained diversified with 24 positions and no individual holding representing more than 5% of the total portfolio. The Fund has also retained more than 35% in cash but they have begun to deploy further capital into new and existing positions as prices become more attractive. Cyan continue to have compelling expectations for the companies in which they have invested and believe these businesses will grow materially over the next year. |
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Performance Report: Bennelong Twenty20 Australian Equities Fund
26 Nov 2018 - Australian Fund Monitors
The Bennelong Twenty20 Australian Equities Fund has returned +9.62% p.a. since inception in November 2009 versus the ASX200 Accumulation Index's +7.18%.
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26 Nov 2018 - Performance Report: Bennelong Twenty20 Australian Equities Fund
By: Australian Fund Monitors
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| Fund Overview | The Fund is managed as one portfolio but comprises and combines two separately managed exposures: 1. An investment in the top 20 stocks of the markets, which the Fund achieves by taking an indexed position in the S&P/ASX 20 Index; and 2. An investment in the stocks beyond the S&P/ASX 20 Index. This exposure is managed on an active basis using a fundamental core approach. The Fund may also invest in securities expected to be listed on the ASX, securities listed or expected to be listed on other exchanges where such securities relate to ASX-listed securities.Derivative instruments may be used to replicate underlying positions and hedge market and company specific risks. The companies within the portfolio are primarily selected from, but not limited to, the S&P/ASX 300 Accumulation Index. The Fund typically holds between 40-55 stocks and thus is considered to be highly concentrated. This means that investors should expect to see high short-term volatility. The Fund seeks to achieve growth over the long-term, therefore the minimum suggested investment timeframe is 5 years. |
| Manager Comments | As at the end of October, the Fund's weightings had been increased in the Health Care, Industrials, REIT's, Financials and Materials sectors, and decreased in the Discretionary, Consumer Staples, Communication and Energy sectors. The Fund's cash weighting remained unchanged at 2.3%. The Fund fell in line with the market in October, returning -6.81% after fees. The Twenty20 Australian Equities Fund comprises a passive investment in the ASX20, which has a weighting of over 50% of the portfolio, and an active investment in ASX ex-20 companies. Therefore, the Fund's returns will largely be influenced by the activity of the ASX's top 20 stocks. However, the active investment in ASX ex-20 has the goal of allowing the Fund to outperform the broader market, which the statistics mentioned earlier show has been successful; superior Sharpe and Sortino, and up-capture and down-capture ratios highlighting outperformance in both rising and falling markets over the long-term. |
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Hedge Clippings - 23 November, 2018
23 Nov 2018 - Australian Fund Monitors
Just because a problem is obvious it doesn't mean it's going to be solved. There is a chorus of negative possibilities currently doing the rounds. This week Hedge Clippings gives an overview of some of the problems facing the Australian...
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23 Nov 2018 - Hedge Clippings - 23 November, 2018
By: Australian Fund Monitors
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Just because a problem is obvious it doesn't mean it's going to be solved.
Hedge Clippings would love to claim the above adage as our own and would also be more than happy to credit the author if only we could recall in which of the thousands of emails we receive each week we found it. In any event it struck a chord based on the chorus of negative possibilities and opinions that are currently doing the rounds.
It is worth noting that based on what we are seeing, reading and hearing we are more in the glass "half empty" than "half full" camp, and in one conversation with a "half full" (metaphorically speaking) investor over the past week we pondered which, if any, of the following scenarios might be more positive in 6 or 12 months' time than they are now.
Australian Property/Equities:
Problem: Negative influences coming from oversupply (units) and reduced demand (particularly from Chinese buyers), potential reductions in immigration, tightening credit from banks following the Hayne Royal Commission, low wages growth, higher mortgage costs as fixed deals turn to variable, higher US interest rates impacting bank's cost of funds, and reduction in negative gearing if there's a (likely) change in government next year.
Solution/Outlook: Glass half full, and a reminder not to listen to property experts who as recently as April this year couldn't, or wouldn't, see the writing on the wall.
Australian Economy:
Problem: The Australian economy is the envy of the world - growth forecast around 3%, low interest rates, low unemployment, but also a hostage to global, and particularly China's, fortunes. See above - if the property market weakens further it will impact significantly on consumer sentiment, spending, and thus unemployment. Any slowdown and the RBA has nowhere to move.
Solution/Outlook: Glass half full. And then there's the federal election.
US Economy/Equities:
Problem: Rising interest rates, stretched valuations, The Donald, and after the recent mid-term elections no longer fully in control, potential expiry of tax and infrastructure short term "sugar pill", trade policy, Chinese tariff war.
Solution/Outlook: Glass half full. Anyone able to predict "double down" Donald please let us know.
US/China Tariff War:
Problem: As above - who's going to blink first, Donald or Xi? There's a good chance that if it gets worse before it's resolved, Donald might have scored an own goal.
Solution/Outlook: Could go either way. If solved expect a bounce, but could get worse before it gets better.
Chinese Economy:
Problem: As above - the tariff war is likely to hurt China more than the US, it's slowing, although still a significant force. There's more than just the tariff issue at play, including mountains of debt.
Solution/Outlook: The government is doing everything it can - and they can do more than most to solve problems as they don't have to face elections - but they can't control everything.
Brexit/Europe:
Problem: The UK's previously dominant position as a (the) global financial centre is irreversibly damaged, and with it a significant section of the economy is relocating to the EU.
Solution/Outlook: Whatever the outcome, no one's going to be happy! Definitely half full, and a reminder that David Cameron must have had a brain snap when he announced the Brexit referendum!
In Summary:
In case you're wondering if we're alone in these thoughts, last night we listened to Dr John Hewson give his economic outlook at EY's Annual Hedge Fund Symposium. Being a self-confessed economist, he was able to quote reams of facts and figures which yours truly couldn't memorise at the time, or if he could, couldn't a couple of glasses of chardonnay later. However, it's fair to say he was definitely in the glass half empty camp.
For what it's worth, while happy to identify the problems, the good Doctor wasn't forthcoming on how to solve any of them either. How times have changed since he left politics!
Fund Review: Insync Global Capital Aware Fund October 2018
23 Nov 2018 - 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...
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23 Nov 2018 - Fund Review: Insync Global Capital Aware Fund October 2018
By: Australian Fund Monitors
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INSYNC GLOBAL CAPITAL AWARE FUND
Attached is our most recently updated Fund Review on the Insync Global Capital Aware Fund.
We would like to highlight the following:
- 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 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.
AFM Fund Review - October 2018 (pdf format)
