US Federal Reserve chickens out

As expected the US Federal Reserve didn't have the nerve to increase rates when they met earlier this week, once again scared that any shift, however long it has been expected, will either damage a fragile economy, equity markets where valuations have been bloated by QE, or their own reputations. It seems unlikely that they will make the move in November either, given the looming presidential election and not wanting to be seen to be political.

Meanwhile, the Bank of Japan confirmed their negative interest rate stance of -0.1%, while back in Australia the market's expectation seems to be that rates may have fallen as far as they can go. What is certainly true is that with rates where they are the RBA's firepower seems limited.

Strange times indeed. Equally as pointed out by Hugh Dive from Aurora Funds Management, over the past week in the financial press there have been articles advocating a zero weighting to banks, and another one has taken the opposite view and saying that Australian bank shares are historically cheap, and investors should be buying with their ears pinned back. With 25% of the ASX 200 represented by six high-yielding bank stocks and investors' relentless search for yield, there is likely to be ongoing support. It will be a brave (and unlikely) retail investor that exits the sector entirely.

However as and when interest rates do start to rise, it is likely that the shift will start to occur. While the market has taken the gloss off bank shares this year, alternative income streams, or concerns about the bank's level of exposure to an overpriced property market, is likely to cause a serious rethink in valuations.

Back to politics for a second - next week sees the great US Presidential debate theatre in action. The big question seems to be whether Donald Trump will try to outdo even himself with further wild rhetoric, or pull his head in. Seeing as he has got this far with the former it seems unlikely he will change his tune, but it will certainly make for an entertaining, if somewhat alarming, TV fodder.

PERFORMANCE NEWS

Pengana Absolute Return Asia Pacific Fund returned 1.63% in August, compared to MSCI ACWI Asia Pacific markets which returned +0.91%.

APN AREIT Fund returned -3.29% in August. The long term performance since inception remains strong with annual returns of 18.62% p.a.

NWQ Fiduciary Fund fell 1.54% in August and has returned +12.72% over the last 24-months.

Affluence Investment Fund rose 1.06% in August, outperforming the ASX 200 Accumulation Index which returned -1.55%, by 2.61%.

King Tide NZ/Australian Long/Short Equity Fund returned -2.10% in August. Over the latest 24-months, the Fund has risen 20.31%. 

FUND REVIEWS released this week: Optimal Australia Absolute Trust; Bennelong Kardinia Absolute Return Fund; APN Asian REIT Fund; Bennelong Twenty20 Australian Equities Fund;

And on that note, have a great weekend.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

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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.

BENNELONG TWENTY20 AUSTRALIAN EQUITIES FUND

Attached is our most recently updated  Fund Review on the Bennelong Twenty20 Australian Equities Fund.

• The Bennelong Twenty20 Australian Equities Fund invests in ASX listed stocks, combining an indexed position in the Top 20 stocks with an actively managed portfolio of stocks outside the Top 20. Construction of the ex-top 20 portfolio is fundamental, bottom-up, core investment style, biased to quality stocks, with a structured risk management approach.

• Mark East, the Fund's Chief Investment Officer, and Keith Kwang, Director of Quantitative Research have over 50 years combined market experience. Bennelong Funds Management (BFM) provides the investment manager, Bennelong Australian Equity Partners (BAEP) with infrastructure, operational, compliance and distribution services.

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

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - August 2016 (pdf format)

APN Asian REIT Fund

Attached is our most recently updated Fund Review on the APN Asian REIT Fund.

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

• APN is an ASX-listed fund manager specialising in property investment, with an investment team of six. Established in 1996, APN now has FUM of $A2.4bn including four REIT (Real Estate Investment Trust) funds.
• The APN Asian REIT Fund (Fund) is a property securities fund that invests in a quality portfolio of Asian REITs, listed on the securities exchanges of the Asian Region, with the ability to hold some cash and fixed interest investments. 
• The Fund aims to deliver a competitive yield with lower risk than the market. The underlying stocks are selected based on a highly disciplined investment approach that focuses on the fundamentals and number of valuation approaches. The universe can include new IPO's, other corporate actions take place and / or corporate governance improvements at country or REIT level bring new stocks into focus.
• The Fund provides access to a wide spread of property-based revenue streams that are specifically analysed, selected and weighted with the aim of delivering strong and sustainable income returns. The Fund is an unhedged product.
• APN's Asian REIT Fund invests in a portfolio of 25-40 listed Asian REITs with a core philosophy of investing in properties with sustainable rental income streams.
• The Fund has delivered an annualised return of 17.10% p.a., since inception in July 2011 with a standard deviation of 9.36% p.a. The Sharpe and Sortino ratios are 1.45 and 2.71 respectively.

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - August 2016 (pdf format)

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 a nine-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 11.71% p.a. with a volatility of 7.25%, compared to the ASX200 Accumulation's return of 4.87% p.a. with a volatility of 14.20%.

• 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 - August 2016 (pdf format)

OPTIMAL AUSTRALIA ABSOLUTE TRUST

AFM have released the most recently updated Fund Review on the Optimal Australia Absolute Trust.

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

• Optimal Australia is a specialist Australian equity investment manager and the Fund has a long/short equity strategy typically with a low but variable net market exposure comprising 40 to 65 stocks broadly selected from within the ASX200. 

• The investment team comprising George Colman, Peter Whiting supported by Stephen Nicholls and Justin Hay have over 100 years combined experience in equity markets.

• In August, the Fund recorded a flat return (+0.02%), to take annualised return since inception to 8.62% p.a. The Fund's approach to risk is shown by the Sharpe ratio of 1.37 (Index 0.21), Sortino ratio of 2.86 (Index 0.19), both of which are well above the ASX 200 Accumulation Index and has recorded 79% positive months.

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

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - August 2016 (pdf format)