NEWS
31 Mar 2017 - 4D Global Infrastructure Fund
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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 | The biggest contributor to performance came from a UK based satellite operator Inmarsat, which was up 17% for the month. The Fund also saw strong performance from its Brazilian names that leveraged to the rapidly declining Brazilian Selic rate, such as the Brazilian toll road operators CCR and Ecorodovias, rail operator Rumo and utility operators who can capitalise on lower interest rates to expand their portfolios. The weakest performer for February was Mexican tower operator Telesites, down 5.5% on the back of slightly weaker than expected FY numbers reported in the last week of February. |
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30 Mar 2017 - Insync Global Titans Fund
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| Fund Overview | Insync employs four simple screens to narrow the universe of over 40,000 listed companies globally to a focus group of high quality companies that it believes have the potential to consistently grow their profits and dividends. These screens are size of the company, balance sheet performance, valuation and dividend quality. Companies that pass this due diligence process are then valued using dividend discount models, free cash flow yield and proprietary implied growth and expected return models. The end result is a high conviction portfolio of typically 15-30 stocks. The principal investments will be in shares of companies listed on international stock exchanges (including the US, Europe and Asia). The Fund may also hold cash, derivatives (for example futures, options and swaps), currency contracts, American Depository Receipts and Global Depository Receipts. The Fund may also invest in various types of international pooled investment vehicles. At times, Insync may consider holding higher levels of cash if valuations are full and it is difficult to find attractive investment opportunities. When Insync believes markets to be overvalued, it may hold part of its resources in cash, or use derivatives as a way of reducing its equity exposure. Insync may use options, futures and other derivatives to reduce risk or gain exposure to underlying physical investments. The Fund may purchase put options on market indices or specific stocks to hedge against losses caused by declines in the prices of stocks in its portfolio. |
| Manager Comments | The performance was driven by positive contributions from the holdings in Unilever, Heineken, Visa, Medtronic and eBay. The main negative contributors were Zimmer Holdings, Microsoft Corp and Comcast. The Fund continues to have no foreign currency hedging in place as Insync consider the main risks to the Australian dollar to be on the downside. Over 50% of the Fund is currently protected using a put protection strategy. |
| More Information |
28 Mar 2017 - KIS Asia Long Short Fund
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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 | The month's performance was driven largely by long positions in Cardinal Resources Ltd (CDV.AX) 0.48%, eCobalt Solutions Inc (ECS.TO) 0.46% and Plymouth Minerals Ltd (PLH.AX) 0.21%. However, detractors for the month, included the long positions in Altium Ltd (ALU.AX) -0.29%, Primary Health Care Ltd (PRY.AX) -0.22% and CapitaLand Limited (CATL.SI) -0.20%. |
| More Information |
27 Mar 2017 - Fund Review Pengana Absolute Return Asia Pacific Fund February 2017
PENGANA ABSOLUTE RETURN ASIA PACIFIC FUND
Attached is our most recently updated Fund Review on the Pengana Absolute Return Asia Pacific Fund.
- The Pengana Absolute Return Asia Pacific Fund ("PARAP") was established in 2008 by portfolio managers Antonio Meroni and Vikas Kumra. The Fund is a feeder fund into a Cayman Islands AUD share class fund.
- The Fund invests both long and short in Asia Pacific equities, including in Australian and New Zealand, after a stock specific "event" has either occurred or been announced and the portfolio aims to be uncorrelated to the underlying equity markets. A combination of the Manager's experience, thorough research and continuous back- testing identify the most attractive of these events.
- Risk controls include limits on individual positions as well as gross and net exposure. Limits are in place for option exposure and cash borrowing, with stop loss limits on individual positions. Overall the manager is looking to derive returns from the event strategies as opposed to any currency or market exposures.
- Since inception, the Fund has an annualised return of 8.49% p.a., compared to the MSCI ACWI Asia Pacific Price Index's return of 3.68% p.a.
For further details on the Fund, please do not hesitate to contact us.
AFM Fund Review - February 2017 (pdf format)
24 Mar 2017 - Hedge Clippings
ETF's are only cheap (good value) in a rising market
One of the great financial product success stories of the past few years has been the dramatic increase of flows into ETF's, which not surprisingly, have had a significant effect on the rise and rise of the overall market.
Based on the concept of a rising tide lifts all ships, ETF's have assisted those tidal flows, as investors, no doubt encouraged by the manufacturers and marketers of ETF's, have sought a simple and low-cost approach to gaining equity market exposure. As investors' funds flow in, by definition they find a home across all stocks in the index according to their weight, and which naturally helps support and/or lift the market.
In turn, the rising market helps the marketers sell the benefits of their products to more and more investors, who are encouraged not only by the performance but the low fee structure. And so it goes on.
Or at least it will until there is a market correction, and - however buoyant the market may seem - there will be one eventually.
When this does occur there is a danger that the rising tide effect of ETF's reverses, and becomes a falling tide. As investors, concerned about capital losses, redeem from ETF's, it will in turn create downward selling pressure on the market, which in turn well result in more investors redeeming or withdrawing. And so it will go on.
Hedge Clippings is not against ETF's as such, and many smart investors use them to gain low-cost exposure to equity markets. However, many other investors ignore the fact that a simple index ETF employs no risk process in the event of a falling market, and therefore they offer no downside protection.
This is relevant at the current stage in the cycle, as markets continue to rise (in spite of a minor bump in the past week), so it is worth looking at recent comments in February investor newsletters from some well-respected active equity managers.
For instance, Richard Fish of Bennelong Long Short Equity, (who has returned an average of 16.5% per annum over the past 15 years) noted:
"The US S&P 500 index has rallied almost 15% since Trump's election victory in early November. Accordingly the forward P/E multiple of the S&P 500 is now over 18 times (its highest level since the unwind of the early 2000's tech bubble) and the relative strength index (a momentum indicator) has moved into the mid-70s (historically a sign that the market is overbought). It's as though the issues plaguing markets 12 months ago, such as China's growth challenges, US policy rate normalisation, European fiscal reform, no longer exist. Yet such issues have far from disappeared."
Meanwhile, George Colman from Optimal Australia (one of the most risk averse funds in AFM's database) wrote:
"Our strategy often underperforms a broader market when it rallies strongly, as we favour downside investor protection when we see many stock prices move well above fundamental fair value. We believe we are at such a junction at present and we continue to worry about downside risk."
And as Mike Surridge from KIS Capital (annual returns of 14.67% pa over 7 years and a Sharpe Ratio of 2 since inception) observed this week when discussing the forward P/E multiples of many stocks now over 20 "At these high levels many investors and brokers don't like to memntion these high P/E multiples as it makes the stock look expensive. They're much happier talking about a yield of 5% which given current cash rates, makes them look cheap."
ETF's may be cheap, but the old adage that you only get what you pay for is often worth remembering.
Affluence Investment Fund increased 1.20% in February, resulting in a +13.41% return for the latest 12 months. Since inception in November 2014, the Fund has an annualised return of 9.98% p.a.
Pengana Absolute Return Asia Pacific Fund returned -0.04% for the month of February 2017, compared to Asia Pacific markets which posted a gain of 2.4%. The Fund has an annualised return since inception of 8.49% p.a.
Collins St Value Fund rose 0.46% for the month of February, taking the latest 12 months return to 23.85%.
Pengana Global Small Companies Fund was up 0.8% for the month of February, compared to a 1.1% return for the MSCI AC World SMID Cap Index. Over the past 12 months, the Fund has returned +16.45%, taking the annualised return since inception to 5.57% p.a.
Bennelong Australian Equities Fund gained 1.58% in February, taking the Fund's one year return to 11.87%. Since inception, the Fund's has an annualised return of 13.27% p.a.
Touchstone Index Unaware Fund returned +3.16% in February, outperforming the ASX 200 Accumulation Index 2.25%, by +0.91. The Fund has gained +7.80% over the latest 6 months.
Pengana PanAgora Absolute Return Global Equities Fund returned +0.87% in February, taking the annualised return since inception to 10.15% p.a.
FUND REVIEWS released this week: Bennelong Twenty20 Australian Equities Fund; Optimal Australia Absolute Trust; APN Asian REIT Fund;
And on that note, have a great weekend.
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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24 Mar 2017 - Fund Review: APN Asian REIT Fund February 2017
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 14% p.a., since inception in July 2011 with a standard deviation of 9.45% p.a. The Sharpe and Sortino ratios are 1.16 and 2.05 respectively.
APN AREIT Fund February 2017 (pdf format)
24 Mar 2017 - Bennelong Australian Equities Fund
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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 | The Fund had a number of solid results, such as CSL and Breville Group that beat expectations in the reporting season and which were well received by the market. There were no majorly disappointing financial results reported, perhaps with the exception of Dominos. Aristocrat, one of the Fund's largest positions, was the largest contributor to the Fund's performance over the month. However, the Fund's positions in BHP and Rio Tinto detracted from its performance. The investment team continues to remain focused on the company fundamentals, particularly in an environment of macro and political uncertainty. |
| More Information |
23 Mar 2017 - Fund Review: Optimal Australia Absolute Trust February 2017
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, and Stephen Nicholls bring 100 years combined experience in equity markets.
- In February, the Fund returned -0.98%, to take annualised return since inception to 8.11% p.a. The Fund's approach to risk is shown by the Sharpe ratio of 1.28 (Index 0.25), Sortino ratio of 2.61 (Index 0.25), both of which are well above the ASX 200 Accumulation Index and has recorded 80% positive months.
For further details on the Fund, please do not hesitate to contact us.
AFM Fund Review - February 2017 (pdf format)
23 Mar 2017 - Pengana PanAgora Absolute Return Global Equities Fund
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| Fund Overview | PanAgora believes the best way to find opportunities in the global markets is to combine fundamental analysis with robust quantitative techniques in order to filter the investment universe and select the investments. The Fund invests primarily in listed equity securities from a global universe of developed markets and a select group of emerging market countries. The Fund's objective is to seek absolute returns by identifying and exploiting multiple inefficiencies that may exist in global equity markets. These inefficiencies are primarily exploited through the use of a long/short equity strategy which aims to construct a portfolio that is generally neutral to market movements. As such the performance of the investment strategy is largely independent of the market's performance. The Fund seeks to achieve its objective by using a diversified set of strategies that have low correlation to one another. In addition, because many of these strategies are designed to generate profit under different market conditions, their combination is expected to result in more stable returns over time than any individual strategy in and of itself. |
| Manager Comments | The month's performance was driven by the long-term portfolio (+0.86%), primarily the international (ex U.S.) sleeve. Attribution wise, Japan was the top performing country contributing 0.59%. From a sector perspective, the largest contributor was Consumer Discretionary, which returned 0.79%, with both long and shorts contributing. Energy was the largest detracting sector for the month, with the majority of the underperformance coming from the Oil, Gas and Consumable Fuel industy, where several companies missed earning expectations. The intermediate strategies detracted slightly from returns in February (-0.03%) due to a few U.S. merger arbitrage related trades. The short-term portfolio contributed +0.04% to performance, with positive performance coming from news related and index reconstitution strategies. |
| More Information |
22 Mar 2017 - Fund Review: Bennelong Twenty20 Australian Equities Fund February 2017
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.
AFM Fund Review - February 2017 (pdf format)
