NEWS
11 Apr 2016 - The Paragon Fund
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| Fund Overview | Paragon believes that markets are not always efficient, exhibiting a common tendency to price securities well outside of their intrinsic value over the medium term. This market characteristic provides the opportunity for Paragon, an active manager with a flexible mandate, to generate superior investment returns over the longer term. Paragon believes that it is critical to understand both the companies and the industries in which they operate, in order to fully comprehend each investment opportunity. Accordingly, a fundamental approach to company research is taken. Assessing the potential downside is also paramount in framing the risk/reward trade-off for potential investments. |
| Manager Comments | Key positive contributors for March included longs in the lithium holdings, Netcomm Wireless, Aconex, Mayne Pharma, and the gold holdings. Short positions in Westpac and 1-Page also contributed. At the end of the month the Fund had 33 long positions and 12 short positions. Click below to read the latest monthly report. |
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8 Apr 2016 - Bennelong Long Short Equity Fund
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| Fund Overview | 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. |
| Manager Comments | The short book drove the under-performance with a negative return contribution approximately twice the size of the positive return generated from the long book. By way of pairs, loss-making pairs outnumbered profitable ones, again by a ratio of about two to one. The short book showed that across the top 10 losing positions in March, all of the price action was driven by sentiment and liquidity factors as opposed to fundamental earnings. The Fund's investment philosophy has always centred upon fundamentals and therefore have not responded to the events of March with any notable portfolio changes. Click below to read the Fund Manager's commentary and market outlook. |
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8 Apr 2016 - Morphic Global Opportunities Fund
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| Manager Comments | The best gain came from the Fund's three long short pairs in Japanese retail. Drugstore chains Tsuruha and Kusuri No Aoki outperformed the overall stock market and the over-priced, exgrowth drugstore chain Cosmos, while Tokyo regional supermarket chain Yaoko also beat the struggling but expensive giant retail conglomerate Aeon. In Australia, the Fund made money being long in Fortescue and short in Woolworths. The biggest loser was US banking giant Wells Fargo. The Fund continues to remain fully invested and grow their over-weight position to emerging markets and US Healthcare services, while reducing their overall exposure to US banks. Click below to read more. |
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7 Apr 2016 - Supervised High Yield Fund
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| Fund Overview | The fund may also invest in interest rate swaps, options over authorized investments and exchange traded futures contracts. All these will be either listed or traded in a market where they can be independently valued. Fundamental to the investment procedure is the tenet that no debt security will qualify for investment unless it can repay 100% of its principal and interest in a worst case economic scenario. |
| Manager Comments | More than half of the portfolio's composition (as a percentage of NAV) was invested in Residential Mortgage-Backed Securities (RMBS) 61.29%. The rest of the portfolio composition was in USD Corporate Loans at 21.68%, Cash at 12.46% and AUD Corporate Loans at 4.57%. The Fund Manager believes that individual valuation prices should follow recent market price activity pointing to improved performance in the period ahead for the type of assets held in the Supervised High Yield Fund. During the first half of March 2016 the reversals in price direction have continued with Treasury Bonds selling off whilst Corporate notes and bonds have been increasing in value along with commodities and equities. Click below to view the latest Fund Manager Report. |
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6 Apr 2016 - Meme Australian Share Fund
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| Fund Overview | The Fund's investment strategy seeks to identify low-risk entry opportunities and then build positions in these stocks. Once established in the portfolio, individual stock holdings are maintained for as long as their long-term upward trend remains intact and while they continue to make positive contributions to portfolio growth. Positions are reduced and ultimately closed out as their trends become exhausted or as their relative long-term performance against the broad market weakens. The Fund believes that longer time frame investments also provide a number of advantages. The effect of false signals and 'noise' which attend shorter term time frames is mitigated by only attending to signals which are confirmed by our longer term assessments. Also, the Fund gains exposure to the more expansive price trends which can last for months and years, allowing dividends and distributions received during this time to further enhance portfolio returns. |
| Manager Comments | The top 5 positive contributors were Resapp Health, Galaxy Resources, Emerchants Limited, Altura Mining and General Mining, while the five most negative contributors were Collins Foods, Nagambie Resources, Blackham Resources, HUB24 Limited and Ramelius Resources. By month end the total number of portfolio stocks had fallen to 88 however the portfolio was virtually fully invested with cash sitting at less than 1%, reflective of the emergence of opportunities. The portfolio increased exposure to the Financials, Materials, Industrials, Property and Utilities sectors and decreased to the Energy, Consumer Staples and Information Technology sectors. Exposure to other sectors remained relatively stable. Click below to read the latest Fund Manager's commentary on the Fund. |
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5 Apr 2016 - Fund Review: QATO Capital Market Neutral Long/Short Fund February 2016
QATO Capital Market Neutral Long/Short Fund
Attached is our most recently updated Fund Review on the QATO Capital Market Neutral Long/Short Fund.
We would like to highlight the following aspects of the Fund;
- Qato Capital is a Melbourne-based boutique fund manager backed by single family office, Larkfield Funds Management.
- Qato has a systematic, market-neutral strategy which invests exclusively in S&P/ASX 100 stocks.
- The QATO Capital's Q-score process captures and quantifies six broad fundamental factors, which assess multiple underlying sub-categories. Those companies with the top score (quality companies) are included in the "long" portfolio, those with the lowest score are sold short.
- The Fund seeks to preserve capital and maximise absolute returns through active and constant risk management, targeting monthly a net market exposure of 0% to hedge broader market risks through 30 S&P/ASX-100 positions (15 long & 15 short equally-weighted positions).
- Qato Capital's process is entirely systematic - stock selection and risk management are employed in a rules based approach. The Fund employs no financial leverage/gearing to purchase securities, no derivatives and no financial products to imitate leverage.
Qato Capital AFM Fund Review February 2016 (pdf format)
4 Apr 2016 - Fund Review: Insync Global Titans Fund February 2016
INSYNC GLOBAL TITANS FUND
Attached is our most recently updated Fund Review on the Insync Global Titans Fund.
We would like to highlight the following:
- The Fund decreased by 1.8% in February. The performance was driven by positive contributions from the holdings in Paypal, McGraw-Hill, Gilead Sciences, Comcast and Reckitt Benckiser. The main negative contributors were Sanofi, Nestle, McDonald's, Time Warner and Microsoft. 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 downsid
- The Global Titans 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.
2 Apr 2016 - Hedge Clippings
"Beta" Rally does some damage, and so long Ronnie Corbett. RIP.
While no fund performances for March are available as yet, anecdotal evidence suggests it has been a pretty tough month for many active managers courtesy of a "beta" rally, particulary in stocks of pretty dubious quality, or those that had previously been oversold. This can make it difficult for non index type funds, such as hedge or those seeking absolute returns, as they normally have good reason to either avoid, or short stocks with poor management or a poor outlook, only to see a significant bounce in the price against all apparent logic or fundamentals.
These situations work themselves out over time as the cream always floats to the top, and the dregs sink to the bottom. However, it can take a while for the turbulence to end, and the froth to subside before the end product declares itself and is worth consuming. In this environment investors are best either sitting tight in funds which have a sound long term track record and good risk adjusted performance, or sitting on the sidelines, as many SMSF's have done over the past few years.
The problem with sitting on the sidelines in the current interest rate environment is evident, and sooner or later investors will have to lower their targeted returns from the previously acheivable double digits, to a more realistic single digit number. And if cash is only hovering around 2-3% (and unlikely to move higher in the foreseeable future) then a return of 2 to 3 times that, provided it doesn't come with excess risk, is likley to be pretty attractive.
On a different note we have uploaded an excellent piece to our library by Hugh Dive of Aurora Funds Management on the subject of short selling. Clear and concise the article takes you through the history, mechanics, logic and rationale for short selling in a brief 3 pages which won't send you to sleep or have you reaching for a glass of something.
Against a backdrop of further volatility in March the ASX200 rose 4.17% for the month to halve the YTD losses to 4.02%. Meanwhile:
APN AREIT Fund rose 3.13%, outperforming the S&P/ASX300 Porperty Trust Accumulation Index's return of 2.81%, by 0.32%.
Jamieson Coote Bonds Active Fund rose 1.08% to take annualised performance since inception to 6.10% p.a., achieved with low volatility of 2.53%.
NWQ Fiduciary Fund fell 2.53% bringing the net performance for the trailing 12 months to 9.27%.
The Bennelong Twenty20 Australian Equities Fund returned -2.67% against the ASX 200 Accumulation Index which returned -1.76%.
Affluence Investment Fund returned -0.20% against the Australian equities market return of -1.76%, to give an outperformance of 1.56%.
Pengana Absolute Return Asia Pacific Fund rose 1.10%, compared to FTSE All World Asia Pacific Index which fell 2.05%.
Newgate Real Estate and Infrastructure Fund delivered a negative 0.70% outperforming the ASX200 Accumulation Index, by 1.06%.
Insync Global Titans Fund returned -1.80%, compared to the MSCI All Country World ex-Australia Net Total Return Index in $A, which returned -1.6%.
Pengana PanAgora Absolute Return Global Equities Fund returned -1.62% for the month of February. The Fund has low systematic risk (beta) to the ASX200 and the MSCI World Indices of 0.10.
FUND REVIEWS released this week: Bennelong Kardinia Absolute Return Fund; Meme Australian Share Fund; APN Asian REIT Fund; Totus Alpha Fund; Pengana Absolute Return Asia Pacific Fund; Bennelong Twenty20 Australian Equities Fund
We have not been publishing our usual "and now for something completely different" for some time, partly due to the time it took to find original, and hopefully funny, or original content. However the sad passing of Ronnie Corbett overnight, the "little" half (or should that be one third) but the remaining one of the Two Ronnies should have provided plenty of material.
Sadly the choice was so great it was difficult to choose, but here's a selection put forward by the Independent. Meanwhile I couldn't find my own favourite, although I can't recall which of the two Ronnies delivered it, dead pan as only they could:
"And now some late news in from Sydney, Australia where a woman has been taken to hospital after being bitten on the funnel by a finger-web spider."
And on that note, have a great week-end.
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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1 Apr 2016 - 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 | This negative performance was all attributed to the longer term portfolio which was down 1.68%. Volatility across asset classes remained elevated and the stocks held by fundamental fund managers performed the worst. As a result quality stocks were sold and, as some investors had to cover their shorts to deleverage their positions, lower quality stocks performed relatively better. Click below to read the latest Fund Manager's Report. |
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31 Mar 2016 - Fund Review: Bennelong Twenty20 Australian Equities Fund February 2016
BENNELONG TWENTY20 AUSTRALIAN EQUITIES FUND
Attached is our most recently updated Fund Review on the Bennelong Twenty20 Australian Equities Fund.
- The Bennelong Twenty20 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.
Bennelong Twenty20 - AFM Fund Review February 2016 (pdf format)
