The 4.4% bounce in Australia's equity markets in July would have been welcome news to investors, providing the first positive month since February, with the market making up most, but not all of June's fall of 5.3%. The reality however is that the market is jumping up and down on the same spot, and has been doing so for the past year, with 12 month performance of the ASX200 just 1.18% to the end of July, or 5.68% on a total return basis.

At least the resulting 4.5% in dividend yield looks attractive against 2% in the bank, but it certainly doesn't pay for the risk and volatility of the market.

Across the Pacific in the US the market's a little better, but not much, with Calendar YTD returns of 2.18%, or 3.35% on a total return basis.  Research out of the US based on analysis by Factset of company reports suggest there remain a number of recurring concerns, including Greece, China, (with the Shanghai market falling 14% in July, adding to June's drop of 7%), and the strength of the US Currency. Somewhat surprisingly the spectre of increasing interest rates didn't feature.

In Australia the concerns are China, Resources (each linked at the hip), and to a lesser degree Greece (which seems to have slipped off the risk radar somewhat).

The major issue locally is the generally poor outlook for consumer and business confidence. Yesterday's employment numbers were a double edged sword, with the participation rate offsetting the actual increase in employment. The elephant in the room from a business confidence perspective would appear to be the ongoing lack of vision coming from either side in Canberra, and the recent focus on the front pages of the shenanigans (a kind term for it) with "entitlements" haven't helped.

As the August reporting season moves into full swing the risk will probably increase, with the general theme of limited earnings' growth (or in the case of resources, negative earnings' growth of around 30%) as the economy remains limp at best.

As Richard Fish from Bennelong Long Short Asset Management (having notched up a return of 8.85% for the month) noted in their July performance report "unless the market is overcome with good results in coming weeks and upbeat outlook statements (which is hard to reconcile with economic data and the direction of recent earnings revisions), it's most probable that the market remains range bound over the balance of this calendar year".

Specific results received this week include the following PERFORMANCE UPDATES:

FUND REVIEWS released this week: Aurora Fortitude Absolute Return Fund; Insync Global Titans Fund

UPCOMING EVENTS:

20 - 21 August 2015 - The 2nd Superannuation Fund Investment Operations Forum 2015 is a two day forum providing invaluable technological, regulatory compliant and best practice insights into improving back and middle office efficiency to drive member loyalty, bottom line profitability and a competitive edge

26 - 28 August 2015 - The 15th Annual Wraps, Platforms & Masterfunds Conference will provide solutions for succeeding in a distribution world of endless possibilities, showcasing strategies to help business achieve the biggest bite of market share, use innovation to overcome problems and support opportunities. Australian Fund Monitors is pleased to offer a discount of $300 to all investors and advisors using coupon code promoFM on registration.

17 September 2015 - The 14th Annual Hedge Fund Rock and Australian Hedge Fund Awards 2015 as the industry lets its hair down with some drinks, music and great videos. All proceeds go to Redkite helping childern with cancer and their families.

On that note, have a good week-end.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

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.

Chad Slater, the Joint CIO of the Morphic Global Opportunities Fund discusses the markets and the August monthly outlook.

Watch AFM's other videos.

INSYNC GLOBAL TITANS FUND

ATTACHED FILESInsync Global Titans Fund AFM Fund Review June 2015 (pdf format)

14th Annual Hedge Funds Rock and Australian Hedge Fund Awards 2015

17 September 2015 at the Ivy Ballroom, Sydney, Australia

The Hedge Fund industry lets its hair down with some drinks, music and great videos at the 14th Annual Hedge Funds Rock and Australian Hedge Fund Awards.

All proceeds to go to Redkite helping children with cancer and their families

We look forward to seeing you at the event.

For more details and ticket bookings please contact:

www.hedgefundsrock.org

• The Aurora Fortitude Absolute Return Fund  (AFARF) has a 10 year track record investing in ASX listed equities. A Market Neutral overlay is used across a multi strategy approach which allows for flexible asset allocation to maximise returns and minimise risk under a variety of market conditions and cycles.CIO John Corr has over 20 years financial market experience with a strong focus on risk.

• Significant use of low risk "long" derivatives and option overlays has provided positive returns with low volatility during periods of market dislocation. Risk statistics are impressive and shows the Funds risk philosophy; over 85% of monthly performances have been positive with no losing months in 2008, the Fund's largest drawdown is -2.09% and the Sharpe ratio 1.06.

• ASX listed Aurora Funds Limited was established on the merger of three existing fund management businesses, managing approx. $230m on behalf of more than 2,500 retail and wholesale investors.

ATTACHED FILESAurora Fortitude Absolute Return Fund Review June 2015 (pdf format)

Twelve month industry and sector performance review

The past 12 months have not been easy for Australian investors, particularly those who had become used to double digit returns from high yielding equities, and bank stocks in particular, over the past couple of years. Just to add insult to injury, the ASX200 dropped over 5% in June as the crisis in Greece reached a crescendo.

As a result the ASX200 Accumulation Index managed to return only 5.67% for the financial year to 30 June, with 5 out of the 12 months in negative territory. Considering September 2014 recorded a negative -5.37% to add to June's -5.30% this was probably not a bad end result, although probably saved by the buoyant start to the calendar year which saw the market rise 3.27% in January, and a further 6.88% in February.

In the 12 months to June 2014 the market returned 17.43%, and for the period to June 2013 an even better 22.67%, so investors had been provided with a period of 24 months averaging 20% plus per annum. As most investors would appreciate most of the performance was coming from a handful of heavyweight financial stocks and Telstra, so the yield hungry, concentrated portfolios were doing even better.

By comparison, actively managed equity and hedge funds performed admirably in the most recent 12 months, returning 11.34% on average, with 75% outperforming the 5.68% return of the ASX200. Including non-equity funds took a little, but not a lot of, gloss off the result, with all single funds returning 10.53% for the same period.

Of interest was the fact that when looking at individual strategies, Long Only (+16.87%) outperformed Equity Long/Short (+11.76%), while Market Neutral struggled at 4.48%. Taking a geographical breakdown showed Asia leading the regions, with Asia up 12.95% and Asia ex Japan up 18%, while Global funds produced 10.72%, and Australian focused funds came in at 7.92%, with currency gains presumably providing significant tail winds for those not hedging their A$ exposure.

So while a creditable 75% of funds outperformed the local equity market, once again fund selection, and having a reasonably diversified portfolio balancing both performance and risk seemed the best solution for the smart investor.

Full details can be found on the www.fundmonitors.com industry and sector performance page.

Specific results received this week include the following PERFORMANCE UPDATES:

Insync Global Titans Fund outperformed its benchmark MSCI All Country World ex-Australia Net Total Return Index ($A) by 0.50%.

FUND REVIEWS released this week: Bennelong Kardinia Absolute Return Fund; Pengana Absolute Return Asia Pacific Fund; Totus Alpha Fund; 

UPCOMING EVENTS:

20 - 21 August 2015 - The 2nd Superannuation Fund Investment Operations Forum 2015 is a two day forum providing invaluable technological, regulatory compliant and best practice insights into improving back and middle office efficiency to drive member loyalty, bottom line profitability and a competitive edge

26 - 28 August 2015 - The 15th Annual Wraps, Platforms & Masterfunds Conference will provide solutions for succeeding in a distribution world of endless possibilities, showcasing strategies to help business achieve the biggest bite of market share, use innovation to overcome problems and support opportunities. Australian Fund Monitors is pleased to offer a discount of $300 to all investors and advisors using coupon code promoFM on registration.

15 September 2015 - The AIMA Australia Hedge Fund Forum 2015 is the annual non-profit hedge fund conference organised by the industry for the industry.

And now for something completely different: Today is the last day of July, ushering in the month of August, so named in 8BC by Julius Caesar in honour of Augustus around the time of several of his great triumphs, including the conquest of Egypt. 

So what you might ask? Well, there has been an email doing the rounds entiltled Silver Pockets Full which claims that this August will be unique in that it has 5 Fridays, 5 Saturdays and 5 Sundays, and that this phenomenon only occurs every 823 years.

For those of you who have received the email and belived it, take another look because you've been conned. Apart from the fact that today is Friday, July 31st, every month with 31 days has three days of the week which occur 5 times, and four that occur 4 times.

It took Hedge Clippings a while to work it out, by which time we had forwarded it to a few people, none of whom seemed to spot the issue either. But it does beg the question, who thinks of these things?

And while on the subject of something completely different.... politicians behaving badly: If we thought a $5,000 helicopter ride for our Speaker of the House was above and beyond, how about the (now former) Deputy Speaker of the House of Lords, Lord Sewel who was reported as saying "The question of whether my behaviour breached the code of conduct is important, but essentially technical". 

This after being filmed snorting cocaine, dressed in a red bra, while cavorting with a couple of prostitutes. 

On that note (a five pound one I understand) have a good week-end.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

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.