OPTIMAL AUSTRALIA ABSOLUTE FUND

Attached is our most recently updated Fund Review on the Optimal Australia Absolute Fund.  

We would like to highlight the following:

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 Fund has recorded out-performance of the market since inception in September 2008 with approximately 84% of monthly performances having positive returns and the largest drawdown -1.38% 

The investment team comprising George Colman, Peter Whiting and Stephen Nicholls have close to 90 years combined experience in equity markets.

Research and Database Manager
Australian Fund Monitors

ATTACHED FILESFund Review: Optimal Australia Absolute Trust (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 seven year track record. Consistent top decile long short equity sector performance with a since inception (May 2006) return of 14.11% pa (ASX Accumulation Index 4.18% pa) and a standard deviation of 7.89% pa (Index 14.86%) indicate the Fund's ability to generate strong risk-adjusted returns. 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 the Bennelong Group provide infrastructure, operational, compliance and distribution capabilities.

Sean Webster

Research and Database Manager
Australian Fund Monitors

ATTACHED FILESBennelong Kardinia Absolute Return Fund (pdf format)

Last week's hope for a clear mandate for the new government in both houses has not come to pass, but it's still too early to tell if incoming PM Tony Abbott will be able to cobble together a working relationship with the rag tag group of independents in the Senate. Anyway, enough of politics. I'm just thankful the electioneering is over for the moment.

This was Hedge Fund Week in Australia, with a range of events and the inevitable post event socialising testing my stamina. AIMA Australia put on an excellent and well attended "by the industry, for the industry" one day seminar in Sydney on Tuesday, which had it not clashed with a commercially sponsored event in Melbourne targeting the same audience would have made it standing room only.

One senior AIMA committee member admitted that they even surprised themselves with the professionalism of the day's proceedings. Certainly the quality of the speakers and panelists, with AIMA Australia's Chairman Paul Chadwick's armchair chat with Sir Michael Hintze from CQS a standout, kept the audience's attention through to the end of the day.

Also on stage was ASIC's deputy commissioner Greg Tanzer who delivered the outcome of ASIC's review of the potential systemic risk of the largest local hedge funds to Australia's financial markets. In what would have been a disappointment to some of the gloom merchants in the media who love to love hating hedge funds, ASIC's findings were that they posed no or little risk. Amongst ASIC's findings were that out of the total funds surveyed, the largest 12, each with greater than $500 million in FUM and representing 42% of the total, held just 0.4% of the ASX All Ords' market capitalisation.

However that's not to suggest that there's no risk, just that they pose no systemic risk to the system in the way that LTCM or Amaranth did in the past.

Last night saw the annual Australian Hedge Fund Awards supporting the Cure Our Kids Foundation. Congratulations to all the finalists, to the evenual winner Chris Black from the Laminar Credit Opportunities Fund, and to John Corr who took out the well deserved "Contribution to the Industry" Award.

EVENTS

An upcoming event that may be of interest for Superannuation member administration and investment operation service providers is the Superannuation Fund Back Office conference coming up on 21-22 October. Visit the International Business Review Conferences website for more details.

The Asset Allocation Conference is also coming up from 30th October to 1 November 2013 at the Grace hotel in Sydney. Details are here.

Specific results received this week include the following PERFORMANCE and NEWS UPDATES:

Bennelong Kardinia Absolute Return Fund returned 0.96% over August with a net equity market exposure of 24.7% (49.2% long and 24.4% short). The Fund's since inception (May 2006) return is 14.11% pa (ASX Accumulation Index 4.18% pa) with a standard deviation of 7.89% pa (Index 14.86%).

The Optimal Australia Absolute Trust returned 0.14% for August with a net risk exposure of 9.2% and gross risk exposure of 61.2%.  The Fund is characterised by low risk with a Sortino Ratio of 5.39 (ASX Accumulation Index 0.06) and high reward-to-risk with a Sharpe Ratio of 1.81 (Index 0.12). All data is since the Fund inception in September 2008.

Morphic Global Opportunities Fund returned -1.57% over August with net leverage of 88%. The Fund's lower risk is evidenced by a downside deviation of 1.87% (ASX 200 Accum 5.70%). The Sortino ratio of 14.88% as compared to 3.37% (Index) and the Sharpe ratio of 3.10 compared to 1.87 (Index) demonstrate the Fund's strong risk-adjusted returns.

The Aurora Fortitude Absolute Return Fund returned 0.18% for August bringing the Fund's percentage of positive months to 87% since March 2005.  Sentiment towards China appears to have turned with the materials index posting a solid 3.7% gain for the month. US Macro data continued to impress, however September does bring a large number of Macro risks to the table including the Tapering debate; Fed Chairman continuity; US Debt Ceiling; German Elections and ongoing tensions in Syria.

Pengana Australian Equities Fund returned 2.27% for August with a cash holding of 26% at month-end. The largest positive contributors to the month's performance were McMillan Shakespeare (validating the Fund's decision to acquire additional shares during the strong reaction to the proposed regulatory change), Seven West Media, Resmed, Woolworths and Ainsworth Gaming.

Updated AFM Fund Reviews were also completed on the following funds this week:

The Bennelong Long Short Equity Fund is a research driven, market and sector neutral, "pairs" trading strategy investing primarily in large cap stocks from the ASX/S&P100 Index, with a ten year track record and annualised net returns of over 20%. Since inception in January 2002 the Fund has had positive annual returns each year, including an 11.95% return in 2008 and 20.6% in 2011, both of which were negative years for the ASX200. The consistent returns across the investment history indicates the Fund's ability to provide positive returns in volatile and negative markets and significantly outperform the broader market. 

For something completely different -  things you need to know when you are in leadership.

On that note, enjoy the week-end!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

BENNELONG LONG SHORT EQUITY FUND

Attached is our most recently updated Fund Review on the Bennelong Long Short Equity Fund.  

The Fund is a research driven, market and sector neutral, "pairs" trading strategy investing primarily in large cap stocks from the ASX/S&P100 Index, with a ten year track record and annualised net returns of over 20%. Since inception in January 2002 the Fund has had positive annual returns each year, including an 11.95% return in 2008 and 20.6% in 2011, both of which were negative years for the ASX200. The consistent returns across the investment history indicates the Fund's ability to provide positive returns in volatile and negative markets and significantly outperform the broader market.

Sean Webster

Research and Database Manager
Australian Fund Monitors

ATTACHED FILESFund Review: Bennelong Long Short Equity Fund (pdf format)

ASIC has released the finding of its 2012 survey of the potential for hedge funds in Australia to pose a systemic risk to financial markets, with the conclusion that there appears to be no such risk at the present time.

The survey also found that the largest funds (those with over $500 million in assets) had relatively low levels of borrowing and leverage.

However it should be noted that the survey only covered a small number of funds based on the $500m cutoff in assets, and that these represented just 42% of the total assets in the sector as at September 2012.

ASIC's survey estimated that over half of Australia's hedge funds manage less than $50 million, and only 8% manage more than the $500 million cutoff. Furthermore the sector as a whole represented just 3% of the total $2.13 trillion managed by the Australian funds management industry.

ASIC's full report is available here.
 

ATTACHED FILESASIC Report 370 (pdf format)

Only one day left of the blandest, longest and most tedious election campaign ever.  This one's been going on since January 30^th this year, when then PM Julia Gillard called the election for September 14^th - a record 32 weeks of campaigning. 

Of course the real reason for the abnormally long campaign was that it meant her minority government was protected from the risks of a by-election in the meantime, and therefore could maintain power a tad longer.

If we have one thing to thank Kevin Rudd for when he finally plucked up the ticker to depose Gillard it must be that he shortened the campaign to 31 weeks.  Phew!

We hope that the incoming government will at least win a clear mandate in both houses to allow them to govern in their own right, and come what may be judged on their record, not that of a hotchpotch of deals and compromise.  That said one of the reforms we'd love to see is some real clarity on implementing Mark Johnson's recommendations from his November 2009 report into creating Australia as a Financial Centre.

There's no doubt Australia has the talent and the governance for its financial services and fund management sector to compete on the world stage. While the geographic realities make it difficult, the taxation environment makes it nearly impossible to do so.

It's too easy to sit back and let Australia's ever growing superannuation pool support the financial services industry, in the way we've let the mining industry keep the rest of the economy afloat for the past few years. Australia needs to compete on the global stage, and to do so the taxation treatment of offshore investors in local funds needs to become an incentive, not a disadvantage.

While on our soap box we were reminded this week by one fund manager that the increasing number of "My Super" products being announced by the larger super funds and financial houses will be rated by APRA based on fees, ahead of their net performance. There's nothing wrong with trying to keep fees as competitive as possible, and as transparent as possible,  but surely they are not the primary method of comparison?

EVENTS

Just a few more days until the the AIMA Hedge Fund Forum , to be held next week on Tuesday 10th September at Hilton Hotel, Sydney. For further details visit AIMA Australia's website or register here.  (This event is FREE for institutional investors).

Another upcoming event that may be of interest for Superannuation member administration and investment operation service providers is the Superannuation Fund Back Office conference coming up on 21-22 October. Visit the International Business Review Conferences website for more details.

Specific results received this week include the following PERFORMANCE and NEWS UPDATES:

Bennelong Long Short Equity Fund returned 2.27% for August bringing the since inception (January 2003) return to 21.18% p.a. achieved with a down-capture ratio over the same time of -1.91% (in other words, the fund rose 1.91% for every 1% fall in the market).

The Monash Absolute Investment Fund returned 1.40% in August with a gross and net exposure of 86%, and a portfolio Beta of 0.59. Monash remarks that the outlook driven stocks reported very strong business growth and outlook statements. These are detailed in the Manager's Month End Note.

Updated AFM Fund Reviews were also completed on the following funds this week:

BlackRock's Multi-Opportunity Fund offers broad diversification across asset classes including equities, fixed income, currencies and commodities with an attractive risk profile, having provided double digit returns since 2009 with low volatility. The current strategy has seen the Fund return only two negative months since May 2010, leading to annualised returns over the past 36 months (to July 2013) of 12.81% (ASX 200 Accumulation 8.79%), an annualised standard deviation of 1.88% (11.74%) and a three year Sharpe Ratio of 4.62, significantly outperforming targeted returns and risk.

Hedge Funds: Two strategies working in 2013, written for the Eureka Report this week, tracks the performance of all hedge fund strategies over the last 7 years.

For something completely different - if you like the Game of Thrones series, you will love the "how to vote" style of Game of Seats.

On that note, enjoy the week-end, and may the best party win - and not have to return to the polls anytime soon.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

BLACKROCK MULTI OPPORTUNITY FUND

ATTACHED FILESFund Review: BlackRock Multi Opportunity Fund (pdf format)

Hey! Big spenders.

Thankfully we only have one more week (well eight days if you want to be pedantic) of this election campaign to endure.  I have to say it's been pretty colourless given the leadership events of the past three years. Even (or maybe particularly) the leadership debates between PM Rudd and PM in waiting Abbott have been tedious, save perhaps for one brief "won't this guy ever shut up" moment.

Most people think the outcome's a foregone conclusion, and today's AFR reported that one bookie has already paid out on a bet that the coalition will win. I'm presuming that no-one, not even the man himself, backed Clive Palmer to win his seat, but who knows, stranger things have happened.

What is a certainty is that there'll be a big black budget hole whoever wins, and at the risk of carrying on where we left off last week, sooner or later governments either need to spend less, or increase income (aka tax), to prevent it becoming larger. 

Expenditure on health, education and welfare runs at around 60% of federal government's total payments. This has remained reasonably constant since 2007/8, and is forecast to remain so out to 2017.  However, in dollar terms these three areas have increased by 38% since 2008, and are forecast to increase by a further 20% by 2017.

That's a compound increase of 66% in ten years, assuming the forecasts are correct, which I doubt.

The difficulty the politicians face, and indirectly the country faces, is that outlining the inevitable solution as part of an election manifesto is likely to see you spend the next three years in opposition, and probably the three beyond that as well.

Anyway, roll on next week's election. After that I promise not to mention it again.  By the way, that's likely to be as good as a politician's promise.

In other news, the AIMA Hedge Fund Forum will be held on Tuesday 10th September at Hilton Hotel, Sydney. For further details visit AIMA Australia's website or register here.

Some specific results received this week include the following Performance and News Updates

Pengana Asia Special Events (Onshore) Fund returned 1.09% over July 2013 and 11.35% for the previous 12 months with the Fund maintaining average net and gross exposure of 11% and 179% respectively over the month.  Capital Management trades contributed over half of the Fund's absolute performance during July and in terms of country positions Japan and Hong Kong / China proved the most fruitful, while Australian positions detracted slightly.

The Auscap Long Short Australian Equities Fund had a strong July returning 4.70% with an average net exposure of 53.1%. Average gross capital employed by the Fund was 107.1% long and 54.0% short. The Fund's performance since inception is now 25.35%.

BlackRock's Multi Opportunity Fund returned 0.40% for July and 7.18% for the last 12 months and notably this was achieved with a remarkably low risk profile and very strong risk-adjusted statistics. The annualised volatility is 1.59% vs 10.99% for the ASX 200 Accumulation Index over the last 12 months and a Sharpe Ratio of 2.50 as compared to 1.74 for the Index over the same time frame.

Updated AFM Fund Reviews were also completed on the following funds this week:

The Insync Global Titans Fund invests in a concentrated portfolio of 15-25 stocks, targeting exceptional, large cap global companies with a strong focus on dividend growth and downside protection with portfolio selection 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... more..

BlackRock's Australian Equity Market Neutral Fund is managed by a 12 person Sydney based investment team following a systematic global research process investing in ASX listed stocks. The Fund's portfolio generally consists of approx. 180 stocks in equally weighted long and short portfolios to maximise potential returns while minimising market volatility... more..

The Aurora Fortitude Absolute Return Fund has an 8 year track record investing in ASX listed equities with a strong focus on risk. The 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. Strong use of low risk "long" derivatives and option overlays has provided positive returns with low volatility during periods of market dislocation. The success of this strategy is shown by the fact that over 87% of monthly performances have been positive and most notably the Fund did not record any negative months in 2008, with the largest drawdown since inception in March 2005 of -2.09%.

For something completely different - following on last week from the photo of a nesting Falcon, we feature this clip featuring a different type of Falcon.

On that note, I hope you have a happy and healthy weekend!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

INSYNC GLOBAL TITANS FUND

ATTACHED FILESFund Review: Insync Global Titans Fund (pdf format)

There has been a significant pickup in activity in the hedge fund sector over the past year, with a range of new funds being launched, and increased inflows from investors across the spectrum both locally and overseas. This has also been matched by increased activity from industry bodies, particularly AIMA under new Chairman Paul Chadwick and General Manager Brett Ireland. One significant initiative from AIMA is the upcoming Annual Hedge Fund Forum to be held on Tuesday 10^th September at Sydney's Hilton Hotel.

The AIMA Australia Hedge Fund Forum is Australia's leading hedge fund conference, and is being organised by the industry to cover a range of local and global topics.  The conference will feature a number of leading Australian and international speakers, including one of Australia's greatest hedge fund success stories, Sir Michael Hintze who will provide insights and a global perspective on the industry, and Gerard Minack, former strategist with Morgan Stanley.

Other speakers include ASIC's Greg Tanzer, APRA's Craig Roodt and Martin Codina from the Financial Services Council, and a wide range of Fund Managers including George Colman (Optimal Australia), David Hobart (Blue Sky Apeiron), Adam Phillips (Blue Fin Capital), Adrian Redlich (Merricks) and Gerard Satur (MST Capital).

Investors and Advisors will also be well represented, and include Simon Ford from ANZ Wealth, Michael Winchester from State Super Financial Services, Dr Alistair Rew from AMP Capital, David George from the Super Fund, and Miles Collins from the Myer Family Office.

Unlike many conferences which are outsourced to external organisers, this year's event has been organised by AIMA Australia and as a result pricing has been set to accommodate and encourage a wide range of industry attendees: Qualified investors will be admitted at no charge, and AIMA members will pay only $100.

For full details and registration visit AIMA Australia's website.