Research and Database Manager
Australian Fund Monitors

ATTACHED FILESAurora Fortitude Absolute Return Fund (pdf format)

With equity markets continuing to power ahead, as shown by the ASX200 adding 3.97% in October, and 25.5% over the past 12 months, and the S&P500 doing even better at 4.6% and 27.2% respectively, there is no surprise that, even before we see fund performances for October appearing, equity-based strategies, and particularly 130/30 and equity long, have been significant beneficiaries.

The S&P 500 of course is at all-time highs, whereas the ASX 200, although at post 2007 highs, still has some way to go. The challenge for markets from here will be for actual 2014 earnings to match the forward earnings estimates and of course to survive the effects of QE tapering when that eventually takes place.

Meanwhile there were some notable awards for Australian fund managers at the recent AsiaHedge Awards held in Hong Kong last week. Platinum Asset Management took out the 2013 Management Firm of the Year award, while PM Capital's Absolute Performance Fund won the Global Equity category, and LHC Capital's Australian High Conviction Fund won the Single Country award.

For the record PM Capital's Absolute Performance Fund returned 59.94% for the 12 months to the end of September with a Sharpe ratio of 3.22, while the LHC Capital High Conviction Fund returned 45.03% with a Sharpe ratio of 3.66%.

Platinum's funds have been no less impressive. For example the Platinum Japan Fund provided twelve-month returns of 69%, while their flagship Platinum International Fund which has $8.7 billion in FUM rose 40.21% over the same period.

Congratulations to all concerned!

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

The Totus Alpha Fund returned 6.48% during September bringing the annual performance to 32.2% (ASX 200 Accum 24.2%).  The Fund had a significant positive contribution from a small cap long position in the mobile payments space that was up strongly during September. The Manager trimmed the position slightly for risk management purposes but remain upbeat about the company's prospects over the medium term. There have been a number of notable success stories in this space in the USA and the investment is an early mover in the Australian market.

Since inception in July 2004 the BlackRock Multi Opportunity Fund has returned 8.65% pa with low volatility of 4.18%. The comparative numbers for the ASX 200 Accumulation Index are 9.07% and 14.01% indicating the Fund's risk controls. During September the Fund returned -0.17%. The Fund's absolute return mandate is shown by the maximum draw-down of 9.45% and 80 % positive months as compared to the Index of draw-down of 47.19% and 65% positive months.

The Aurora Fortitude Absolute Return Fund  recorded 6.28% over the last 12 months with a volatility of only 1.82%. During September the Fund returned 0.53%. Within the Fund, the Convergence strategy was the largest positive contributor for the month +0.26%. The main driver was the Wesfarmers Partially Protected shares against the underlying Wesfarmers shares. The Long / Short strategy, whilst not generally a large part of the Fund's exposure, was profitable (+0.12%) while the Mergers and Acquisitions strategy also performed well (+0.19%).  The Options portfolio was a large drawdown on the monthly return (-0.20%) as realisable volatility remained low despite the potential political and global macro catalysts.

Pengana's Australian Equities Market Neutral Fund has returned 9.4% pa (ASX 200 Acc 5.00% pa) since inception (Sept 2008) with an annualised standard deviation of 7.97% pa (15.37%). The Fund recorded -0.2% in September.  The Fund's lower risk is indicated by a downside deviation of 4.96% and largest draw-down of 13.47% as compared to 11.57% and 33.11% for the Index respectively.

The Cor Capital Fund has returned 6.00% pa since inception (August 2012) with a volatility of 6.64%. The September return was -1.49%. Over the last quarter all the Fund's asset classes of equities, gold, fixed interest and cash delivered positive returns for total return of 5.36%. 

The Manager notes that the Fund is currently earning about 4 per cent on portfolio cash. The Fund's fixed interest investments were slightly positive on a total return basis over the quarter as US long-term bond yields moved higher. Whether that continues due to a possible 'tapering' of Fed buying or because investors are becoming concerned about the absolute size of buying (government borrowing) will become clearer over time.

Allard's Investment Fund has returned 8.8% pa over the last five years with a volatility of 9.09% as compared to the ASX 200 Accumulation comparative data of 7.29% and 14.78%. The September return was -0.1%. The Fund's low risk exposure to Asia equities is shown by the largest draw-down of -18.29% and a downside deviation of 5.5% with the Index comparative data of -47.19% and 9.97%. 

At end-September the geographic breakdown was HK/China 32.6%, Singapore 13.3% and Korea 9.2%. Cash and Fixed Income holdings were 31.5%. The industry breakdown was Financial Services 13.8%, Conglomerates 12.4% and Telco's at 8.7%.

EVENTS

Hedgeopolis New York is being held on 4 November at the Metropolitan Club. Use AFM's discount code "fundmo" to obtain a discount, or contact Adriana Costov for additional information.

Back in Hong Kong, the 26th Annual AVCJ Private Equity and Venture Form is at the Four Seasons Hotel from 12-14 November 2013.

IPARM Australia 2013 is being held in Sydney on 18-19 November on Investment Performance Measurement Attribution and Risk. Speakers include Dr Thomas Gillespie from Aurora Funds Management.

Also on 19 November, at the Renaissance Hotel in Hong Kong - the Art of Asset Management - free for senior asset management professionals from both global and local asset management firms. View the agenda here.

We lost another great rocker this week, so we tribue this week's "and now for something completely different" to Lou Reed and Take a walk on the wild side, this particular clip from Farm Aid 1985.

On that note, enjoy the week-end!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

September Fund Performance

With close to 90% of single fund performances to hand, September is looking to be a pretty normal month for AFM's database of over 300 funds. By normal, I guess we're talking about averages - the ASX200 accumulation index rose 2.19% and the AFM Equity Fund Index as good as matched that at +2.17%.

Beyond that the breakdown and distribution of returns, be it by individual fund or strategy, was anything but stable: Equity based funds significantly outperformed those in the non-equity category, which only managed to return 0.49%.  Based on returns to date 32% of all funds outperformed the ASX200 and 84% provided positive returns, with individual performances as varied as ever, ranging from -12% through to +13%. While that might seem extreme, it is not particularly unusual as the distribution of returns over the past 12 months ranges from -42% through to +70%, with just over 25% outperforming the ASX200.

So there's nothing "normal" about hedge funds, each and every one is individual.

Meanwhile the Hedge Fund Association's Australian chapter held a seminar this week with David Walter of PAAMCO as the guest speaker. David has extensive industry experience and discussed the current environment for local funds wanting to raise institutional capital offshore. Amongst his other insights were:

• Cayman is the preferred fund domicile for international investors, although Europe and UCITS structures are making some inroads.
• An independent and appropriately experienced board of directors is becoming mandatory.
• Operational issues and compliance are increasingly important, including independent reporting lines to the board for risk and operations executives.
• The days of the "2 and 20" fee structure are gone, as are lockups and long redemption terms (although AFM's data shows this has long been the case locally).
• Transparency is essential, quoting one investor whose policy is "Why should we trust you with our money if you won't trust us with your information".

With the exception of the Cayman Island structure it would seem there's little difference between the demands of institutional investors here and overseas, it is just there are less of them locally and they allocate to the sector less.  So David's advice to managers wanting to raise FUM offshore to (apart from the above prerequisites) "travel, travel, travel" would seem spot on.

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

The Auscap Long Short Australian Equities Fund gained 5.84% in September, taking YTD performance to an impressive 34.48% as they approach thier first anniversary.

Pengana's Asia Special Events (onshore) Fund rose 0.88% in September and 3% for the quarter, noticing a significant pick up in opportunity.

The Intelligent Investor Value Fund  has a 12 month return of 42.68% and annualised return since inception (November 2009) of 15.09%.

Pengana's Australian Equities Fund returned 1.38% in September to take it's 12 month performance to 24%, matching the ASX Accumulation Index, but with significantly less volatility.

FUND REVIEWS that have been updated this week include:

The Optimal Australia Absolute Trust is a specialist Australian equity investment manager with a long/short strategy, and has out-performed the market since it's inception in September 2008.

Insync's Global Titans Fund shows the fund delivering an annualised return of 9.26% and annualised standard deviation of 8.34%.

The Morphic Global Opportunities Fund recently completed it's first year of operation, having returned 29.91% over 12 months with volatility of under 10%.

BlackRock's Australian Equity Market Neutral Fund has a market neutral strategy that gains exposure to long and short positions in Australian equities.

EVENTS

Hedgeopolis New York is being held on 4 November at the Metropolitan Club. Use AFM's discount code "fundmo" to obtain a discount, or contact Adriana Costov for additional information.

Back in Hong Kong, the 26th Annual AVCJ Private Equity and Venture Form is at the Four Seasons Hotel from 12-14 November 2013.

IPARM Australia 2013 is being held in Sydney on 18-19 November on Investment Performance Measurement Attribution and Risk. Speakers include Dr Thomas Gillespie from Aurora Funds Management.

Also on 19 November, at the Renaissance Hotel in Hong Kong - the Art of Asset Management - free for senior asset management professionals from both global and local asset management firms. View the agenda here.

And now for something completely different, this video is called Funny Friday and I hope it brings a smile to your face.

On that note, enjoy the week-end!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook