Tomorrow, June 30th sees the end of the financial year in Australia, and while that has little impact on many of our overseas subscribers, for Australian investors in managed funds it marks a yardstick as profits from the last 12 months have to be distributed (even if re-invested) and then accounted for in their personal 2012 tax returns.
So too will realised gains and profits on the sale of other taxable assets such as listed equities, and given that the past 12 months has not been a universally buoyant time on the ASX200 there may be some despair not only at investor level, but also as the government counts the cost of a lower than forecast tax revenues.
Although there's still a few hours' trading left it looks as if the ASX200 fell by just over 12% in the year to June, and for those who need reminding this leaves it 40% below the peak reached in November 2007. As a comparison the AFM hedge fund index of all funds fell 1.76% over the past 12 months, but is up 7.17% since 2007 (assuming June performance is in line with the market).
There's no doubt investors in many asset classes will be glad to see the back of the past 12 months, but we haven't been able to find many investors, nor many fund managers, who are overly optimistic about the next 12 months. At a time when much of the smart money is heading for the safety of cash or term deposits it will take a while to adjust to the new era of supposed safety but with low returns.
Which brings us back to the hedge fund sector. We have no doubt the sceptics will be out in force to say that hedge funds had their second worst (financial) year on record, but while that is true it ignores the fact that 89% of funds outperformed the ASX200 in the 12 months to May, and 47% provided positive returns to their investors. (These statistics may change when June fund returns are received, but we suspect not by much).
So that's the positive side to the story. On the flip side is that 53% of funds in the AFM database fell over the past year, and therefore won't be contributing to the nation's tax take. And of the 11% of funds which underperformed the ASX, the worst fell by over 32% to take the wooden spoon. No doubt their investors will give them worse than that.
At Fund Monitors it is also a case of June 30 being a turning point, not least of which because it means yours truly turns a year older, a little wider, greyer, but a little wiser. Hopefully. More importantly July will see some significant changes and announcements, including the release of the E5 Active Equity Model Portfolio, which we have tracked for over 5 years, as an investable product for wholesale investors.
The information memorandum for the AFM Prism Active Equity Fund, issued by Providus Capital and will aim to replicate the performance of AFM's model portfolio which has an indicative annualised performance of 15% with volatility of less than 6%. The Fund will allocate to 5-10 of the best managers in AFM's database of over 280 funds, with selection based on a combination of quantitative performance and in depth quantitative due diligence.
Other initiatives are afoot, including the launch of an online Portal featuring "best of breed" funds, an enhanced learning and education centre and much more. Maybe we will embrace social media, who knows?
Don't let anyone tell you old dogs can't learn new tricks.
Regards
Chris Gosselin
