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| Fund Overview | The Fund's bias is likely to be net long under normal market conditions, with the core strategy being to construct a portfolio of listed equity securities priced at levels that do not adequately reflect their underlying value. The Fund will seek to boost returns and limit potential market downside by selective short selling of individual stocks which are priced at levels that are viewed as materially above their underlying value. The Fund will also use certain trading strategies both within its core portfolio (through rebalancing stock weights and overall market exposure in response to price movements) and in certain other situations (typically of a shorter-duration and/or opportunistic nature) with the objective of further increasing returns. |
| Manager Comments | The manager notes that the equity market had a strong month in February, led by a small group of defensive and financial large-cap names. In terms of sectors, the leaders were Consumer Staples up 9.7% and Financials up 6.5%. The concentration of returns was evidenced by the fact that eight names contributed to 50% of the market increase in 2012 and this phenomenon has accelerated into 2013. Market breadth is therefore very narrow and the performance gap between defensive industrials and resources has reached levels unprecedented in the manager's experience. The Fund is under-represented in these most popular sectors, as the manager finds the combination of high valuations and low (and declining) earnings growth unattractive. Major factors impacting the market include money flows into quantitative funds, retail investors search for yield and investors benefiting from the AUD carry trade. Major contributions to the Fund's return came from long position in banks and insurance and energy and losses from short positions in banks, consumer staples and media. At month-end the Fund was 33.5% long, 14.2% short and had a short equity derivatives position of 10.7% for net risk exposure of 3% and a gross risk exposure of 60.3%. |
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