Risk comes roaring back.
Over the past few weeks we have ignored market risk, focusing instead on the risk facing the retirement incomes of more Australians than the treasurer would have us believe.
This is a good lesson, as investors generally ignore risk at their peril. Looking back through March editions of 'Hedge Clippings' we were pointing to the historically low levels of the VIX 'fear index' and the tendency for markets to wobble when that occurs.
Of course low volatility might not cause markets to fall, but it does indicate that investors as a whole are optimistic enough to put risk to the back of their minds. Cyprus gave investors some cause to pause, and then it was back to the fray. However as the past week or so has shown, while it takes a while for investor confidence to build, it can evaporate very quickly.
March performance from Australia's absolute return sector reinforced its risk averse nature. With 80% of all returns to hand the average fund fell -0.15%, against the ASX200's fall of -2.7% or the ASX200 Accumulation's decline of -2.27%. Overall 91% of funds in the database outperformed the index, and 55% were in positive territory.
It is too early to call the ASX200 as negative in April, but if it turns out that way it will be two in a row, heading into 'sell in May and go away'. The real issue seems to be the exit from the resources sector, which will only create more focus on the yield and defensive areas, particularly while rates seem destined to stay low for some time to come.
Performance and News Updates on www.fundmonitors.com this week:
Insync's Global Titans Fund was up 1.17% in March, and 14.5% for the past 12 months as global markets were mixed with rises in the US and Japan offset by subdued returns in Europe thanks to Cyprus, China and Hong Kong.
Optimal's Australia Absolute Trust was broadly flat in March with small losses on long positions being offset by similar gains on their shorts. The manager continues to be confounded by the performance gap between defensive industrials and resources stocks, and finding difficulty finding value at current pricing
BlackRock's Australian Equity Market Neutral Fund was up 1.29% in March after being caught in the first half of January by the sharp rally in specific sectors such as building materials and diversified financials.
Platinum's Unhedged Fund returned +0.69% in March, taking 12 month performance to +8.33%, in line with annualised performance of 8.25% since inception in January 2005. As above, and in common with many other manager's comments, Platimum noted that complacency was creeping back into markets.
And now for something completely different, a short clip showcasing one of the greatest magicians in the world, the Great Flydini!
On that note, I hope you have a happy and healthy weekend!
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
| AFM's Featured Fund profiles provide thorough research and performance data on the best Funds across Australia. This week, we look at BlackRock Australian Equity Market Neutral Fund. | Fund Managers and paid Subscribers also have access to details on Individual Managers and Funds, with historical results, key performance indicators, latest news and performance reports. | Tune into Sky Business on Foxtel every week on Monday at 2:20pm for AFM's weekly comment on Hedge Funds. |
