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| Fund Overview | The Fund will invest in a portfolio consisting of a group of underlying managed funds which focus on investing in ASX listed companies. The Fund will not directly invest in equity markets or derivatives, but the underlying funds may use short selling or invest in derivatives to improve performance or reduce risk. The underlying managers and funds will be selected from Absolute Return Funds managed in Australia. This reduces the risk of currency fluctuations, facilitates due diligence and ensures that each underlying fund manager is licensed by the Australian Securities Investments Commission (ASIC). A combination of quantitative performance analysis and qualitative operational due diligence is used to create a portfolio of five to ten 'best of breed' funds. AFM's research has shown that selecting a relatively small group of funds results in better risk adjusted performance than that of a larger, more diversified group. Significant research from Australia and overseas shows that the performance of boutique funds, (particularly those where the principals remain actively involved in the day to day investment decisions) and smaller managers can provide more attractive returns than larger or more established managers. As a result the Fund may invest in funds managed by boutique fund managers where the principals invest alongside outside investors, creating an attractive alignment of interests. In addition the Fund may also invest in funds managed by early stage managers with less than three years history, but only where the principals concerned have a demonstrated track record of prior performance in a similar role, and where AFM has been able to conduct thorough due diligence on the management company and its operations. The underlying funds are monitored each month by AFM Prism Asset Management and AFM to ensure each fund's strategy and risk limits remain appropriate for current market conditions. The returns of each underlying fund are also analysed to ensure the original basis for inclusion in the portfolio remains relevant, and to allow new or additional funds to be added to enhance overall performance. |
| Manager Comments | May was the month that the search for yield came to an end as investors rotated away from the stocks that had enjoyed strong performances over the last twelve months. Banks fell 11.3% and Telco's 4.9% as did consumer staples, -9.0% and discretionary retail, -10.1%. Of the five underlying funds, three had a positive month in May, and two had negative returns. One of the funds delivered a remarkable performance of 9.49% and this was the major contributor to Prism's performance. On the flip side one of the managers had a weak month losing 2.37%. However with this fund's allocation in the portfolio at 2%, the loss had a minimal impact on Prism's May performance. The Manager continues to conduct research on new managers for investment, but balancing caution remains an important factor given the market's recent activity. |
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