Just as markets in the USA had readjusted to Ben Bernanke's new "no taper" policy update, along come negotiations between Democrats and Republicans over budget negotiations with the potential for the US government to run out of funding by mid October. This would force government employees to face taking temporary unpaid leave, delaying payments to the military, and closure of some administrative departments. Naturally members of Congress would continue to be paid as usual.
At stake it would seem is the passage of the Affordable Care Act, or "Obamacare" as it has become known. Presuming that no-one wants to be responsible for the political fallout of the budget not being passed, the focus will then fall on the so called debt ceiling. This currently sits at just under $17 billion or $53,500 per US citizen, and by mid October there will only be $30 billion to meet commitments which includes a $60 billion social security payment due at the beginning of November.
If you want to look at a neat graphic calculator of the actual numbers involved, click here. The Australian version can be seen here.
There's an element of deja vu in this as the same concerns spooked markets two years ago. However it highlights two other over-riding issues that seem to dominate markets and economies post 2008. The first is that there aren't too many governments around the world that aren't facing increasing outlays, but are not prepared to increase taxation to balance the books.
The second seems to be that politics and politicians are driving markets as much as, or more than fundamentals. This is not only in the US, but also across Europe. The same might be said of China, except there the politicians are expected to control the outcome, at least have a longer time horizon, and don't have to concern themselves over pesky elections to the same degree.
Australia has the same problem as the US and Europe: Everyone seems to want more welfare and lower taxation - but no-one's prepared to pay for it or give up what they already have. And no-one wants to factor in an increase in the GST.
Specific results received this week include the following PERFORMANCE and NEWS UPDATES:
Pengana Australian Equities Market Neutral Fund completed its fifth year of operation recording an annualised return of 9.60% pa compared to the benchmark (ASX 200 Acc Index) return of 4.63%. Since inception the Fund has an annualised standard deviation of 8.02% compared to 15.48% (Index) and the risk-reward and risk statistics are sound with a Sharpe ratio of 0.7 (0.12 Index) and a Sortino Ratio of 1.06 (0.06 Index).
The Totus Alpha Fund rose 2.1% during August with net exposure of 41%. Since inception in April 2012 the Fund has returned 29.1% (24.2% ASX 200 Acc Index) with a Sharpe Ratio of 1.41, Sortino Ratio of 3.14 and a down capture ratio of -0.84. The Fund also has a negative correlation of -0.209 to the Index.
Allard Investment Fund returned -1.0% during August with an allocation of 67.1% equity and 32.9% cash and fixed income. In terms of geographic allocation the Fund's major allocations are 32.1% HK/China and 13.1% Singapore and in terms of industry the biggest exposure is financial services at 14.5% and conglomerates, 12.2%.
The Intelligent Investor Value Fund returned 1.13% in August and 40.05% over the 12 previous months. The Fund has a since inception (November 2009) annualised return of 14.05% pa as compared to the ASX 200 Accumulation Index of 7.32% return over the same time frame. The Fund's value strategy is shown by the Sharpe Ratio of 0.73 as compared to the Index Sharpe Ratio of 0.32 (since inception).
Updated AFM Fund Reviews were also completed on the following funds this week:
The Insync Global Titans Fund invests in a concentrated portfolio of 15-25 stocks, targeting exceptional, large cap global companies with a strong focus on dividend growth and downside protection. Portfolio selection is driven by a core strategy of investing in companies with sustainable growth in dividends, high returns on capital, positive free cash flows and strong balance sheets. The investment strategy has delivered above MSCI ($A) benchmark performance over the medium and longer terms with limited draw-downs and excellent risk statistics. The Sharpe ratio is 0.67 (ASX 200 Acc 0.26) and Sortino ratio 1.17 (ASX 200 Acc 0.28) and are well above those of the ASX with downside deviation approximately one-half of the same Index since inception.
Next Tuesday, 1 October 2013 at 5.30pm sees one of the newer Sydney fund managers, Auscap Asset Management heading to Brisbane to present their current perspective on equities. Tickets are limited, but if interested contact info@auscapam.com.
An upcoming event that may be of interest for Superannuation member administration and investment operation service providers is the Superannuation Fund Back Office conference coming up on 21-22 October. Visit the International Business Review Conferences website for more details.
If you are visiting Hong Kong, the UCITS Asia 2013 Conference is on 9-10 October. AFM have a 10% discount coupon available, more details here.
The Asset Allocation Conference is also coming up from 30th October to 1 November 2013 at the Grace Hotel in Sydney. Details are here.
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.
In the last few week's "Clippings" we have mentioned some notable anniversaries - the collapse of LTCM and Lehman Brothers in particular. This week's "and now for something different" remembers Australia 11 winning the America's Cup, coincidentally in the same week 30 years later as the Americans boat (skippered by an Aussie I might add) won it back from our New Zealand cousins. At a lunch to remember the time 30 years ago that the then Prime Minister Bob Hawke donned his famous jacket, he wore it again to take the stage and tell this joke. Take it away Bob ...
On that note, enjoy the week-end!
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
