September performance:
Based on very early indications, with just over 6% of equity fund's performances received to date, September looks to have been a positive month for the industry, with an average return of 4.4% against the ASX200 Accumulation index which rose 2.19%.
The major caveat to the results to date is the very small sample - 6% - while it is also worth remembering that the ASX200 fell by over 1% on the last day in September. I have no doubt that as other results come to hand the headline number will fall somewhat, but in the meantime the 2013 YTD figure for equity funds is 17.41% (vs ASX200 at 16.15%) and 22.74% on a rolling 12 month basis, vs the ASX200 at 24.21%.
It is also worth remembering that these figures are not adjusted or weighted to funds under management, but rather are a simple average by fund, with the bulk of funds being equity long/short.
ASIC's new disclosure regime:
Yesterday ASIC released its updated Regulatory Guide 240 entitled Hedge funds: Improving disclosure. Previously ASIC's definition of a hedge fund was governed either by the rather obvious definition that it called itself one, or it had two or more of one of the following five characteristics: A complex investment strategy, use of short selling, use of leverage, use of derivatives, and finally charged a performance fee.
We have always supported this, albeit that frequently just one of the five ASIC criteria (particularly short selling) would have triggered the definition in our opinion. In any event the key changes would seem to be in the push for increased transparency in a fund's offer documents, which in turn should enable a greater understanding by investors and their advisors. We wholeheartedly support the thrust of this also.
ASIC's RG240 is focused on retail investors, whereas sophisticated or institutional investors are considered to have sufficient knowledge or expertise, or should be able to afford to hire it. Much of ASIC's thrust seems to come from the Trio experience which cost investors over $100 million and while not criticising ASIC in any way, the reality is that a lack of disclosure was not the issue in that failure. Trio's losses were firstly the result of deliberate fraud on behalf of the management and those close to them, and secondly from the failure by those that should have asked the right questions (mainly the research houses but also those close enough to management who should have known what was going on) not doing so.
While the new RG240 increases the detail and complexity of the definition of a hedge fund, the vast majority already comply with the new increased disclosure regime, or will have little difficulty in doing so. Those that are uncomfortable about the increased transparency will no doubt focus on the institutional investor where ASIC's new regulations won't apply.
Specific results received this week include the following PERFORMANCE and NEWS UPDATES:
The BlackRock Multi Opportunity Fund has a five year track record of 9.00% pa as compared to the ASX 200 Acc Index return of 4.63% and the RBA Cash Rate return of 3.96%. The Fund recorded this return with an annualised standard deviation of 4.44% as compared to the Index number of 15.48% pa. For the month of August the Fund returned -0.28% and the 12 month return is 6.24%.
LHC Capital High Conviction Fund has returned 2.77 times the ASX 200 Accumulation Index since inception in May 2011. The Fund's annualised return is 21.37% pa as compared to the Index with 7.69% pa. This return was achieved with approximately three-quarters of the volatility recorded by the Index.
The BlackRock Australian Equity Market Neutral Fund returned -0.04% during August with a five year annualised return twice that of the ASX 200 Acc Index (9.73% as compared to 4.73% respectively) and less than half the volatility (6.65% compared to 15.48%).
Monash Absolute Investment Fund returned 7.15% during September (ASX 200 Acc 2.19%) with a net exposure of 81% and gross exposure of 91%. The sound risk- reward of the Fund is indicated by the since inception (June 2012) Sharpe Ratio of 2.82 and the largest draw-down of -1.35% as compared to the Index of -6.72%. The Manager notes that the portfolio more than kept up with the broader market this month despite action taken to protect returns by: trimming some holdings; increasing cash, and; adding to the short positions.
The Bennelong Long Short Equity Fund has a five year performance record of 16.85% vs 4.63% for the ASX200 and an annualised standard deviation of 12.63% compared to 15.48%.
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.
And now for something completely different, if only I could get my wife's pug Harry to be as well trained as this.
On that note, enjoy the week-end!
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
