November saw the ASX200 decline for only the fourth month since June 2012, falling 1.94%, or 1.31% on a total return basis. The Australian market also disconnected from the S&P500 which rose 2.8%, and the A$ also lost ground. November fund results are positive overall, currently +1.59%, although with only 10% of fund reports to hand it is early days yet.
Even with the limited sample size there's a clear indication of where the action was in November, with the combination of positive offshore markets and a falling A$ clearly evident. Funds investing in Asia are currently averaging +5.2% for the month, Asia ex Japan +4.91% and Global +2.76%. Meanwhile Australian strategies are negative -0.18%. Only one week into December and there's some unfamiliar softness around the local market, with managers reporting that local investors are cashing up to take advantage of the pre-Christmas IPO rush, and offshore investors are concerned about potential further weakness in the A$ on the back of a stronger US currency.
There could also be some investor fatigue, combined with the realisation that 12 month equity returns of 25% don't continue forever. Perhaps some disappointment over what's looking like the shortest political honeymoon in history is also having an effect, along with the realisation that actual forward earnings might not match current expectations. Overseas indications are that QE tapering will eventually end, with US 10 year bond futures moving towards 3% also pressuring offshore markets.
Christmas cheer of the liquid kind might also be distracting some local investors, with only two week's full trading remaining before the traditional summer break looms for most market participants, with indications that many won't return to the fray until mid-January at least.
Specific results received this week include the following PERFORMANCE and NEWS UPDATES:
The Cor Capital Fund returned 0.56% during October and has delivered a return of 6.05% p.a. since inception (August 2012) with a volatility of 6.41%; in line with its goal of stable medium-term returns with liquidity, transparency and balance.
The Manager comments that during October the Fund's equities holdings contributed the most to performance (+1.07%) and this was partly offset by precious metals (-0.46%). Following a movement of some asset classes above defined limits, funds were allocated to precious metals and away from equities, fixed interest and cash at the end of the month in line with the Fund's re-balancing policy. This active risk management is critical to the Fund remaining prepared for a range of market outcomes.
BlackRock Multi Opportunity Fund returned 1.54% during October and 6.69% over the last 12 months with a volatility of 2.16%.
The Multi Opportunity Fund delivered strong performance in October with strong contributions from both Global Equity Long/Short and European Equity Long/Short strategies. The International Alpha Transport, Fixed Income Global Alpha and Australian Equity Long/Short strategies also added value. The fund returned 1.83% gross of fees versus the RBA cash benchmark return of 0.21%. Year to date, the Fund has returned 7.36% gross of fees.
The Australian Equity Long/Short strategy's performance benefited from an overweight to iron ore producers versus other miners. Underweight positions in mining services companies were also profitable with further downgrades across the sector. Other outperforming positions were over-weights in wealth managers which continue to run due to exposure to the rising market, and positive stock selection within the healthcare sector. The main performance detractors came from underweight positions in domestic cyclicals such as building materials, retail and media.
The CSAG Long Only Program returned -0.28% during October and -7.09% for the previous twelve months in a difficult commodities market. At month-end the Fund's allocations were approx Soft Commodities 8%, Grains 5%, Energy 20% and Metals 25%. The residual of 42% was in cash.
Since inception in April 2004 the Fund has delivered 5.68% p.a. as compared to the Dow Jones- UBS Commodities Index return of -0.30% p.a. over the same time frame. Annualised standard deviation for the Fund was 13.18% as compared to 18.26% for the Index.
FUND REVIEWS updated this week include:
The Aurora Fortitude Absolute Return Fund (AFARF) has a 8 year track record investing in ASX listed equities. A Market Neutral overlay is used across a multi strategy approach which allows for flexible asset allocation to maximise returns and minimise risk under a variety of market conditions and cycles.CIO John Corr has over 20 years financial market experience with a strong focus on risk.
Significant use of low risk "long" derivatives and option overlays has provided positive returns with low volatility during periods of market dislocation. Annualised return since inception is 8.17% with a very low standardised standard deviation. Over 87% of monthly performances have been positive, with no losing months in 2008 and a largest drawdown of -2.09%.
ASX listed Aurora Funds Limited was established on the merger of three existing fund management businesses, managing approx. $480m on behalf of more than 2,500 retail and wholesale investors.
BlackRock's Australian Equity Market Neutral Fund portfolio generally consists of approx. 180 stocks in equally weighted long and short portfolios to maximise potential returns while minimising market volatility. The strategy has recorded a return of 12.01% since inception (Sept 2001) as compared to the ASX 200 Accumulation Index return of 8.80% and with a volatility less than one-half that of the Index at 5.67% pa as compared to 13.18% pa.
The Fund has also recorded a maximum drawdown of 12.41% as compared to 47.19% for the Index and has had 78% positive months since inception.
Blackrock operates in 27 countries including Australia (where BlackRock has A$48.6 billion in FUM - March 2013) managing a broad range of strategies across a variety of asset classes.
12 February 2014: Investment Administration Conference - Efficiency in a Regulated World.
If you know of any upcoming hedge fund industry Events, or would like your Event listed in our calendar, please contact us.
As we mentioned last week, for something completely different Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. Although we usually like to include a humorous clip every week, we were moved by watching Gavin's Bridge Climb and urge you to take a few minutes to see it for yourself.
Did You Know?
For more information visit www.cpresearch.org.au or contact me by email chris.gosselin@fundmonitors.com
On that note, enjoy the week-end!
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
