Last week we wrote of the unfamiliar weakness of the ASX in November, and the apparent disconnect between the local market and the US. In December the ASX200 has continued to decline with a range of less than positive news damaging investor confidence and enthusiasm. November's general market weakness was put down to some pre-Christmas fatigue, profit taking to chase a range of new IPO's (which have been largely uninspiring on debut) possibly some broader political/economic concerns, and finally some offshore selling on concerns for a weaker A$.
Not so long ago there was hope for returns of 25% for the ASX200 in 2013, which with a week and a half to go look more likely to be 15%. To the end of November Equity based funds in AFM's database had returned just under 20% YTD, much in line with the ASX200, with 82% of funds to date outperforming in November.
With the A$ trading below US$0.90 the currency view was certainly correct, assisted by some overnight comments from RBA Governor Stephens who would be happy to see it fall further. Elsewhere this week the decision by General Motors to finally bite the bullet and cease manufacturing Holden cars in Australia from 2017, based on uncompetitive labour costs and agreements and the equally uncompetitive currency, probably helped.
Coupled with the previously announced decision by new Treasurer Hockey to knock back the foreign takeover of GrainCorp, and the posturing about "eavesdropping" on our neighbours by Australia's security agencies (after all, amongst other things, isn't that what they're there to do, and don't they do the same to us?) and there hasn't been too much positive news on the political or economic front.
All is not lost though. The Wallabies seem to be getting their mojo back. Australia are two up in the cricket against the "old enemy" England... surely we can't blow it from here? And there you have it: The sun's shining, the beach beckons, the Christmas parties are in full swing. It's all a case of priorities!
Specific results received this week include the following PERFORMANCE and NEWS UPDATES:
Morphic's Global Opportunities Fund returned 5.48% in November and 41.50% for the previous twelve months with a volatility of 9.06% p.a. Fund exposure was 112% net at month-end and 169% gross with a VAR of 1.30% at the 95th percentile. Largest sector exposures were Financials, Information Technology and Consumer Discretionary with geographic exposure dominated by North America.
The top three active positions were US financials, a Global Cylical Basket and a Data Centre Spread with the first two positions net long and the last position net flat. The Fund also had currency position in the USD/Yen and an interest rate position that was long European Rates.
The Bennelong Kardinia Absolute Return Fund returned 0.15% during November and 14.73% for the previous 12 months as compared to the S&P/ASX 200 Index return of 23.18% but with a volatility of 2.83% as compared to 11.51% for the Index. Since inception in May 2006 the Fund has delivered 14.10% p.a. (4.69% Index) with a volatility of 7.78% (14.70% Index).
Short positions in Westpac and Westfield and long positions in Henderson and Macquarie were the largest positive contributors to performance, whilst long positions in Sirius and Carsales were the largest detractors. The Fund's net equity market exposure decreased to 56.9% (86.6% long and 29.7% short).
Monash Absolute Investment Fund returned -0.58% in November and 35.0% over the last year with a Sharpe Ratio of 3.49. The Fund had a month-end net exposure of 98% and gross exposure of 107%. Notable risk statistics for the Fund are the draw-down of -1.35% (S&P/ASX 200 Accum -6.72%), Up capture ratio of 0.69 and Down capture ratio of -0.13 with 76% positive months. All data is since inception in May 2012.
The Manager discusses a number of portfolio holdings including Emerchants, Technology One, Ozforex and Emeco Holdings.
The Insync Global Titans Fund returned 4.4% during November and twelve month return of 23.47% with low volatility of 6.67% p.a. The Fund's continues to record sound risk statistics with an annualised volatility of 8.36% p.a. (S&P/ASX 200 Accumulation Index 12.24% p.a.), a maximum draw-down of 4.39% (15.13%) and a down capture ratio of -0.52.
The biggest contributors for the month were Time Warner Cable (a subject of takeover speculation), Coach, Wyndham Worldwide, Reckitt Benckiser and Oracle. The Fund benefited from the depreciation of the Australian dollar during the month, having no foreign exchange hedging in place.
FUND REVIEWS updated this week include:
BlackRock's Multi Opportunity Fund offers broad diversification across asset classes including equities, fixed income, currencies and commodities with an attractive risk profile, having provided double digit returns in 2009 through 2012 with low volatility of 4.17% since inception.
The current strategy has seen the Fund record only three negative months since May 2010, leading to annualised returns over the past 48 months (to October 2013) of 11.74% and an annualised volatility of 2.16% pa. The four year Sharpe Ratio is 3.60, indicating an excellent reward-to-risk ratio. BlackRock's Active Scientific involves extensive research into every aspect of the investment process starting with the identification of fundamental investment insights. These are thoroughly tested to ensure that the outcome consistently adds to performance: Quantitative analysis is also applied to balance both performance and risk ensuring the position is only taken when the potential for reward is adequate. Only insights meeting this multi level process are implemented into portfolios.
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.
While on the subject of cricket, today's the anniversary of the birthday WG Grace in 1850. And now for something completely different, Dionne Warwick's birthday was yesterday. Here she is in 2000 in a live tribute to Burt Bacharach and Hal David. It's a long clip, but you don't have to watch it all.
On that note, enjoy the week-end!
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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