This week saw a return of AIMA Australia's annual hedge fund conference, which under the chairmanship of Paul Chadwick took on the theme of "by the industry for the industry" for the second year in a row, and for the second year in a row saw a packed audience still in attendance well after the designated 5:30 close.
As Paul noted afterwards, the challenge now is how to run the event next year - stick to the winning formula, or try to introduce change?
Winning formulas will work while the quality of the speakers and panels remains, and this year's "fireside chat" (sans flames) with London based Keith Haydon, CIO of $14bn fund of funds FRM will be a hard act to follow next year.
Keith gave an insight into his view of the industry, blending his dry wit with the benefit of experience across a period in which there has been more than a fair share of change and turbulence. In particular his observations on the challenge of balancing manager performance with size was illuminating.
From a performance perspective managers with $500 million to $1bn provide the best returns, while balancing out the business risk of managers with less than $500m. However, according to Haydon this represents only 4% of total industry assets, with over 20% in funds with $1bn to $5bn, and 68% in funds over $5bn.
With close to 90% of FUM allocated to funds with $1 billion or more, the scraps allocated to smaller funds, which dominate the Australian landscape are hard fought for. However, this should be good news for investors in smaller funds, and Australian managers in particular, and no doubt is one of the major factors behind the outperformance of Australian equity long short managers compared with their global counterparts.
AFM's analysis of the 5 and 10 year performance of local long short funds compared with their global peers based on the Eureka Hedge Global Index shows a clear outperformance, totalling 2.54% pa over 5 years, and 2.70%pa over 10.
Statistics as we've often noted can be misleading and there could be other reasons including the dominance of Australian equity strategies amongst local long short managers, currency movements and a myriad of others. However the bottom line is that local managers have outperformed their global peers, and these local managers are predominantly in the under $1,000 billion size range.
With institutions generally unable or unlikely to be able to participate in the sweet spot the beneficiaries are local investors, be they retail, HNW, SMSF's or family offices.
Finally last night saw one of Australia's most successful managers, Regal, take out the Hedge Fund of the Year at the industry's annual awards night for their Atlantic long short fund, and followed this up by their Tasman fund winning the best market neutral fund, with Jenny Harding from Harbridge wining the award for contribution to the industry. Congratulations to all concerned, they are well deserved.
Specific results received this week include the following PERFORMANCE UPDATES:
The Monash Absolute Investment Fund returned 2.30% during August, above the Index return of 0.6%, with an annual return of 21.14% (Index 14.40%).
With overall performance at 25.92% over the last 12 months, the Microequities Deep Value Microcap Fund fell slightly in August.
Bennelong Kardinia Absolute Return Fund returned 0.56% during August bringing 12 month performance to 6.60% with a volatility of 4.27%.
With a very low volatility of 1.71% the Optimal Australia Absolute Trust returned 0.06% during August and 6.29% for the prior 12 months.
The Paragon Fund returned -1.1% during August and 39.83% for the prior twelve months with a volatility of 13.91%.
Aurora Fortitude Absoloute Return Fund returned 0.30% during August and 3.56% over the previous 12 months with a very low volatility of 0.96%.
The Cor Capital Fund returned 0.10 % during August bringing 12 month performance to 1.93 percent with a volatility of 3.62%.
With a volatility of 4.18%, the Alpha Beta Asian Fund returned 0.90% during August and 10.62% over the prior 12 months.
15-17 October Grace Hotel, Sydney - Investment Performance Measurement, Attribution & Risk Management Forum will have leading experts sharing up-to-date, cutting edge ideas and insight on frontiers of recent developments in performance measurement.
21-22 October in Sydney Post-Retirement Australia 2014 conference. Comprehensive two day forum for high profile cross industry participants to provide updates, insights and ongoing discussion into the key issues central to achieving optimal financial outcomes.
Friday 24 October in Sydney Financial and Media Markets Charity Regatta Day out of Middle Harbour Yacht Club. Promises to be a fantastic day.
5-6 November, Grace Hotel, Sydney. Alternative Investments Conference - Investigating the rise of non-traditional high yield and low risk investment products, strategies and allocation in an era of prolonged volatility and low returns.
This week's Now For Something Completely Different, Sunday is Leonard Cohen's birthday. For someone who spent a reasonable part of his mis-spent youth listening to tracks such as "Suzanne" and "Bird on a Wire" I thought you might like to listen to the great man's live recording (and his explanatory preamble) of the Chelsea Hotel.
Best wishes for a happy and healthy weekend,
Chris
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Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.
