17 Oct 2014 - Bennelong Kardinia Absolute Return Fund

By: Australian Fund Monitors

Report Date	16 October 2014
Manager	Kardinia Capital, a Bennelong Funds Management boutique
Fund Name	Bennelong Kardinia Absolute Return Fund
Strategy	Equity Long/Short
Latest Return Date	September 2014
Latest Return	-0.31%
Latest 6 Months	0.38%
Latest 12 Months	5.29%
Latest 24 Months	19.70%
Annualised Since Inception	13.00%
Inception Date	01 May 2006
FUM (millions)	AU$150
Fund Overview	The Fund consists of a concentrated long/short portfolio typically comprising 20 to 50 ASX300 listed stocks, generally with a long bias aligned to the overall market direction. On average since inception the Fund's exposure has averaged 40% net long. There is a slight bias to large cap stocks on the long side of the portfolio, although in a rising market the portfolio will tend to hold smaller caps, including resource stocks, more frequently. On the short side, the portfolio is particularly concentrated, with stock selection limited by both liquidity and the difficulty of borrowing stock in smaller cap companies. Short positions are only taken when there is a high conviction view on the specific stock. The Fund uses derivatives in a limited way, mainly selling short dated covered call options to generate additional income. These typically have less than 30 days to expiry, and are usually 5% to 10% out of the money. ASX SPI futures and index put options can be used to hedge the portfolio's overall net position. The Fund's discretionary investment strategy commences with a macro view of the economy and direction to establish the portfolio's desired market exposure. Following this detailed sector and company research is gathered from knowledge of the individual stocks in the Fund's universe, with widespread use of broker research. Company visits, presentations and discussions with management at CEO and CFO level are used wherever possible to assess management quality across a range of criteria. Detailed analysis of company valuations using financial statements and forecasts, particularly focusing on free cash flow, is conducted. Technical analysis is used to validate the Manager's fundamental research and valuations and to manage market timing. A significant portion of the Fund's overall performance can be attributed to the attention and importance given to the macro economic outlook and the ability and willingness to adjust the Fund's market risk.
Manager Comments	Bennelong Kardinia Absolute Return Fund returned -0.31% during September, while ASX 200 Acc stocks fell 5.38%, bringing annual performance to 5.29% with volatility at 4.32%. Since inception (May 2006) returns are 13.00% pa as compared to the Index at 4.61% pa with a volatility of 7.55% (index 14.32%). Sharpe and Sortino ratios over that time are 1.08 and 2.08 respectively. Net equity market exposure (including derivatives) was progressively decreased to 21.7% (47.6% long and 25.8% short) at month-end. Short positions in Share Price Index Futures contracts (hedging market risk), AGL Energy and Metcash were the largest positive contributors, whilst long positions in Oil Search, Challenger and Crown Resorts were the largest detractors from performance.
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Fund Monitors Pty Ltd

17 Oct 2014 - Bennelong Kardinia Absolute Return Fund