8 May 2015 - Hedge Clippings

We might apologize for being boring, but the budget shouldn't be!

Each Friday the Hedge Clippings team cast their collective minds over the economic activity of the previous seven days, taking note when we can of happenings relevant to the absolute return and hedge fund sector. Uppermost in our thinking is trying to remain relevant and informative while trying not to bore the socks off our readers, not to mention ourselves, at the same time.

You might think we shouldn't be so indulgent as to worry about whether we're the ones bored or not, but it does concern us. Given that there's been an unrelenting theme of QE, central bank intervention, and low and falling interest rates across financial markets for so long now, it's been difficult to avoid being boring, as we're sure you might have noticed.

The net result of the these conditions has been, as we've mentioned before, the rise of the TINA, or There Is No Alternative, investment strategy that has seen equity market valuations pushed and stretched to dangerous levels as noted this week by no less than US Fed head honcho, Janet Yellen.

It is ironic therefore that at a time when the RBA reduced rates by a further 25 bps to an unheralded 2%, 10 year bond yields both in Australia and overseas start to rise, and rise quite sharply, with the result that equity markets, and particularly the high yielding banks, retreated sharply.

For the record the ASX 200 Accumulation Index fell 1.7% in April (compared with early indications of equity-based hedge funds rising 0.52%) and has fallen a further 2.5% since, including the largest one-day fall for a couple of years.

Whether this was the start of a much anticipated pullback, or just a pause remains to be seen, but it was certainly an indication of what could, or should happen in response to rising bond yields.

And while on the subject of boring, PM Tony Abbott has promised Australia a boring budget next week. For his part it might be wishful thinking, hoping perhaps that the electoral response to Joe Hockey's second budget will be boring, unlike last year's. Unfortunately a boring budget is not what is required, and it is gratifying to see that there is an increasingly widespread opinion that long-term vision and strong management, rather than pandering to interest groups and personal political survival, are what's required.

Specific results received this week include the following LATEST PERFORMANCE UPDATES:

Alpha Beta Asian Fund generated a return of -1.16% during March, to bring the Fund's annual return since inception to 6.77% p.a.

Signature Quantitative Fund 2.80% for March, to bring the annual performance since inception to 15.99%.

The KIS Asia Long Short Fund returned of2.59% during March, bringing the Fund's annual return since inception to 14.91% p.a

Supervised High Yield Fund rose 0.45% during March to bring the Fund's annual return since inception to 10.23%. In the same time frame the RBA Cash Rate returned 3.49%.

Chris
CEO,AUSTRALIAN FUND MONITORS

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