22 Aug 2015 - Hedge Clippings

When the going gets tough....

Regular readers of Hedge Clippings will know that our commentary frequently varies from a focus on fund or industry returns. This week however, given the volatility in markets and the uncertainty that prevails, we will take a look at how actively managed funds as a whole have performed in recent times.

Prior to doing so however it's worth just reflecting on some of the factors disappointing markets. Firstly in Australia the reporting season has been less than stellar, with more disappointments evident than surprises to the upside. Elsewhere the overnight news from Greece was probably a surprise, but it's doubtful if anyone outside Greece is taking much notice any more.

China and the USA remain the big issues driving markets, with two big questions arising: Will the Chinese authorities have a Mario Draghi moment and actually come out and declare that they'll do "whatever it takes", or have they already indicated that they'll do so by their actions? Meanwhile in the US we are getting closer and closer to the day when interest rates will finally rise, and this week has shown that while most understand that, when it actually happens there will be a significant impact on the market.

And so back to the performance of absolute return and actively managed funds. There have been plenty of comments in the press over the past few years that as a whole active managers have not performed sufficiently to justify their fees. In somecases that may well have been the case, but it's difficult to outperform in a strongly rising market, while still protecting the downside.

However, it is evident that when markets begin to underperform, or become volatile, absolute return funds come into their own. Over the past 12 months to the end of July the ASX 200 Accumulation Index has risen 5.68%. When one considers that the index includes dividends, the ASX 200 (excluding dividends) has risen just 1.18%.

Over the same 12 month period equity-based funds in AFM's database have risen 13.43% on average, with 63% of funds outperforming the ASX 200 Accumulation Index. Taking June returns by themselves, when the market fell 5.3% funds significantly protected investors' downside, albeit that they also fell 1.88%. That's still an outperformance of almost 3.5 percent, with 85% of all funds outperforming the market.

Specific results received this week include the following PERFORMANCE UPDATES:

FUND REVIEWS released this week: Monash Absolute Investment Fund; Morphic Global Opportunities Fund; Bennelong Long Short Equity Fund

UPCOMING EVENTS:

20 - 21 August 2015 - The 2nd Superannuation Fund Investment Operations Forum 2015 is a two day forum providing invaluable technological, regulatory compliant and best practice insights into improving back and middle office efficiency to drive member loyalty, bottom line profitability and a competitive edge

26 - 28 August 2015 - The 15th Annual Wraps, Platforms & Masterfunds Conference will provide solutions for succeeding in a distribution world of endless possibilities, showcasing strategies to help business achieve the biggest bite of market share, use innovation to overcome problems and support opportunities. Australian Fund Monitors is pleased to offer a discount of $300 to all investors and advisors using coupon code promoFM on registration.

17 September 2015 - The 14th Annual Hedge Fund Rock and Australian Hedge Fund Awards 2015 as the industry lets its hair down with some drinks, music and great videos. All proceeds go to Redkite helping childern with cancer and their families.

And Now for Something Completely Different. Koala's are renowned for all sorts of things, but generally for being cute, cuddly and sleepy, I'm told becasue they're stoned on the gum leaves they munch all day. Not this one.

On that note, have a good week-end.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook