| Report Date | 10 February 2016 |
| Manager | Kardinia Capital, a Bennelong Funds Management boutique |
| Fund Name | Bennelong Kardinia Absolute Return Fund |
| Strategy | Equity Long/Short |
| Latest Return Date | January 2016 |
| Latest Return | -3.42% |
| Latest 6 Months | 0.66% |
| Latest 12 Months | 4.36% |
| Latest 24 Months | 14.39% |
| Annualised Since Inception | 12.22% |
| Inception Date | 01 May 2006 |
| FUM (millions) | AU$253 |
| 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 | The Bennelong Kardinia Absolute Return Fund fell 3.42%, in January, vs. the ASX 200 Total Return Index, which returned -5.48%. Since inception in May 2006, the Fund has an annualised performance of 12.22% p.a, compared to the Index's 3.97% p.a. The Fund has achieved this performance with lower volatility of 7.34% than that of the Index (14.31%), to give notable Sharpe and Sortino ratio of 1.06 (Index 0.06) and 1.95 (Index -0.02) respectively.
Ramsay Health Care, Blackmores and NAB were the largest detractors from performance whilst Amaysim, BWX and M2 made significant positive contributions. Net equity market exposure (including derivatives) was substantially reduced during the month to 32.3% (52.4% long and 20.1% short).
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