21 Nov 2016 - Pengana Absolute Return Asia Pacific Fund

By: Australian Fund Monitors

Report Date	18 November 2016
Manager	Pengana Capital
Fund Name	Pengana Absolute Return Asia Pacific Fund
Strategy	Equity Long/Short
Latest Return Date	October 2016
Latest Return	0.43%
Latest 6 Months	-2.82%
Latest 12 Months	1.20%
Latest 24 Months	5.60%
Annualised Since Inception	8.92%
Inception Date	01 September 2010
FUM (millions)	AU$72.8
Fund Overview	The Pengana Absolute Return Asia Pacific Fund employs an event-driven investment strategy that seeks to exploit the mispricing of securities of companies involved in corporate transactions within the Asian (including Japan, Australia and New Zealand) region. Event driven strategies involve investing in opportunities created by significant transactional events, such as mergers and acquisitions, earnings surprises, capital management initiatives, capital structure arbitrage and index changes, among others. The Fund believes that significant corporate events can often create inefficiency in a company's share price which the Fund then seeks to exploit. The Fund aims to generate consistently positive returns which have a low correlation to the Asian stock markets. The objective to generate a net annualised return greater than 5% above the Reserve Bank of Australia's Cash Rate Target over a 3 to 5 year period with low volatility and low correlation to Asian stock markets. The Fund will usually hold 40 to 80 positions and will be well diversified across the various event strategies. In keeping with the absolute return focus the Manager will eliminate market risk where appropriate by hedging market and foreign currency risks. Since inception the Fund has averaged a net equity market exposure of ~10%. Sizing of an investment position will depend on the expected risk adjusted returns while taking account the liquidity and volatility of the stock. In addition, the maximum potential loss on any one position should be greater than 0.5% of the NAV and the position should not exceed 30% participation of stressed volume assuming a $200m NAV. Other criteria considered are ability to hedge and the availability of pair candidates as well as the average bid-ask size. For M&A strategies average long position is 3 to 5.5% and average short position 2 to 5%.
Manager Comments	The Pengana Absolute Return Asia Pacific Fund rose 0.43% in October, compared to MSCI ACWI Asia Pacific markets which returned -0.49%. The HFR Event Driven Index closed -0.1%. Since inception, the Fund has achieved an annualised return of 8.92% p.a., with a volatility of 6.29%, to give notable Sharpe and Sortino ratios of 0.90 and 1.55 respectively. A number of strategies contributed positively, for the month. The stub strategy was the largest contributor (+0.45%) to Fund performance, bringing the YTD contribution from the strategy to 3.9%. The Fund maintains a healthy gross exposure to this strategy of 25% of NAV. The M&A sub-strategy also contributed positively (+0.24%) to the Fund, with the most notable development being in Vitaco (VIT AU) where the offeror received key regulatory approvals which de-risked the transaction and the spread tightened. The Fund's existing position in Coca-Cola West (2579 JT) also benefited from a reported capital tie-up with Kirin (2503 JT). The Fund continued to develop the credit sub-strategy, which focuses on Convertible Bonds and the arbitrage opportunities they create and has reduced the exposure to M&A. For the month, the Fund averaged a gross and net exposure of 198.9% and 15.3% respectively. Click below to read the latest Fund Manager's Report.
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Fund Monitors Pty Ltd

21 Nov 2016 - Pengana Absolute Return Asia Pacific Fund