3 May 2017 - Pengana Absolute Return Asia Pacific Fund

By: Australian Fund Monitors

Report Date	02 May 2017
Manager	Pengana Capital
Fund Name	Pengana Absolute Return Asia Pacific Fund
Strategy	Equity Long/Short
Latest Return Date	March 2017
Latest Return	-1.15%
Latest 6 Months	-1.20%
Latest 12 Months	-3.13%
Latest 24 Months	-0.04%
Annualised Since Inception	8.25%
Inception Date	01 September 2010
FUM (millions)	AU$49.4
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	Pengana Absolute Return Asia Pacific Fund returned -1.15% for the month of March, compared to Asia Pacific markets which posted a return of 1.3%. Since inception, the Fund has achieved an annualised return of 8.25% p.a., with a volatility of 6.23%. For the month, the M&A sub-strategy was the main positive contributor, while the Holding Companies and Capital Management sub-strategies detracted from performance. The M&A sub-strategy posted a positive performance of +0.4%, bringing the total return for the current year to 2.8%. The biggest positive contributor of 0.15% was from the position in Yingde Gases. Within Capital Management, the bulk of the negative performance was due to the short position in Kaisa. After a 2-year trading suspension, the stock resumed trading with an uptick of 60%, forcing the Fund to cover its short position. In the Holding Company strategy, the positions in Jardine Matheson / Jardine Strategic and Wharf / Wheelock also underperformed. During the month, the Fund's net and gross exposures averaged 15.7% and 229.6% respectively.
More Information	Fund Profile Manager's Report AFM Research Reports

Fund Monitors Pty Ltd

3 May 2017 - Pengana Absolute Return Asia Pacific Fund