Curiouser and Curiouser...
This week Hedge Clippings turns to the mystery of Philip Parker and Altair Asset Management, the previously unheard of fund manager who made it to the front pages with his bold decision to hand back investors' money (actually not that much it seems - from what we can discern there was only $5 million in one fund, and $7 million in another) because he thought market valuations were unrealistic, and that the property market was due for a crash.
Our first thought was that Mr Parker is not Robinson Crusoe in his view of the markets. Plenty, if not most fund managers on AFM's radar have been concerned about stretched valuations for some time, and have been particularly concerned about the excessive multiples that Australia's banks are or were trading at. Equally, one would have to have been living on a different planet (or with Robinson Crusoe on his desert island) if you weren't aware of the fact that Australia's property prices are sky-high, as they are in many other countries of the world, including Hong Kong, Canada and the UK.
Of course there are opposing opinions as to whether this is going to lead to a property crash, or just a slowing of the price increases. The former would certainly lead to a significant fallout across the economy, and particularly affect the banks, and their share prices. The issue however is quite simply: Why would a fund manager simply hand the money back to investors given his view of the market, rather than managing their money responsibly to protect their investment?
One argument might be that Altair's funds were "long" only, and indeed two of them were, and on the latest numbers available both were fully invested with only 1% held in cash. One of them had an exposure to the major banks of 30%, and the other over 20%. Surely the responsible approach would have been for Mr Parker to write to his investors, advising them of his opinion, and giving them the option of redeeming their investment.
As it turns out, since June 29, 2012 Altair Assets Ltd has also been licensed by ASIC to operate the Parker Absolute Return Fund (ARSN 159 082 630) which, as the name suggests, is licensed to hold derivatives. There is a little clue there in the word "derivatives" as to what he might have done to protect his investors.
If Mr Parker was so concerned about equity valuations and an impending property crisis, then surely put options over the banks, or an index put over the whole market would not only have protected his investors, but could have provided them with a significant return if his doom and gloom forecast was proven to be correct.
Curiously, or not surprisingly, once the other side of the story, (namely a minor issue in the courts relating to his mother's shares which had been sold without her knowledge) came to light, Mr Parker was much keener to communicate through his solicitor, rather than through the lens of the camera and via the front pages of the financial press.
Given that the market was down sharply in May, with the worst performance since January 2016, Mr Parker may well be right in his market view, but we would have thought completely wrong in his implementation. Hedge Clippings suspects there is more to this story than meets the eye.
On a different note, there are reports that the UK election result may continue the run of political suprises of the past few years. Unless Hedge Clippings is hallucinating (again) this seems improbable based on logic, but so did Macron, Brexit, and Trump. For that reason we'll leave political comment to others more qualified, and stick to subjects we're at least supposed to understand.
As above, early days for May performance updates, but with the market having had its worst month since Janaury 2016 it is fair to expect that most absolute return and hedge funds will significantly out-perform. In the meantime below is a selection of April's results.
Affluence Investment Fund increased 0.53% in April, resulting in a +11.18% return for the latest 12 months. Since inception, the Fund's has an annualised return of 9.77% p.a.
APN AREIT Fund gained 2.27% for the month of April, to take the latest 24 months return to +22.79%. The Fund has an annualised return since inception of 16.69% p.a.
Bennelong Australian Equities Fund returned a positive 2.79% in April, outperforming the S&P/ASX-300 Accumulation Index which returned 0.98%, by +1.80%. Over the past 12 months, the Fund has returned +15.24%, taking the annualised return since inception to 13.82% p.a.
Bennelong Concentrated Australian Equities Fund outperformed the market (S&P/ASX 300 Accumulation Index) posting a positive return of 2.91% for the month of April 2017. Since inception in January 2009, the Fund has an annualised return of 17.96% p.a.
Bennelong Kardinia Absolute Return Fund rose 0.89% in April, taking the annualised return since inception to 11.09% p.a.
Bennelong Twenty20 Australian Equities Fund returned +1.25% for the month of April, slightly outperforming the S&P/ASX-300 Accumulation Index by +0.26%. For the most recent 12 months, the Fund has gained 16.25%, taking the annualised return since inception to 10.5% p.a.
Cyan C3G Fund returned +1.9% in April, to take the Fund's one year return to +14.49%. Since inception, the Fund has an annualised return of +25.8% p.a, against the S&P/ASX200 Accumulation Index's +6.6% p.a. return.
Insync Global Titans Fund increased 5.2% in April, outperforming the MSCI All Country World ex-Australia Net Total Return Index ($A), which returned 3.7%, by +1.5%. The Fund has an annualised return since inception in October 2009 of 9.58% p.a.
NWQ Fiduciary Fund returned +0.25% in April and has returned +5.74% p.a. since its inception in May 2013.
Pengana Global Small Companies Fund returned +6.7% in April, outperforming the MSCI AC World SMID Cap Index, which returned 4.0%, by +2.7%. The Fund has returned a positive 24.74% over the past 12 months and +9.93% p.a. annually since inception in April 2015.
Pengana Absolute Return Asia Pacific Fund finished up 0.7% for the month of April 2017, compared to Asia Pacific markets which posted a gain of 1.3%. Since inception, the Fund has an annualised return of 8.26% p.a.
Pengana PanAgora Absolute Return Global Equities Fund returned -1.17% for the month of April. The Fund has a low systematic risk (beta) to the ASX 200 and the MSCI World Indices of 0.07 and 0.08 respectively. Since inception the Fund has an annualised return of 9.79% p.a.
Touchstone Index Unaware Fund recorded a net gain of 3.5% for the month of April, which was broadly in line with the FTSE 50/50 Infrastructure Index, which returned 3.62%. Since inception in March last year, the Fund has an annualised return of 14.34% p.a.
FUND REVIEWS released this week: Bennelong Long Short Equity Fund; APN Asian REIT Fund; Bennelong Kardinia Absolute Return Fund; Optimal Australia Absolute Trust; Bennelong Twenty20 Australian Equities Fund; Pengana Absolute Return Asia Pacific Fund; Insync Global Titans Fund;
And, on that note, have a great weekend.
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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