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| Fund Overview | The Fund seeks to preserve capital and maximise absolute returns through active and constant risk management, targeting monthly a net market exposure of 0% to hedge broader market risks by generally holding up to 50 S&P/ASX-100 positions (up to 25 long positions & 25 short positions). Historically, the strategy has been uncorrelated to traditional asset classes with a negative beta to equity markets. Qato Capital's process is entirely systematic - stock selection and risk management are all employed in a rules based approach. Positions in Qato's long-portfolio and short-portfolio are rotated monthly dependent upon their Q-Score ranking. The strategy employs no financial leverage/gearing to purchase securities, no derivatives and no financial products to imitate leverage. |
| Manager Comments | Positive contributors in December included long positions in Alumina (+9.46%), Fortescue Metals (+6.09%), Iluka (+9.59%), Orica (+6.47%), Boral (+3.59%), Bluescope Steel (+12.93%), OzMinerals (+9.7%) and Origin (+5.49%). Negative contributors included long Caltex, short Oil Search, long Qantas, short Westfield and short TPG Telecomm. Qato's latest report briefly discusses risk appetite and the most likely catalyst for a correction. They noted institutions and investment banks abroad believe risk appetites have reached extreme levels, and that the 9-week RSI (a measure of how overbought the market is) reached its highest level in December 2017 since March 2009. Qato also noted that banks agree the most likely catalyst for a correction will be an increase in bond yields which, at the time of writing their December 2017 report, Qato believed wouldn't be far away should inflation continue to flow back into the economy. |
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