| Report Date | January 2019 |
| Manager | Kardinia Capital, a Bennelong boutique |
| Fund Name | Bennelong Kardinia Absolute Return Fund |
| Strategy | Equity Long/Short |
| Latest Return Date | January 2019 |
| Latest Return | 1.66% |
| Latest 6 Months | -8.93% |
| Latest 12 Months | -8.48% |
| Latest 24 Months | -1.87% |
| Annualised Since Inception | 9.15% |
| Inception Date | 01 May 2006 |
| FUM (millions) | AU$166.43 |
| 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 rose +1.66% in January, taking annualised performance since inception May 2006 to +9.15% with an annualised volatility of 7.14%. By contrast, the ASX200 Accumulation Index has returned +5.38% per annum over the same period with almost twice the volatility (13.30% per annum). The Fund's Sortino ratio of 1.31 versus the Index's 0.18, combined with the Fund's average negative return of -1.44% versus the Index's -3.26%, downside deviation of 4.05 versus the Index's 9.96 and down-capture ratio of 40.11% highlight the Fund's capacity to avoid the market's downside volatility over the long term.
Top contributors in January included Rio Tinto (+26 basis point contribution), A2 Milk (+21bp), Tabcorp (+19bp), CSL (+17bp), Evolution Mining (+16bp). Key detractors included Netwealth (-13bp), Northern Star (-11bp) and Qantas (-9bp). The individual short book dragged on performance (-27bp), with shorts in the waste management, IT and packaging sectors the key detractors.
Net equity market exposure was increased from 30.4% to 40.2% (48.7% long and 8.4% short), with the key changes being increased weightings in Macquarie Group, Woodside Petroleum, A2 Milk, Tabcorp, Cleanaway and CSL, and a new position in Independence Group. |
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