14 May 2020 - Performance Report: Bennelong Kardinia Absolute Return Fund

By: Australian Fund Monitors

Report Date	14 May 2020
Manager	Kardinia Capital, a Bennelong boutique
Fund Name	Bennelong Kardinia Absolute Return Fund
Strategy	Equity Long/Short
Latest Return Date	April 2020
Latest Return	0.63%
Latest 6 Months	-0.25%
Latest 12 Months	1.01%
Latest 24 Months (pa)	-2.71%
Annualised Since Inception	8.58%
Inception Date	01 May 2006
FUM (millions)	AU$60.51
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 +0.63% in April, with the portfolio lagging the market due to a conservative net long position. The Fund has risen +1.01% with a volatility of 8.40% over the past 12 months, whereas the ASX200 Accumulation Index has fallen -9.06% with a volatility of 25.18% over the same period. The Fund has returned +8.58% p.a. with an annualised volatility of 7.20% versus the Index's return of +4.84% p.a. with an annualised volatility of 14.48% since the Fund's inception in May 2006. Top contributors in April included JB Hi-Fi, Polynovo, Fortescue, BHP and Macquarie. Key detractors included Fisher & Paykel, Scentre, ARB Corp and Bingo. The Fund's Short Book detracted -335 basis points from performance. The Fund's net equity market exposure was increased from 28.4% to 43.3% (45.8% long and 2.5% short), with the key changes being the addition of 13 new long positions including Santos, Pointsbet, Seek, Nanosonic and Altium, and the closure of several individual stock shorts and Kardinia's short position in Share Price Index futures. The Fund's net market exposure has average 40% since inception. Kardinia noted they are close to that level given their cautious view on the direction of the market over the next 12 months. Their view is that, for now, liquidity is overwhelming earnings.
More Information	Fund Profile Manager's Report

Fund Monitors Pty Ltd

14 May 2020 - Performance Report: Bennelong Kardinia Absolute Return Fund