BENNELONG KARDINIA ABSOLUTE RETURN FUND

Attached is our most recently updated Fund Review. You are also able to view the Fund's Profile.

• The Fund is long biased, research driven, active equity long/short strategy investing in listed ASX companies with over ten-year track record. 

• The Fund has significantly outperformed the ASX200 Accumulation Index since its inception in May 2006 and also has significantly lower risk KPIs. The Fund has an annualised return of 9.57% p.a. with a volatility of 7.11%, compared to the ASX200 Accumulation's return of 5.37% p.a. with a volatility of 13.38%.

• The Fund also has a strong focus on capital protection in negative markets. Portfolio Managers Mark Burgess and Kristiaan Rehder have significant market experience, while Bennelong Funds Management provide infrastructure, operational, compliance and distribution capabilities.

For further details on the Fund, please do not hesitate to contact us.

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - October 2018 (pdf format)

BENNELONG LONG SHORT EQUITY FUND

Attached is our most recently updated Fund Review on the Bennelong Long Short Equity Fund.

• The Fund is a research driven, market and sector neutral, "pairs" trading strategy investing primarily in large-caps from the ASX/S&P100 Index, with over 15-years' track record and an annualised returns of over 15.8%.

• The consistent returns across the investment history indicate the Fund's ability to provide positive returns in volatile and negative markets and significantly outperform the broader market. The Fund's Sharpe Ratio and Sortino Ratio are 0.94 and 1.54 respectively.

For further details on the Fund, please do not hesitate to contact us.

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - October 2018 (pdf format)

Times are tough!

Markets remain tough. China is slowing ahead of the tariffs kicking in at 25% in January, the UK is anything but a United Kingdom, valuations (particularly tech and growth) are stretched, banks are tightening credit whilst the property market is awash with unsold units and an upcoming election next year could, and probably will, significantly change negative gearing, imputation credits and the labour market, the ASX is back to levels of 12 months ago, and volatility has spiked.

What makes a good fund manager in tough times?

It would be trite to reply to this question with the obvious answer "one who doesn't lose my capital", but in reality that's about it. However, the "why" and "how" behind the answer is less obvious. Given that markets are undoubtedly in the midst of tough times at the moment it is worth taking a deeper dive into a fund's quantitative performance and risk analytics to look behind the numbers.

This week we hosted a joint presentation from two different fund managers, Dean Fergie from Cyan, and Rodney Brott from DS Capital. Both are "boutiques", running concentrated portfolios and managing relatively small amounts of capital on behalf of both themselves and their investors. That gives a clue to one answer - invest with managers who have a significant amount of the own capital at risk alongside their investors and don't run other PA positions outside the fund. Both Dean and Rodney started their funds primarily to manage their own capital the way they'd like to, and so are literally putting their money where their mouths are.

Both funds have relatively small amounts of FUM by industry standards and as a result can not only be more nimble but can invest in smaller cap stocks without taking huge liquidity risks. Moving outside the ASX200 not only avoids the large cap stocks which are fully covered by brokers' and institutional research, and therefore are more efficiently priced, but also avoids the rising (and falling) tide effect of index and passive investing. It also increases choice, which of course can be a double-edged sword as it requires significant research to find the hidden gems amongst the dirt.  

Both have the flexibility to move out of the market to cash when deemed appropriate, although in practical terms this means generally in the range of 20 to 40%. "Appropriate" means not only when the market as a whole is risky, but also when they can't find quality companies in which to invest at attractive valuations.

Quality companies and attractive valuations means having a deep understanding of the sector, the company, and its competitors, and involves multiple company visits and "eyeballing" management as well as analysing their financials from which to finally invest in as few as 30 to 40 positions. Understanding was a recurring theme, not only understanding why to invest and what price represents value, but also understanding changes to their original investment thesis, or valuation metrics, and therefore when it is time to reduce or exit a position.

Speaking to one of the investors present at the lunch afterwards, the ability to sell a stock is where he felt the best managers have a real edge over the individual investor. Good managers don't use hope as a strategy, and when circumstances, news or valuations change, they're prepared to cut the position accordingly.

Finally, with approximately 58% of all equity funds having reported their October results, 54% of those have outperformed the ASX200 Accumulation Index's October return of -6.05%, whilst only 2% have managed to achieve positive returns. Of the funds that outperformed the market in October, the average return was -1.39%, with returns ranging from -5.94% up to +7.81%.