INSYNC GLOBAL TITANS FUND

Attached is our most recently updated Fund Review on the Insync Global Titans Fund.

We would like to highlight the following:

• The Global Titans Fund invests in a concentrated portfolio of 15-30 stocks, targeting exceptional, large cap global companies with a strong focus on dividend growth and downside protection.

• Portfolio selection is driven by a core strategy of investing in companies with sustainable growth in dividends, high returns on capital, positive free cash flows and strong balance sheets.

• Emphasis on limiting downside risk is through extensive company research, the ability to hold cash and long protective index put options.

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

Australian Fund Monitors

ATTACHED FILESAFM Fund Review - February 2018 (pdf format)

Bill Gates reportedly once gave this advice to an audience of school leavers he was asked to address. It might be equally apt for Robert Shand, the CEO of Blue Sky Alternative Investments, under extreme pressure this week from an activist short selling attack by US hedge fund Glaucus, who claim that Blue Sky's share price is (was is probably more correct now) significantly overpriced. Readers would understand that Hedge Clippings has no issue with short selling in itself, but can sympathise with Blue Sky, whom we have always found to be smart and professional, under attack from a concerted campaign online and in the media designed solely to drive the price down for a profit, rather than letting natural market price discovery take its course.

There's no doubt that Glaucus has involved itself in a case of market manipulation, as Shand claimed in his teleconference on Tuesday morning. There's also no doubt that some elements of the Glaucus report were based on assumptions and speculation, which Blue Sky has claimed are not based on fact, but opinion. The issue with activist short selling, and then heavy publication of the logic or otherwise behind it, is that it doesn't have to be based on fact, or accurate. Once the fear factor is in shareholders minds the buying will dry up, even if they don't hit the panic button and sell. That's how the activist model works.

Shand is facing a number of difficulties in responding, and is learning the hard way that running a fast-moving asset management company investing in alternative and unlisted assets as a public company has its own set of issues. Many, or most of the asset they have developed and manage are closed-ended funds investing in unlisted assets, so pricing is always going to be a question. The timing of exiting, or realising the full value of these mainly private equity, private real estate or infrastructure assets is critical. Most importantly the issue of market transparency doesn't necessarily sit comfortably with unlisted assets housed in wholesale funds.

As such Blue Sky are caught between a rock and a hard place, but like it or not Shand and his board have only two options - either open up the books to prove Glaucus is wrong, or secondly, putting their heads down and focus on delivering the performance of the various underlying assets in due course. The second option in itself will not be easy as "in due course" could be a number of years in the case of some of the underlying investments. Meanwhile, market perception will make it difficult to source new deal flow, and the negative publicity will also make it difficult to attract investors to those funds, while at the same time trying to keep the market happy.

Difficult does not mean impossible. Macquarie Bank came under a similar style attack a few years ago when a US based short seller accused it of being a Ponzi scheme. History shows that Macquarie's share price suffered (and no doubt the short seller profited) but over time the performance was such to re-build the bank's reputation - and share price. There have of course been other cases...