NEWS

19 Dec 2017 - Performance Report: Bennelong Twenty20 Australian Equities Fund
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Fund Overview | The Fund is managed as one portfolio but comprises and combines two separately managed exposures: 1. An investment in the top 20 stocks of the markets, which the Fund achieves by taking an indexed position in the S&P/ASX 20 Index; and 2. An investment in the stocks beyond the S&P/ASX 20 Index. This exposure is managed on an active basis using a fundamental core approach. The Fund may also invest in securities expected to be listed on the ASX, securities listed or expected to be listed on other exchanges where such securities relate to ASX-listed securities.Derivative instruments may be used to replicate underlying positions and hedge market and company specific risks. The companies within the portfolio are primarily selected from, but not limited to, the S&P/ASX 300 Accumulation Index. The Fund typically holds between 40-55 stocks and thus is considered to be highly concentrated. This means that investors should expect to see high short-term volatility. The Fund seeks to achieve growth over the long-term, therefore the minimum suggested investment timeframe is 5 years. |
Manager Comments | At the end of November, weightings were increased in the Consumer Staples, Health Care, Energy and REIT's sectors and were decreased in the Discretionary, Industrials, Telco's, Financials and Materials sectors. The Fund combines a passive investment in the S&P/ASX20 Index and an actively managed investment in Australian listed stocks outside this index. The passive position is achieved by investing individually in each of the S&P/ASX20 Index's individual stocks with approximately the same weightings they represent in the S&P/ASX300. Currently this weight is approximately 60% of the Fund's portfolio. The active position in ex-20 stocks has the goal of allowing the Fund to outperform the broader market. |
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18 Dec 2017 - Performance Report: NWQ Fiduciary Fund
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Fund Overview | The Fund aims to produce returns, after management fees and expenses of between 8% to 11% p.a. over rolling five-year periods. Furthermore, the Fund aims to achieve these returns with volatility that is a fraction of the Australian equity market, in order to smooth returns for investors. |
Manager Comments | There were solid contributions to the overall Fund performance from both the Alpha and Beta managers. The Beta managers benefited from the continued strength of the broader equity market, while the Alpha managers benefited from higher levels of dispersion both within and across sectors. Overall, seven of the eleven underlying managers comprising the Fund delivered positive returns. The Fund is a diversified multi manager portfolio comprising 11 managers in total, 6 Alpha managers and 5 Beta managers. The objective of the Fund is to produce attractive positive returns irrespective of market direction. The Fund places emphasis on managers who demonstrate a rigorous and repeatable investment process that has delivered a strong track record. |
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15 Dec 2017 - Hedge Clippings, Friday 15 December, 2017.
Do Lowy and Murdoch know more than the rest of us? Undoubtedly!
Last week Hedge Clippings discussed the potential for the $8 billion in bank dividends due in December being fed back to the market as a driver of a Santa Rally, although given the current negative publicity banks are receiving, it might not all necessarily find its way back in to bank stocks themselves. This week came news which might herald a similar injection (or more) from Westfield shareholders, although a fair proportion of that might be re-allocated to the property sector.
Not content with the Lowy's taking a profit after over 50 years getting to, and at the top of their game, Rupert Murdoch's announcement overnight signifies there could be a move by two of Australia's most successful businessmen that there's something afoot. Could this be the start of the smartest money in town taking a "little" off the table while asset prices are high, and the market is still buoyant, or is it just a co-incidence?
Hedge Clippings suggests possibly a little bit of each, along with a number of other reasons. Apart from both being incredibly successful on the global stage, neither are getting any younger, although there's no suggestion Murdoch is stepping back from the fray. Both have built and are/were at the helm of businesses which having benefitted from massive change over their tenure, are facing even greater pressure from a change in technology going forward. With nothing left to prove, why not cash in some chips while there are willing buyers?
In Lowy's case he also referenced the increasing burden of reporting and compliance in an increasingly regulated world which, while it might be necessary, has become such a feature of the corporate, and particularly listed corporate, world. Anecdotal evidence suggests that in many cases the risk and compliance role of a director of a listed company, particularly in financial services or any other heavily regulated sector, outweighs time and focus on strategy and direction. Given the CBA's current woes this may seem implausible, but that doesn't allow for incompetence.
For those readers in private financial services businesses we suspect the emphasis on the compliance and reporting requirements are also an equal or increasing burden, with few technological solutions to the problem. In fact advancing technology may simply be increasing the compliance burden.
Meanwhile, the US FED raised rates 0.25% as expected, even if the vote was not unanimous, and with expectations of three more to come in 2018, the markets were unsurprised. Well that depends if it was the equity market - happy that the economic signals continue to gather momentum without undue inflation - or the bond market, unhappy as yields rise. The question is when does the switch in asset allocation out of equities start? Probably not for a while yet, but the tipping point will come at some point.
Labour markets and employment are strong both at home and the USA, but not so wages growth. That tipping point will no doubt change when labour markets go from being strong to tight, a scenario which will be delayed somewhat by advancing technology, but which the corporate world will not be looking forward to.

15 Dec 2017 - Performance Report: Pengana Absolute Return Asia Pacific Fund
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Fund Overview | The Fund will usually hold 40 to 80 positions and will be well diversified across the various event strategies. In keeping with the absolute return focus the Manager will eliminate market risk where appropriate by hedging market and foreign currency risks. Since inception the Fund has averaged a net equity market exposure of ~10%. Sizing of an investment position will depend on the expected risk adjusted returns while taking account the liquidity and volatility of the stock. In addition, the maximum potential loss on any one position should be greater than 0.5% of the NAV and the position should not exceed 30% participation of stressed volume assuming a $200m NAV. Other criteria considered are ability to hedge and the availability of pair candidates as well as the average bid-ask size. For M&A strategies average long position is 3 to 5.5% and average short position 2 to 5%. |
Manager Comments | The M&A and Direction Alpha strategies contributed positively for the month, returning +0.4% and +0.32% respectively, while the Relative Value book detracted -0.43%. In the M&A book, positive contributors included the Fund's position in Hong Kong listed TCC International Holdings (+0.20%) and Siliconware Precision Industries in Taiwan. The Fund also added Changyou.com Limited in the month. In Australia, the Fund's position in Pepper Group completed successfully, as the scheme implementation agreement by private equity buyer KKR was voted through. Key successes in the Directional Alpha book were Shangri-La Asia (+13.4%), Shinsegae (+14.8%) and the spin-off in Wharf Real Estate Investment (+10%), whilst detractors included China Travel (-12.5%) and Samsung Electronics (-7.8%). Most of the negative contribution from the Relative Value book came from the Fund's long/short position long SINA Corp/short Weibo Corp, however, Pengana continue to hold this position. In Japan, the Fund has entered into a long position in Kansai Pain / short Nippon Paint which contributed positively. The Fund's position in long Mitsui OSK / short Kawasaki Kisen was unwound with a positive contribution of 14 basis points. |
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14 Dec 2017 - Performance Report: Bennelong Long Short Equity Fund
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Fund Overview | In a typical environment the Fund will hold around 70 stocks comprising 35 pairs. Each pair contains one long and one short position each of which will have been thoroughly researched and are selected from the same market sector. Whilst in an ideal environment each stock's position will make a positive return, it is the relative performance of the pair that is important. As a result the Fund can make positive returns when each stock moves in the same direction provided the long position outperforms the short one in relative terms. However, if neither side of the trade is profitable, strict controls are required to ensure losses are limited. The Fund uses no derivatives and has no currency exposure. The Fund has no hard stop loss limits, instead relying on the small average position size per stock (1.5%) and per pair (3%) to limit exposure. Where practical pairs are always held within the same sector to limit cross sector risk, and positions can be held for months or years. The Bennelong Market Neutral Fund, with same strategy and liquidity is available for retail investors as a Listed Investment Company (LIC) on the ASX. |
Manager Comments | Performance in November reflected an even spread of positive vs negative pairs, however, the Fund's top contributors did not overcome the worst pair performers. These were: 1) long SEK / short NWS / short NEC; 2) long ALS / short AZJ; and 3) long Aristocrat / short Tabcorp. The most notable positive pair was long Origin / short CTX / short AGL, with Origin buoyed by a higher oil price and further announced cost reductions at its APLNG project. Bennelong noted the S&P500 has gained every single month in 2017 except in March when it fell -0.04%. There have only been three other calendar years in the entire history of the S&P500 Index (which commenced in 1923) where the Index has exhibited only one negative month. The Index normally has 3-6 negative months in any calendar year, hence Bennelong conclude the Index's trend in 2017 is consistent with other data showing a lack of volatility in the overall market such as the VIX Index. |
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13 Dec 2017 - Fund Review: ARCO Absolute Trust November 2017
ARCO ABSOLUTE TRUST (formerly Optimal Australia Absolute Trust)
AFM have released the most recently updated Fund Review on the ARCO Absolute Trust.
We would like to highlight the following aspects of the Fund;
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ARCO Investment Management is a specialist Australian equity investment manager and the Fund has a long/short equity strategy typically with a low but variable net market exposure comprising 40 to 65 stocks broadly selected from within the ASX200.
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The investment team comprising George Colman, Peter Whiting, and Stephen Nicholls bring 100 years combined experience in equity markets.
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The Fund has an annualised return since inception of +8.41%. The Fund's approach to risk is shown by the Sharpe ratio of 1.39 (Index 0.30), Sortino ratio of 2.95 (Index 0.32), both of which are well above the ASX 200 Accumulation Index and has recorded over 79% positive months.
For further details on the Fund, please do not hesitate to contact us.

12 Dec 2017 - Performance Report: Allard Investment Fund
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Fund Overview | Allard's investment approach has remained consistent throughout their history: That is to invest prudently but proactively in well-managed businesses that achieve superior returns on capital in industries with long-term growth potential. The Manager uses both broad top-down guidance and detailed bottom-up analysis to identify suitable markets, industries and companies. Although long only investors, a critical factor in their strategy and performance is the ability to hold cash when they cannot find companies that meet their criteria or are at a sufficient discount to their valuations. |
Manager Comments | The Fund's latest report shows that holdings in Cash and Fixed Income have decreased to 20.7% from 23.0% as at the end of October. The portfolios weightings were decreased in the Consumer Staples, Industrials and Utilities sectors and weightings in the Health Care, IT, Financials and Telco sectors were increased. The portfolio remains highly concentrated, with 53.2% of NAV held in the Fund's top 10 stocks. Geographically, Hong Kong and China make up most of the portfolio (45.1%), followed by Singapore (13.7%), India (11.2%), Korea (4.9%), Indonesia (2.3%), Australia (1.1%) and Vietnam (1.0%). |
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11 Dec 2017 - Fund Review: Bennelong Long Short Equity Fund November 2017
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 large-caps from the ASX/S&P100 Index, with over fourteen-year track record and annualised returns of 16.38% p.a.
- 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 0.99 and 1.63 respectively.
For further details on the Fund, please do not hesitate to contact us.


8 Dec 2017 - Hedge Clippings, 8 December, 207
Some say that Australian's shut up shop in January and go to the beach, thereby making it an 11 working month year. From Hedge Clipping's experience that's a gross understatement. Many in the financial services sector, particularly when in Melbourne, advise that if you don't get deals in place by Cup Day on the second Tuesday in November, then getting any serious traction and attention becomes increasingly difficult. And even if that's a Melbourne issue, by the beginning of December many Australians go in to "count down mode" leading up to Christmas.
Without wishing to admit to being a member of the 10 working month a year fraternity, there's certainly truth in the facts. From December 1 onwards driving on city roads becomes progressively easier, politicians head for overseas taxpayer funded "research trips", and those left at the coal face endeavour to clear up all the outstanding administrivia we have been putting off for the past few months.
Not that it apparently affects the stock market, which according to an article written by Wilson Asset Management's Chris Stott, argues that as the new year approaches, the market tends to perform particularly well as the Santa Claus effect, first documented in 1972, takes hold. Stott's research shows that since 1950, December has been the best performing month for the market, with the All Ordinaries index rising 74 per cent of the time. Over the period, the index has delivered average gains of 2.1 per cent over the month.
Bell Potter's Richard "Coppo" Coppleson describes the market hitting a "sweet spot" from mid-December through to early January. His research shows that during this period, Australian shares have posted gains in 31 out of the past 37 years to deliver an average return of 3 per cent. In the 31 "up" years since 1980, the market has increased an average of 4.2 per cent. Further, a remarkable 25 per cent of the time the market has surged by 6 per cent or more.
Since 1995, the All Ordinaries has fallen just twice during this trading period - once in 2007-08 (down 6.3 per cent) and again in 2010-11 (down 0.7 per cent). Analysis by Andrew McCauley of Veritas Securities finds that the market delivers inordinately high returns in the eight trading days before New Year's Eve, with the All Ordinaries rising a remarkable 83 per cent of the time from 1980 to 2015.
All this is great news for investors, but "why is it so"? Wilson Asset Management's Chris Stott goes on the explain it might be bank dividends:
"As investors make adjustments to their holdings and position their portfolios for the new calendar year they tend to be net buyers of shares as December 31 edges closer. Not to be overlooked is the fact that three of the four big banks all pay dividends in December.
This year, ANZ Banking Group, Westpac Banking Corp and National Australia Bank will pay out a combined $8.2 billion in dividends to shareholders between December 13 and 22. Assuming about 15 per cent of dividends are reinvested through dividend reinvestment plans, collectively investors will still receive almost $7 billion in cash to potentially invest in the sharemarket.
In spite of the additional buying occurring during this period, the absence of many market participants at their desks during the holidays has seen the volume of shares traded on the ASX fall markedly. For example, in recent months the sharemarket has had average daily volumes of about $5.7 billion. In comparison, over the last two weeks of December 2016 and the first week of January this year, average daily volumes dropped by 21 per cent to $4.5 billion.
In Wilson's view, the combined effect of investors' net buying and the market's constricted liquidity helps push share prices higher, creating a Santa rally at the end of the calendar year.
With the festive season upon us, investors may wonder if this year the sharemarket will bring them some cheer. With the outlook for interest rates to be lower for longer, many investors could be more inclined to reinvest their cash dividends into the sharemarket, rather than put them into term deposits with record low returns. Past experience would seem to give reason for optimism with the market outperforming on average over the holiday period."
That's enough from Hedge Clippings for now - there's a (long) Christmas lunch I'm due to go to....
8 Dec 2017 - Performance Report: Collins St Value Fund
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Fund Overview | The managers of the fund intend to maintain a concentrated portfolio of investments in ASX listed companies that they have investigated and consider to be undervalued. They will assess the attractiveness of potential investments using a number of common industry based measured, a proprietary in-house model and by speaking with management, industry experts and competitors. Once the managers form a view that an investment offers sufficient upside potential relative to the downside risk, the fund will seek to make an investment. If no appropriate investment can be identified the managers are prepared to hold cash and wait for the right opportunities to present themselves. |
Manager Comments | The Fund's performance in October was largely due to two of the Fund's holdings having experienced temporary falls in their share prices. Crowd Mobile fell from 24c per share to 14c per share after the CEO announced he was selling shares to fund a tax liability. However, Collins St noted Crowd Mobile had moved up to 17c and the Fund had recouped the majority of October's losses at the time of writing their latest report. The Fund stands out as one of the few with zero management fees, charging performance fees only, ensuring the Manager's interests are aligned with investors'. It invests in sustainable cash-flow generating businesses that are trading at significant discounts to their underlying worth. |
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