NEWS
11 Apr 2017 - 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. |
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10 Apr 2017 - 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. |
| Manager Comments | The standout pair for the month was ILuka / Downer with both positions contributing positively. The TPG Telecom / Telstra and Challenger / AMP pairs also contributed positively for the month. Elsewhere pair performance was balanced with little change. The Fund's performance for the most recent quarter was up +7.43%, dominated by company fundamental performance in 2017. The portfolio benefited from both numerous upgrades to the long portfolio and downgrades to the short portfolio, and had few losers. |
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5 Apr 2017 - King Tide NZ/Australian Long/Short Equity Fund
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| Fund Overview | The fund seeks to outperform the market with less volatility than the market by allocating capital to a select group of eight to sixteen funds whose investment mandates allow them to use short selling of equities and equity indices, to use derivatives to manage risk, to use leverage and to hold large amounts of cash. In-depth proprietary research is used to select and monitor fund managers with particular emphasis on their ability to manage equity market risk through stock selection, short selling and the use of derivatives and cash. |
| Manager Comments | It was the managers with large cap exposure and more diversified portfolios such as Wavestone and L1 that performed well for the month, with returns of 2.35% and 2.23% respectively. However, some of the Fund's small cap specialists such as PIE Funds found the month tough, with their Growth Fund and Emerging Companies Fund falling -5.98% and -4.30%. Managers investing in resource sector, such as Paragon and Regal Atlantic also fell -4.99% and -5.12% respectively. At the end of February, King Tide added a new fund, the Sandon Capital Activist Fund, bringing a different style of investing - an activist strategy, to the Fund's portfolio. |
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4 Apr 2017 - Fund Review: Insync Global Titans Fund February 2017
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 Fund's unit price returned +2.1% for the month of February. The performance was driven by positive contributions from the holdings in Unilever, Heineken, Visa, Medtronic and eBay. The main negative contributors were Zimmer Holdings, Microsoft Corp and Comcast.
- 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.
AFM Fund Review - February 2017 (pdf format)
31 Mar 2017 - 4D Global Infrastructure Fund
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| Fund Overview | The fund will be managed as a single portfolio of listed global infrastructure securities including regulated utilities in gas, electricity and water, transport infrastructure such as airports, ports, road and rail as well as communication assets such as the towers and satellite sectors. The portfolio is intended to have exposure to both developed and emerging market opportunities, with country risk assessed internally before any investment is considered. The maximum absolute position of an individual stock is 7% of the fund. |
| Manager Comments | The biggest contributor to performance came from a UK based satellite operator Inmarsat, which was up 17% for the month. The Fund also saw strong performance from its Brazilian names that leveraged to the rapidly declining Brazilian Selic rate, such as the Brazilian toll road operators CCR and Ecorodovias, rail operator Rumo and utility operators who can capitalise on lower interest rates to expand their portfolios. The weakest performer for February was Mexican tower operator Telesites, down 5.5% on the back of slightly weaker than expected FY numbers reported in the last week of February. |
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30 Mar 2017 - Insync Global Titans Fund
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| Fund Overview | Insync employs four simple screens to narrow the universe of over 40,000 listed companies globally to a focus group of high quality companies that it believes have the potential to consistently grow their profits and dividends. These screens are size of the company, balance sheet performance, valuation and dividend quality. Companies that pass this due diligence process are then valued using dividend discount models, free cash flow yield and proprietary implied growth and expected return models. The end result is a high conviction portfolio of typically 15-30 stocks. The principal investments will be in shares of companies listed on international stock exchanges (including the US, Europe and Asia). The Fund may also hold cash, derivatives (for example futures, options and swaps), currency contracts, American Depository Receipts and Global Depository Receipts. The Fund may also invest in various types of international pooled investment vehicles. At times, Insync may consider holding higher levels of cash if valuations are full and it is difficult to find attractive investment opportunities. When Insync believes markets to be overvalued, it may hold part of its resources in cash, or use derivatives as a way of reducing its equity exposure. Insync may use options, futures and other derivatives to reduce risk or gain exposure to underlying physical investments. The Fund may purchase put options on market indices or specific stocks to hedge against losses caused by declines in the prices of stocks in its portfolio. |
| Manager Comments | The performance was driven by positive contributions from the holdings in Unilever, Heineken, Visa, Medtronic and eBay. The main negative contributors were Zimmer Holdings, Microsoft Corp and Comcast. The Fund continues to have no foreign currency hedging in place as Insync consider the main risks to the Australian dollar to be on the downside. Over 50% of the Fund is currently protected using a put protection strategy. |
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28 Mar 2017 - KIS Asia Long Short Fund
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| Fund Overview | Whilst the Fund's primary strategy is focused on long/short equities, the ability to retain discretionary powers to allocate across a number of other investment strategies is reserved. These strategies may include, but not be limited to: convertible bond investments, portfolio hedging, equity related arbitrage, special situations (e.g. merger arbitrage, rights offerings, participation in international public offerings and placements, etc.). The Fund's geographic focus is Asia excluding Japan, but including Australia). The Fund may invest outside of this region to the extent that: 1. The investment decision is driven from the Asian region or; 2. The exposure is intended to mitigate risk or enhance return from factors external to the Asian region. |
| Manager Comments | The month's performance was driven largely by long positions in Cardinal Resources Ltd (CDV.AX) 0.48%, eCobalt Solutions Inc (ECS.TO) 0.46% and Plymouth Minerals Ltd (PLH.AX) 0.21%. However, detractors for the month, included the long positions in Altium Ltd (ALU.AX) -0.29%, Primary Health Care Ltd (PRY.AX) -0.22% and CapitaLand Limited (CATL.SI) -0.20%. |
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27 Mar 2017 - Fund Review Pengana Absolute Return Asia Pacific Fund February 2017
PENGANA ABSOLUTE RETURN ASIA PACIFIC FUND
Attached is our most recently updated Fund Review on the Pengana Absolute Return Asia Pacific Fund.
- The Pengana Absolute Return Asia Pacific Fund ("PARAP") was established in 2008 by portfolio managers Antonio Meroni and Vikas Kumra. The Fund is a feeder fund into a Cayman Islands AUD share class fund.
- The Fund invests both long and short in Asia Pacific equities, including in Australian and New Zealand, after a stock specific "event" has either occurred or been announced and the portfolio aims to be uncorrelated to the underlying equity markets. A combination of the Manager's experience, thorough research and continuous back- testing identify the most attractive of these events.
- Risk controls include limits on individual positions as well as gross and net exposure. Limits are in place for option exposure and cash borrowing, with stop loss limits on individual positions. Overall the manager is looking to derive returns from the event strategies as opposed to any currency or market exposures.
- Since inception, the Fund has an annualised return of 8.49% p.a., compared to the MSCI ACWI Asia Pacific Price Index's return of 3.68% p.a.
For further details on the Fund, please do not hesitate to contact us.
AFM Fund Review - February 2017 (pdf format)
24 Mar 2017 - Hedge Clippings
ETF's are only cheap (good value) in a rising market
One of the great financial product success stories of the past few years has been the dramatic increase of flows into ETF's, which not surprisingly, have had a significant effect on the rise and rise of the overall market.
Based on the concept of a rising tide lifts all ships, ETF's have assisted those tidal flows, as investors, no doubt encouraged by the manufacturers and marketers of ETF's, have sought a simple and low-cost approach to gaining equity market exposure. As investors' funds flow in, by definition they find a home across all stocks in the index according to their weight, and which naturally helps support and/or lift the market.
In turn, the rising market helps the marketers sell the benefits of their products to more and more investors, who are encouraged not only by the performance but the low fee structure. And so it goes on.
Or at least it will until there is a market correction, and - however buoyant the market may seem - there will be one eventually.
When this does occur there is a danger that the rising tide effect of ETF's reverses, and becomes a falling tide. As investors, concerned about capital losses, redeem from ETF's, it will in turn create downward selling pressure on the market, which in turn well result in more investors redeeming or withdrawing. And so it will go on.
Hedge Clippings is not against ETF's as such, and many smart investors use them to gain low-cost exposure to equity markets. However, many other investors ignore the fact that a simple index ETF employs no risk process in the event of a falling market, and therefore they offer no downside protection.
This is relevant at the current stage in the cycle, as markets continue to rise (in spite of a minor bump in the past week), so it is worth looking at recent comments in February investor newsletters from some well-respected active equity managers.
For instance, Richard Fish of Bennelong Long Short Equity, (who has returned an average of 16.5% per annum over the past 15 years) noted:
"The US S&P 500 index has rallied almost 15% since Trump's election victory in early November. Accordingly the forward P/E multiple of the S&P 500 is now over 18 times (its highest level since the unwind of the early 2000's tech bubble) and the relative strength index (a momentum indicator) has moved into the mid-70s (historically a sign that the market is overbought). It's as though the issues plaguing markets 12 months ago, such as China's growth challenges, US policy rate normalisation, European fiscal reform, no longer exist. Yet such issues have far from disappeared."
Meanwhile, George Colman from Optimal Australia (one of the most risk averse funds in AFM's database) wrote:
"Our strategy often underperforms a broader market when it rallies strongly, as we favour downside investor protection when we see many stock prices move well above fundamental fair value. We believe we are at such a junction at present and we continue to worry about downside risk."
And as Mike Surridge from KIS Capital (annual returns of 14.67% pa over 7 years and a Sharpe Ratio of 2 since inception) observed this week when discussing the forward P/E multiples of many stocks now over 20 "At these high levels many investors and brokers don't like to memntion these high P/E multiples as it makes the stock look expensive. They're much happier talking about a yield of 5% which given current cash rates, makes them look cheap."
ETF's may be cheap, but the old adage that you only get what you pay for is often worth remembering.
Affluence Investment Fund increased 1.20% in February, resulting in a +13.41% return for the latest 12 months. Since inception in November 2014, the Fund has an annualised return of 9.98% p.a.
Pengana Absolute Return Asia Pacific Fund returned -0.04% for the month of February 2017, compared to Asia Pacific markets which posted a gain of 2.4%. The Fund has an annualised return since inception of 8.49% p.a.
Collins St Value Fund rose 0.46% for the month of February, taking the latest 12 months return to 23.85%.
Pengana Global Small Companies Fund was up 0.8% for the month of February, compared to a 1.1% return for the MSCI AC World SMID Cap Index. Over the past 12 months, the Fund has returned +16.45%, taking the annualised return since inception to 5.57% p.a.
Bennelong Australian Equities Fund gained 1.58% in February, taking the Fund's one year return to 11.87%. Since inception, the Fund's has an annualised return of 13.27% p.a.
Touchstone Index Unaware Fund returned +3.16% in February, outperforming the ASX 200 Accumulation Index 2.25%, by +0.91. The Fund has gained +7.80% over the latest 6 months.
Pengana PanAgora Absolute Return Global Equities Fund returned +0.87% in February, taking the annualised return since inception to 10.15% p.a.
FUND REVIEWS released this week: Bennelong Twenty20 Australian Equities Fund; Optimal Australia Absolute Trust; APN Asian REIT Fund;
And on that note, have a great weekend.
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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24 Mar 2017 - Fund Review: APN Asian REIT Fund February 2017
APN Asian REIT Fund
Attached is our most recently updated Fund Review on the APN Asian REIT Fund.
We would like to highlight the following aspects of the Fund;
- APN is an ASX-listed fund manager specialising in property investment, with an investment team of six. Established in 1996, APN now has FUM of $A2.4bn including four REIT (Real Estate Investment Trust) funds.
- The APN Asian REIT Fund (Fund) is a property securities fund that invests in a quality portfolio of Asian REITs, listed on the securities exchanges of the Asian Region, with the ability to hold some cash and fixed interest investments.
- The Fund aims to deliver a competitive yield with lower risk than the market. The underlying stocks are selected based on a highly disciplined investment approach that focuses on the fundamentals and number of valuation approaches. The universe can include new IPO's, other corporate actions take place and / or corporate governance improvements at country or REIT level bring new stocks into focus.
- The Fund provides access to a wide spread of property-based revenue streams that are specifically analysed, selected and weighted with the aim of delivering strong and sustainable income returns. The Fund is an unhedged product.
- APN's Asian REIT Fund invests in a portfolio of 25-40 listed Asian REITs with a core philosophy of investing in properties with sustainable rental income streams.
- The Fund has delivered an annualised return of 14% p.a., since inception in July 2011 with a standard deviation of 9.45% p.a. The Sharpe and Sortino ratios are 1.16 and 2.05 respectively.
APN AREIT Fund February 2017 (pdf format)
