NEWS
24 Mar 2017 - Bennelong Australian Equities Fund
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| Fund Overview | The Bennelong Australian Equities Fund seeks quality investment opportunities which are under-appreciated and have the potential to deliver positive earnings. The investment process combines bottom-up fundamental analysis with proprietary investment tools that are used to build and maintain high quality portfolios that are risk aware. The investment team manages an extensive company/industry contact program which helps identify and verify various investment opportunities. The companies within the portfolio are primarily selected from, but not limited to, the S&P/ASX 300 Index. The Fund may invest in securities listed on other exchanges where such securities relate to the ASX-listed securities. The Fund typically holds between 25-60 stocks with a maximum net targeted position of an individual stock of 6%. |
| Manager Comments | The Fund had a number of solid results, such as CSL and Breville Group that beat expectations in the reporting season and which were well received by the market. There were no majorly disappointing financial results reported, perhaps with the exception of Dominos. Aristocrat, one of the Fund's largest positions, was the largest contributor to the Fund's performance over the month. However, the Fund's positions in BHP and Rio Tinto detracted from its performance. The investment team continues to remain focused on the company fundamentals, particularly in an environment of macro and political uncertainty. |
| More Information |
23 Mar 2017 - Fund Review: Optimal Australia Absolute Trust February 2017
OPTIMAL AUSTRALIA ABSOLUTE TRUST
AFM have released the most recently updated Fund Review on the Optimal Australia Absolute Trust.
We would like to highlight the following aspects of the Fund;
- Optimal Australia 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.
- The investment team comprising George Colman, Peter Whiting, and Stephen Nicholls bring 100 years combined experience in equity markets.
- In February, the Fund returned -0.98%, to take annualised return since inception to 8.11% p.a. The Fund's approach to risk is shown by the Sharpe ratio of 1.28 (Index 0.25), Sortino ratio of 2.61 (Index 0.25), both of which are well above the ASX 200 Accumulation Index and has recorded 80% positive months.
For further details on the Fund, please do not hesitate to contact us.
AFM Fund Review - February 2017 (pdf format)
23 Mar 2017 - Pengana PanAgora Absolute Return Global Equities Fund
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| Fund Overview | PanAgora believes the best way to find opportunities in the global markets is to combine fundamental analysis with robust quantitative techniques in order to filter the investment universe and select the investments. The Fund invests primarily in listed equity securities from a global universe of developed markets and a select group of emerging market countries. The Fund's objective is to seek absolute returns by identifying and exploiting multiple inefficiencies that may exist in global equity markets. These inefficiencies are primarily exploited through the use of a long/short equity strategy which aims to construct a portfolio that is generally neutral to market movements. As such the performance of the investment strategy is largely independent of the market's performance. The Fund seeks to achieve its objective by using a diversified set of strategies that have low correlation to one another. In addition, because many of these strategies are designed to generate profit under different market conditions, their combination is expected to result in more stable returns over time than any individual strategy in and of itself. |
| Manager Comments | The month's performance was driven by the long-term portfolio (+0.86%), primarily the international (ex U.S.) sleeve. Attribution wise, Japan was the top performing country contributing 0.59%. From a sector perspective, the largest contributor was Consumer Discretionary, which returned 0.79%, with both long and shorts contributing. Energy was the largest detracting sector for the month, with the majority of the underperformance coming from the Oil, Gas and Consumable Fuel industy, where several companies missed earning expectations. The intermediate strategies detracted slightly from returns in February (-0.03%) due to a few U.S. merger arbitrage related trades. The short-term portfolio contributed +0.04% to performance, with positive performance coming from news related and index reconstitution strategies. |
| More Information |
22 Mar 2017 - Fund Review: Bennelong Twenty20 Australian Equities Fund February 2017
BENNELONG TWENTY20 AUSTRALIAN EQUITIES FUND
Attached is our most recently updated Fund Review on the Bennelong Twenty20 Australian Equities Fund.
- The Bennelong Twenty20 Australian Equities Fund invests in ASX listed stocks, combining an indexed position in the Top 20 stocks with an actively managed portfolio of stocks outside the Top 20. Construction of the ex-top 20 portfolio is fundamental, bottom-up, core investment style, biased to quality stocks, with a structured risk management approach.
- Mark East, the Fund's Chief Investment Officer, and Keith Kwang, Director of Quantitative Research have over 50 years combined market experience. Bennelong Funds Management (BFM) provides the investment manager, Bennelong Australian Equity Partners (BAEP) with infrastructure, operational, compliance and distribution services.
For further details on the Fund, please do not hesitate to contact us.
AFM Fund Review - February 2017 (pdf format)
22 Mar 2017 - Pengana Global Small Companies Fund
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| Fund Overview | The Fund is managed by Founder & CIO Leah Zell, and Portfolio Managers Jon Moog and David Li. The Lizard investment team have over 50 years combined investment experience in global small cap investing. Leah Zell has over 30 years of experience and is a recognized expert in international investing in the international small-cap category. The Fund's investment team uses a value-oriented investment approach to small and mid-cap global equities that seeks to identify and invest in quality businesses that create significant value but are mispriced, overlooked or out-of-favour. The investment manager believes that unique opportunities exist due to limited available research, corporate actions or unfavourable investor perception. The portfolio construction process aims to develop portfolios that incorporate the best investment ideas from the investment manager's research while allowing for liquidity constraints and perceived risk. The Fund's investment manager will not typically hedge currency exposures, however during periods of currency extremes, some currency hedging may be employed. Derivatives may be used to achieve long or short exposures, reduce risk and reduce transaction costs. Derivatives will not be used for the purposes of leverage and the Fund's net exposure will never be short. |
| Manager Comments | The largest positive contributors to February's performance included ams AG, Halogen Software Inc., NetScout Systems Inc., Pico Far East Holdings Limited, and Rami Levi Chain Stores Hashikma Marketing 2006 Ltd. However, positions in Broadleaf Co. Ltd, CROOZ Inc., Peyto Exploration & Development Corp., Ubiquiti Networks Inc., and Wizz Air Holdings Plc detracted from the performance. At month-end, the Fund's 10 holdings accounted for 32.4% of the Fund's assets, with no single name representing more than 4% of the Fund. Cash increased from the prior month's 8.7% to 17.4%, mainly due to inflow into the Fund. |
| More Information |
21 Mar 2017 - 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. |
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21 Mar 2017 - Touchstone Index Unaware Fund
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| Fund Overview | The portfolio is constructed using Touchstone's Quality-At-a-Reasonable-Price ('QARP') investment process. QARP is a fundamental bottom-up process, however, it also incorporates a top-down risk management framework designed to successfully manage the portfolio during varying market conditions and economic cycles. The Touchstone Fund is concentrated, typically holding between 15-20 stocks. No individual stock will ever make up more than 10% of the portfolio at any one time. The Investment Manager may temporarily exceed the exposure limits of the Fund occasionally, particularly during periods of market volatility, to allow for holdings in excess of this 10% limit where the increase in value of the underlying security is due to market movement. The Fund may also hold between 0-50% of the portfolio in cash. The Fund has a high level of associated risk, therefore, the minimum suggested investment time-frame is 5 years. |
| Manager Comments | The Fund benefited from its holding in Costa Group (+24.1%) which rose after posting strong growth in earnings of 36%. The Fund's two large positions in the REITs sector, namely Charter Hall (+11.9%) and Goodman Group (+9.1%) also delivered solid returns in the month. However, the holding in the US based James Hardie Industries (JHX) fell in the month -5.7% after the company reported 3Q17 results which were below market expectations. Telstra (-3.6%) was also weaker, largely driven by higher tax and depreciation and amortisation charges. With the current political risks elevated globally, combined with market uncertainties, the investment team continues to remain focused on downside protection. |
| More Information |
20 Mar 2017 - Affluence Investment Fund
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| Fund Overview | The Fund does not invest directly into any asset class, rather, it invests in investment managers which satisfy Affluence Funds Management's investment criteria; its investment philosophy is based on a formula developed by CEO/Portfolio Manager Daryl Wilson since the start of his career in 1999. The Fund targets total returns of at least 5% above inflation over rolling 3 year periods with volatility of returns less than 50% of the ASX200 Index. The Fund also aims to provide investors with a distribution yield of at least 5% p.a. To ensure appropriate diversity of managers and limit the potential for conflicts of interest, no more than 20% of the Fund will be invested with any one external manager. Affluence seeks to achieve the Funds' investment objective by choosing attractively priced investments overseen by quality managers. The Fund uses a number of processes to identify potential investments including quantitative screens for investments which meet historical performance, volatility and other criteria. They also use a number of external researchers and information sources to assist in this process. |
| Manager Comments | The top performing investments for the month included the listed Brookfield Prime Property Fund up 25%, the Terra Capital Natural Resources Fund up 13.6%, the Phoenix Opportunities Fund up 4.8%, and the India Avenue Equity Fund up 4.3%. The Fund's long only and long short equities funds were mixed, depending on how their portfolios were positioned during the reporting season. At the end of February, the Fund held investments in 26 unlisted funds representing 57% of the portfolio. The Affluence LIC Fund accounted for 19% of the portfolio and provided exposure to 19 LIC's. The Fund held investments in 5 other listed entities which represented 8% of the total portfolio, with the remaining 16% held in cash. |
| More Information |
20 Mar 2017 - 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 sub-strategy posted a positive performance of +1.3% after gaining 1.1% in January. The biggest positive contributor was the position in Television Broadcasts Ltd TVB, which gained 14% and contributed 40 basis points to performance. The Fund's position in Yingde Gases contributed 22bp to performance, gaining 13% over the month. The Capital Structure strategy was the main negative contributor, generating a loss of -0.9% for the month. The bulk of the poor performance stemmed from the positions in Korean Preference vs Ordinary shares. |
| More Information |
18 Mar 2017 - Hedge Clippings
He may not fit the presidential mould, but the market likes the President
The US market is continuing to be buoyed overall by the "Trump Effect", albeit that certain sectors are benefiting considerably more than others. That's life in general, and it is certainly going to be life under this president. Any sector related to the $1 trillion intended to be spent on new infrastructure projects are looking positive. On the other side of the ledger, Trump's move against Obamacare, renewable energy and others are going to suffer.
As a result of the overall Trump Effect the US market has seen a significant upward trend, with hardly a pause, let alone a pull back, over the past three months. In fact since Trump won the November election, the US market hasn't had a one day fall of 1%. As a result volatility, as measured by the VIX index sits currently at 11.21, although that's fractionally higher than the 10.58 it touched at the end of January. Not even a 0.25% rate rise announced during the week in the US was able to upset Trump's rally, which has also reached across the Atlantic as the British market set a new record high overnight.
Compare the VIX to the PC (Political Correctness) Index which the Tweeting Mr Trump has sent into overdrive! In fact, we wonder if Trump is the beneficiary, or benefactor, of the Twittersphere?
Closer to home local funds managers have been making the headlines over the past couple of weeks. Bronte Capital's John Hempton won both the war of words with and bragging rights over Pershing Square's Bill Ackman based his short in US pharmaceutical company Valeant. Meanwhile, Russel Pillemer's Pengana Capital seems to have pulled off a coup with their bid (in conjunction with WH Soul Pattinson) for listed fund manager Hunter Hall, winning the backing of Hunter Hall's board.
Most in the industry are still wondering why founder and CIO Peter Hall chose to sell a 19.9% stake in Hunter Hall to Soul Patts back in December for $1 a share, way below the then market price, although he has since agreed to sell them the balance of 24% for a more respectable market price of $2.60 a share. If nothing else he did trigger the bidding war which ensued, will hardly be left penniless, and according to the Financial Review is committed to "making the world a better place", so overall not a bad result for him either.
From Pengana's perspective, the deal looks like one with excellent synergy. They add an additional $900m in funds under management to their current $2.2b without having to cannibalise their existing suite of managers, with a similar target client base of premium investors, while gaining a foothold in the increasingly interesting ethical investing space.
We're not sure how ethical investing fits with The Donald's casino empire, but we think investors will like it.
Bennelong Long Short Equity Fund returned +2.07% in February, to take the annualised return since inception to 16.47% p.a.
Paragon Australian Long Short Fund returned -5.0% for the month of February and +9.96% for the latest 12 months. The Fund has an annualised return since inception of 13.63% p.a.
APN AREIT Fund rose +3.02% in February, to take the latest 12 months return to +8.68%. The S&P/ASX 300 Property Trust Accumulation Index also gained in February, returning +4.13%. Since inception in January 2009, the Fund has an annualised return of 16.71% p.a.
Allard Investment Fund increased 0.75% for the month of February. The Fund has gained +18.54% over the latest 12 months, taking the annualised return since inception to 9.03% p.a.
Bennelong Kardinia Absolute Return Fund returned +0.25% in February, taking the annualised return since inception to 11.07% p.a.
Cyan C3G Fund returned +0.1% in February, taking the Fund's one year return to 22.44%. Since inception, the Fund's has an annualised return of 26.16% p.a.
APN Asian REIT Fund returned -0.19% in February, outperforming the Bloomberg Asia REIT Index which returned -0.81%, by 0.62%. Since inception, the Fund has an annualised return of 13.99% p.a.
Quay Global Real Estate Fund increased +3.1% for the month of February and +4.84% for the prior 12 months. The Fund has an annualised return since inception of 15.35% p.a. Global real estate returned +1.8% for the month in AUD terms, with around 3.2% in underlying stock returns, while the stronger AUD deduced -1.4%.
Totus Alpha Fund fell -0.46% in February, to take the latest 24 months return to +23.02%. Since inception in April 2012, the Fund has an annualised return of 19.63% p.a.
Bennelong Twenty20 Australian Equities Fund increased 2.03% in February and 18.2% over the latest 12 months.
NWQ Fiduciary Fund returned -0.35% in February, to bring the annualised return since inception in May 2013 to +5.87% p.a.
Optimal Australia Absolute Trust returned -0.98% in February, a rare negative month for one of the most consistent performers, to take the annualised return since inception to 8.11% p.a.
FUND REVIEWS released this week: Bennelong Long Short Equity Fund; Bennelong Kardinia Absolute Return Fund;
And on that note, have a great, and if you're in Sydney, a wet and windy weekend.
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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