NEWS
28 Jan 2017 - Hedge Clippings
Let the games begin!
There was never going to be any risk that Donald Trump's presidency would be plain sailing, and to be fair he also said that he would not dilly-dally when implementing his policies. And so it seems, with the TPP out the door (at least from the US perspective, but it is hardly going to work without them) and the Mexican wall, irrespective of who will end up paying for it, on the agenda in his first week. He certainly has hit the ground running, irrespective of the direction.
Meanwhile the DJIA has hit the 20,000 level for the first time, albeit that it is not the best or broadest indicator of US stock prices. None the less, the markets, including the US dollar, are certainly positive about Trump's plans to reinvigorate the US economy, and particularly his insistence to put the US first. No one can say he didn't telegraph his punches during the campaign.
Quite how he will end up working with the media and Democrats on the East and West coast remains to be seen. Foreign leaders will have an interesting time, as evidenced by the cancellation of discussions between Trump and the Mexican President overnight. Is this what is meant by a Mexican stand-off?
British PM Theresa May also wasted no time in presenting her credentials and opinions to the new President at the annual Congressional Republican Retreat in Philadelphia overnight, albeit that she still has the challenge of having to guide Article 50 through the British Parliament thanks to a pesky high court.
Politics in Australia seem positively insignificant by comparison, but maybe that is due to the short term focus on the date on which Australians should be celebrating Australia Day, and what it should be called. Political correctness prevents Hedge Clippings from publishing our real thoughts on this matter, except that without Captain Cook's discovery in 1770, and Captain Phillip sailing through Sydney heads in 1778, there would be nothing for Australians to celebrate. For those who think the "Great Southern Land" was a blissful Utopia prior to the first fleet's arrival we suggest reading Captain Watkin Tench's first hand account (appropriately titled 1788) of the first four years of the colony.
NEW FUNDS!
We are continually adding new funds to the database, and this week are pleased to include two new early stage managers/funds, the Collins St Value Fund and the Mhor Australian Small Cap Fund.
Melbourne based Collins St Asset Management is managed by founders Vasilios Piperoglou and Michael Goldberg, whose experience servicing high net worth clients and family offices covers wealth management, portfolio management and private equity. The concentrated portfolio consists of undervalued stocks, and the managers are prepared to hold cash until sufficiently attractive opportunities are available.
The Collins St Value Fund returned +0.89% in December, to take the latest 6 months return to 20.62%. Since inception in February 2016, the Fund has returned 25.14%.
Based in Sydney, Mhor Asset Management was founded by Portfolio Manager Gary Rollo, along with co-founder James Spenceley (who previously founded the ASX listed Vocus Communications). The fund's portfolio typically consists of 25 to 75 small cap stocks listed in Australia or NZ, and may also invest in stocks to be listed in the next 12 months. At the manager's discretion the Fund may hold up to 50% in cash.
In December the MHOR Australian Small Cap Fund rose 5.14%, outperforming the ASX Small Ordinaries Index which returned +3.61%, by 1.53%. Since inception in August 2016, the Fund has returned +5.10%.
Other PERFORMANCE NEWS
Over the last 12 months, the S&P/ASX 200 Total Return Index returned +11.80%, the MSCI Asia Pacific Ex-Japan Index returned +9.49% and the S&P 500 Total Return Index returned +14.77%.
QATO Capital Market Neutral Long/Short Fund rose 0.70% in December, taking annualised return since inception to 4.93% p.a.
King Tide NZ/Australia Long/Short Equity Fund returned -0.64% in December, the Fund has an annualised return of 11.37% p.a.
Pengana PanAgora Absolute Return Global Equities Fund returned -1.38% in December. Since inception in December 2015, the Fund has returned -3.24%.
Bennelong Twenty20 Australian Equities Fund gained +2.62% in December, taking the most recent 12 months return to 7.42%.
FUND REVIEWS released this week: Bennelong Long Short Equity Fund; Optimal Australia Absolute Trust; Pengana Absolute Return Asia Pacific Fund;
And on that note, have a great weekend.
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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27 Jan 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. |
| Manager Comments | Click below to learn more about the Fund and read its latest quarterly report. |
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27 Jan 2017 - Fund Review: Bennelong Long Short Equity Fund December 2016
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 16.14% 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 0.96 and 1.58 respectively.
For further details on the Fund, please do not hesitate to contact us.
AFM Fund Review - December 2016 (pdf format)
26 Jan 2017 - MHOR Australian Small Cap Fund
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| Fund Overview | MHOR looks for investment that exhibit the following set of characteristics: -Opportunity - to take advantage of growth and positive alignment with industry themes and trends. -Quality business - competitively advantaged product or service offering. -Financial flexibility - appropriately resourced to capture its opportunity. -Management - with the vision and capability to bring it all together. -Fundamentally undervalued. MHOR also considers labour standards, environmental, social and ethical considerations when making investment decisions but only to the extent that these factors impact the assessment of risk or return. There is a high level of risk associated with this fund, therefore the minimum suggested investment timeframe is 3-5 years. |
| Manager Comments | The Fund entered December 2016, with 34 stocks (including 1 unlisted) and just 1.4% as cash, in aims to take advantage of the post-Trump rally. In December, the Fund changed course, with the later part spent preparing the Fund for the upcoming earnings season, steadily de-risking the portfolio into market strength and raising cash. At month end, the Fund had 33 stocks and cash increased to 11.2%. The Fund's largest positive contributions came from Spirit Telecom (ST1), Robo 3D (RBO) and Nextdc (NXT). The only major detractor for the month was Ellex Medical Lasers (ELX). The portfolio continues to have growth bias and has considerable exposure to smaller 'undiscovered' stocks as the team believes these have attractive growth opportunities. Click below to learn more about the Fund. |
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25 Jan 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 December return was largely driven by the US and International long-term models, which contributed -0.78% and -0.48% respectively. The intermediate strategies outperformed modestly, resulting in a total contribution of +0.04% (both the US merger arbitrage and the US share class arbitration trades performed strongly). The short-term arbitrage strategies detracted -0.17%. The underperformance of the sleeve was almost exclusively caused by levered ETF trades. |
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25 Jan 2017 - 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 | The largest contributors to the year's performance were Fortescue Metals Group, Newcrest, Vocus Communications and Flight Centre. The main detractors included TPG Telecom, Domino's Pizza Enterprises, South32 and Fisher & Paykel Healthcare. Throughout the year, the Fund trimmed or sold out of a number of high PE names, but maintained positions in companies in which the company fundamentals justified doing so. The investment team remains confident that these fundamentals will dictate returns over the long-term and therefore comfortable with the Fund's holdings. In more general terms, the Fund benefitted from an underweight position in bond proxies, such as REITs, Infrastructure, and Utilities stocks. On the other hand, the Fund's performance was hindered by an overweight exposure to the Healthcare sector, specifically through positions in Ramsay Health Care and Fisher & Paykel Healthcare, and from its exposure to the Retail sector, where a number of names held underperformed. |
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24 Jan 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 | However, LHC was hit by two very large downgrades in two of core its positions; Sirtex and Mayne Pharma which fell 50% and 16% respectively, resulting in a -9.7% fall in the fund. Paragon, Wavestone, Monash, Smallco and Wilson all rose less than 1%, while Bennelong Long/Short, from which the Fund has now fully redeemed, fell -3.2%. The Listed Investment Company (LIC) 8EC's share price was down -0.5% despite their underlying portfolio gaining 2%. The two PIE funds (NZ based funds) were weaker but performed better than the sector once again in 2016. The Fund is considering a couple of funds and plans on adding one new underlying manager on February 1, bringing the total to 16. |
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24 Jan 2017 - Fund Review Pengana Absolute Return Asia Pacific Fund December 2016
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 8.56% p.a., compared to the MSCI ACWI Asia Pacific Price Index's return of 2.86% p.a.
For further details on the Fund, please do not hesitate to contact us.
AFM Fund Review - December 2016 (pdf format)
23 Jan 2017 - Fund Review: Optimal Australia Absolute Trust December 2016
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 nearly 100 years combined experience in equity markets.
- In October, the Fund rose 0.29% in December, to take annualised return since inception to 8.54% p.a. The Fund's approach to risk is shown by the Sharpe ratio of 1.39 (Index 0.25), Sortino ratio of 2.92 (Index 0.24), 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 - December 2016 (pdf format)
23 Jan 2017 - QATO Capital Market Neutral Long/Short Fund
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| Fund Overview | The Fund seeks to preserve capital and maximise absolute returns through active and constant risk management, targeting monthly a net market exposure of 0% to hedge broader market risks with up to 50 S&P/ASX-100 positions (up to 25 long positions & 25 short positions). Historically, the strategy has been uncorrelated to traditional asset classes with a negative beta to equity markets. Qato Capital's process is entirely systematic - stock selection and risk management are all employed in a rules based approach. Positions in Qato's long-portfolio and short-portfolio are rotated monthly dependent upon their Q-Score ranking. The strategy employs no financial leverage/gearing to purchase securities, no derivatives and no financial products to imitate leverage. |
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