Fund Review: Optimal Australia Absolute Trust February 2016

14 Mar 2016 - Australian Fund Monitors

Read the latest Fund Review on Optimal Australian Absolute Trust Fund.

Bennelong Kardinia Absolute Return Fund

14 Mar 2016 - Australian Fund Monitors

The Bennelong Kardinia Absolute Return Fund fell
1.78% in February.

14 Mar 2016 - Bennelong Kardinia Absolute Return Fund

By: Australian Fund Monitors

Report Date	10 March 2016
Manager	Kardinia Capital, a Bennelong Funds Management boutique
Fund Name	Bennelong Kardinia Absolute Return Fund
Strategy	Equity Long/Short
Latest Return Date	February 2016
Latest Return	-1.78%
Latest 6 Months	1.16%
Latest 12 Months	0.59%
Latest 24 Months	9.41%
Annualised Since Inception	11.91%
Inception Date	01 May 2006
FUM (millions)	AU$257.42
Fund Overview	The Fund consists of a concentrated long/short portfolio typically comprising 20 to 50 ASX300 listed stocks, generally with a long bias aligned to the overall market direction. On average since inception the Fund's exposure has averaged 40% net long. There is a slight bias to large cap stocks on the long side of the portfolio, although in a rising market the portfolio will tend to hold smaller caps, including resource stocks, more frequently. On the short side, the portfolio is particularly concentrated, with stock selection limited by both liquidity and the difficulty of borrowing stock in smaller cap companies. Short positions are only taken when there is a high conviction view on the specific stock. The Fund uses derivatives in a limited way, mainly selling short dated covered call options to generate additional income. These typically have less than 30 days to expiry, and are usually 5% to 10% out of the money. ASX SPI futures and index put options can be used to hedge the portfolio's overall net position. The Fund's discretionary investment strategy commences with a macro view of the economy and direction to establish the portfolio's desired market exposure. Following this detailed sector and company research is gathered from knowledge of the individual stocks in the Fund's universe, with widespread use of broker research. Company visits, presentations and discussions with management at CEO and CFO level are used wherever possible to assess management quality across a range of criteria. Detailed analysis of company valuations using financial statements and forecasts, particularly focusing on free cash flow, is conducted. Technical analysis is used to validate the Manager's fundamental research and valuations and to manage market timing. A significant portion of the Fund's overall performance can be attributed to the attention and importance given to the macro economic outlook and the ability and willingness to adjust the Fund's market risk.
Manager Comments	The Bennelong Kardinia Absolute Return Fund fell 1.78% in February, vs. the ASX 200 Total Return Index, which returned -1.76%. Since inception in May 2006, the Fund has an annualised performance of 11.91% p.a, compared to the Index's 3.74% p.a. The Fund has achieved this performance with lower volatility of 7.36% than that of the Index (14.27%), to give notable Sharpe and Sortino ratio of 1.02 (Index 0.05) and 1.87 (Index -0.03) respectively. The Kardinia portfolio had a Growth and Momentum bias which dragged on performance. At the individual stock level, Surfstitch did the majority of the damage. Other significant detractors from performance were Blackmores, Bellamy's, Isentia and National Australia Bank. On the positive side, short positions in Share Price Index futures and Bendigo and Adelaide Bank, as well as longs in BWX, Burson and Transurban were the best contributors. Net equity market exposure (including derivatives) was reduced over the course of the month from 32.3% to 27.0%. Click below to read the latest Fund Report.
More Information	Fund Profile Manager's Report AFM Research Reports

Hedge Clippings

12 Mar 2016 - Australian Fund Monitors

Hedge funds aren't nasty, they're sensible!

12 Mar 2016 - Hedge Clippings

By: Australian Fund Monitors

Hedge funds aren't nasty, they're sensible!

Certain sections of the media have been getting excited about the prospect of those 'nasty' hedge funds with short positions losing money thanks to a "short squeeze" rally in the price of the banks and Fortescue Metals Group (FMG). Of course there are some who think (Gerry Harvey for instance, who has always been ready and willing to talk his own book) that all short sellers should "be put up against a wall and shot" (his words, not mine). Others seem to believe that the only reason share prices fall is because of short selling by hedge funds.

Let's put this in perspective: Firstly the banks:

The price of CBA fell from $95 twelve months ago to $72 during September, following which there was a rally back up to $85 by the end of the year. Then a further fall to $72 followed towards the end of February, since which time it rallied back towards $75.

So apart from the fact that most of the downward pressure on CBA has come from "long" investors exiting or reducing their holdings because it was overpriced, any smart hedge fund should have been "short" at prices of over $90, and would have been more than happy to exit those positions between $70 and $75.

Only about 3% of the total big four banks' stock is "borrowed", which includes borrowing by traders who need to cover their option positions. While the banking sector may be large, that's not enough to have enabled short sellers to have cut the price by 20%. The reality was that at $95 the CBA was overpriced and conditions for banks were, as George Colman from Optimal Australia said at the time, "as good as they get", and the downside was inevitable.

Let's take a look at Fortescue:

In June 2008 FMG was trading at close to $11, riding high on the back of iron ore prices of around $140 a tonne. By January 2009 the price at fallen to $1.94 before rallying over two years to $6.65 in January 2011, before falling to $1.60 in January 2016.

FMG's share price might well have bounced $1.00 from that low, but that completely ignores the fact that they had fallen from $11 to $1.60 during their volatile journey.

It's not only short sellers that push the price of stocks down. It is the outlook for the company's earnings and profitability. Long only investors reduce their holdings, and just as importantly buyers pull bids back because there is limited value, or the stock is overvalued.

Message: Don't blame short sellers for the company's prospects and share price. Having said that manipulation of news and research (whether positive or negative) should not be allowed to benefit the peddlers of such information.

Performance updates and reviews received this over the past week included the following PERFORMANCE UPDATES:

Against a backdrop of further volatility in commodities and general de-risking in February the ASX200 Accumulation Index fell 1.76%. The S&P500 fell and the Asia Pacific ex Japan Index fell 0.63%. Meanwhile:

The Optimal Australia Absolute Trust recorded a positive 0.80% return, in another tough month to outperform by 2.56%.

The Bennelong Long Short Equity Fund rose 2.37%, to outperform by 4.13%.

KIS Asia Long Short Fund returned a positive 0.67% for the month, to give an out-performance of 1.30% against the Asia Pacific ex Japan index.

The Alexander Credit Opportunities Fund returned +0.55% for the month of February.

Morphic Global Opportunities Fund fell 2.24% in February, underperforming its benchmark (MSCI AC World Total Return in Australian Dollars), which fell 1.65%, by 0.59%.

The Newgate Real Estate and Infrastructure Fund returned -0.24% for the month of January.

FUND REVIEWS released this week: Insync Global Titans Fund

And on that note, have a great week-end.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

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KIS Asia Long Short Fund

11 Mar 2016 - Australian Fund Monitors

KIS Asia Long Short Fund returned a positive 0.67% for the month of February.

11 Mar 2016 - KIS Asia Long Short Fund

By: Australian Fund Monitors

Report Date	10 March 2016
Manager	KIS Capital Partners
Fund Name	KIS Asia Long Short Fund
Strategy	Equity Long/Short
Latest Return Date	February 2016
Latest Return	0.67%
Latest 6 Months	6.18%
Latest 12 Months	13.61%
Latest 24 Months	15.31%
Annualised Since Inception	14.45%
Inception Date	01 October 2009
FUM (millions)	AU$81
Fund Overview	The Fund's investment objective is to generate absolute returns, in Australian dollars, of around 15% p.a. after all fees without noticeable correlation to any particular asset class or market. 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	KIS Asia Long Short Fund returned a positive 0.67% for the month of February, against another tough month in Asian equities, with the AFM Asia Pacific ex-Japan Index down by 0.63%, to give an out-performance of 1.3%. Since inception, the Fund has an annualised return of 14.45% p.a. In comparison, the AFM Asia Pacific ex-Japan Index has an annualised returned of 1.48% p.a. The Fund has achieved this double-digit performance with lower volatility of 5.60%, to give notable Sharpe and Sortino ratios of 1.88 (Index -0.13) and 4.20 (Index -0.24) respectively.
More Information	Fund Profile Manager's Report

Alexander Credit Opportunities Fund

11 Mar 2016 - Australian Fund Monitors

Alexander Credit Opportunities Fund returned +0.55% for the month of February.

11 Mar 2016 - Alexander Credit Opportunities Fund

By: Australian Fund Monitors

Report Date	08 March 2016
Manager	Alexander Funds Management
Fund Name	Alexander Credit Opportunities Fund
Strategy	Fixed Income
Latest Return Date	February 2016
Latest Return	0.55%
Latest 6 Months	3.42%
Latest 12 Months	7.05%
Latest 24 Months	16.66%
Annualised Since Inception	17.48%
Inception Date	31 October 2009
FUM (millions)	AU$66.87
Fund Overview	The aim of the fund is to identify opportunities in the fixed income credit markets. The Fund invests in a full spectrum of fixed income products that includes but is not limited to: corporate bonds,; bank debt; credit derivatives; bank loans;commercial paper;hybrid securities; and mortgage-backed and asset-backed securities. The Fund may also invest in derivatives for hedging purposes. The portfolio of the Fund comprises primarily Investment Grade holding of 75% of the Fund's assets. Benchmark allocations are Australasia 50% to 100%, North America 0% to 50% and Europe 0% to 50%. Currency hedging may take place depending on benefits to the Fund.
Manager Comments	Alexander Credit Opportunities Fund returned +0.55% for the month of February. Since inception, the Fund has an annualised return of 17.48% p.a (RBA Cash Rate Index 3.31% p.a), to give notable Sharpe and Sortino Ratio of 1.89 and 18.80 respectively. The Fund has delivered positive returns for over 95% of the months since inception. For February majority of the Fund's portfolio composition was in Residential Mortgage Backed Securities (RMBS) at 53%, followed by Short-dated loans at 20%. For 2016, the asset class that has performed well for the Fund is government bonds. The price of the 10 year Australian government bond for instance started the year at 112 and rose 4.4% to 117 in mid-February. Though the Fund does not invest in government bonds or take interest rate risk generally (all of its assets are floating rate notes) but it does look to hedge market volatility via other methods. This has helped the Fund achieve positive returns for the first two months of the year.
More Information	Fund Profile Manager's Report

Morphic Global Opportunities Fund

11 Mar 2016 - Australian Fund Monitors

Morphic Global Opportunities Fund fell 2.24% in February, underperforming its benchmark (MSCI AC World Total Return in Australian Dollars), which fell 1.65%, by 0.59%.

Bennelong Long Short Equity Fund

10 Mar 2016 - Australian Fund Monitors

Bennelong Long Short Equity Fund rose 2.37%, against the S&P/ASX 200 Accumulation Index which fell 1.76%.

10 Mar 2016 - Bennelong Long Short Equity Fund

By: Australian Fund Monitors

Report Date	07 March 2016
Manager	Bennelong Long Short Equity Management, a Bennelong Funds Management boutique
Fund Name	Bennelong Long Short Equity Fund
Strategy	Equity Market Neutral
Latest Return Date	February 2016
Latest Return	2.37%
Latest 6 Months	18.29%
Latest 12 Months	36.28%
Latest 24 Months	30.54%
Annualised Since Inception	18.51%
Inception Date	01 January 2003
FUM (millions)	AU$349.8
Fund Overview	Bennelong Long Short Equity Management applies a qualitative stock selection process to construct a diversified portfolio of paired securities based on relative value. The Bennelong Long Short Equity Management strategy invests primarily in the S&P/ASX 100 and is dollar neutral at cost. 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	Bennelong Long Short Equity Fund rose 2.37%, against the S&P/ASX 200 Accumulation Index which fell 1.76%. Long term performance since inception, remains strong with annual returns of 18.51% p.a. (Index 7.04% p.a.) and a volatility of 11.83% (Index 13.03%). Positive contributing pairs outnumbered loss-making pairs. The top contributors over the month was the long Seek / short Fairfax pair. The Fund continues to hold this pair. This pair was unprofitable last year, however Seek's increased investment spending improved top-line growth, and this came to fruition in the recent interim financial result. In contrast, Fairfax's interim financial result prompted earnings downgrades due to growing evidence that Fairfax is not sufficiently monetising it's digital audience to overcome continued declines across its print advertising publications. On the other side, a key negative contributor for the month was the long Ramsay / short Primary Healthcare pair. While, Ramsay delivered a quality result with (again) an upgrade to full year earnings guidance, Primary staged a strong rally following relief after it's financial result that a capital raising was not necessary. Click below to read the Fund Manager's commentary and market outlook.
More Information	Fund Profile Manager's Report AFM Research Reports

Optimal Australia Absolute Trust

9 Mar 2016 - Australian Fund Monitors

Optimal Australia Absolute Trust recorded a positive 0.8% return in February, against another tough month in Australian equities, with the ASX 200 Accumulation Index down by 1.76%.

9 Mar 2016 - Optimal Australia Absolute Trust

By: Australian Fund Monitors

Report Date	07 March 2016
Manager	Optimal Fund Management Australia
Fund Name	Optimal Australia Absolute Trust
Strategy	Equity Long/Short
Latest Return Date	February 2016
Latest Return	0.80%
Latest 6 Months	5.03%
Latest 12 Months	11.11%
Latest 24 Months	10.65%
Annualised Since Inception	8.97%
Inception Date	15 September 2008
FUM (millions)	AU$100
Fund Overview	The investment objective of the Fund is to seek to achieve above average returns in absolute terms, through investing in listed securities in Australia and New Zealand, subject to the overarching requirement of capital preservation. Investments will predominantly be in equity securities but may include fixed interest instruments, money market instruments, derivatives and foreign exchange contracts. The Fund's bias is likely to be net long under normal market conditions, with the core strategy being to construct a portfolio of listed equity securities priced at levels that do not adequately reflect their underlying value. The Fund will seek to boost returns and limit potential market downside by selective short selling of individual stocks which are priced at levels that are viewed as materially above their underlying value. The Fund will also use certain trading strategies both within its core portfolio (through rebalancing stock weights and overall market exposure in response to price movements) and in certain other situations (typically of a shorter-duration and/or opportunistic nature) with the objective of further increasing returns.
Manager Comments	Optimal Australia Absolute Trust recorded a positive 0.8% return in February, against another tough month in Australian equities, with the ASX 200 Accumulation Index down by 1.76%. Since inception, the Fund has an annualised return of 8.97% p.a. (Index 3.91% p.a.), which has been achieved with relatively low volatility of 3.61% p.a. (Index 14.52% p.a). The Fund entered February with net long exposure, at 9% of NAV, and with a higher beta skew towards the Resources complex. The Fund's stock selection worked well during the month, as mean reversion finally paid. No multiple and no commodity exposure was low enough to be investible. In the current earning season, the Fund's strike rate on their higher conviction investments was generally good, despite one bad earnings miss in retail. The investment team continues to believe the recent market volatility is here to stay and therefore will continue to focus on stock opportunities, with limit the exposure to the market risk. Click below to read the latest Fund monthly report.
More Information	Fund Profile Manager's Report AFM Research Reports

Fund Review: Insync Global Titans Fund January 2016

8 Mar 2016 - Australian Fund Monitors

Latest Fund Review on Insync Global Titans Fund is now available.

Newgate Real Estate and Infrastructure Fund

7 Mar 2016 - Australian Fund Monitors

Newgate Real Estate And Infrastructure Fund returned -0.24% for the month of January.

7 Mar 2016 - Newgate Real Estate and Infrastructure Fund

By: Australian Fund Monitors

Report Date	04 March 2016
Manager	Newgate Capital Partners Pty Ltd
Fund Name	Newgate Real Estate and Infrastructure Fund
Strategy	Equity Long/Short
Latest Return Date	January 2016
Latest Return	-0.24%
Latest 6 Months	-1.81%
Latest 12 Months	2.50%
Latest 24 Months	22.56%
Annualised Since Inception	13.31%
Inception Date	01 July 2013
FUM (millions)	AU$20
Fund Overview	The Newgate Real Estate And Infrastructure Fund takes long and short positions across securities exposed to assets such as office and industrial real estate, residential development, retail shopping centres, airports, ports, toll roads, rail and utilities. The Fund Manager's belief is that a combination of solid research and an understanding of the persistent inefficiencies found in the pricing of REIT and Infrastructure securities will achieve positive risk adjusted returns. The Fund's research use detailed analysis of the underlying assets integrated with financial analysis to determine a sustainable yield and fundamental DCF valuation for the security. Also the Fund believes in having a strong risk control framework. The Fund will also use trading strategies via rebalancing of core portfolio positions as well as taking advantage of shorter duration inefficiencies in markets caused by an imbalance in demand and supply for global REIT and Infrastructure securities. The Fund focuses on generating absolute returns after fees of 12 to 15% pa over the medium to long term. The long-short nature of the Fund combined with Newgate's rigorous investment process ensures returns generated by the Fund are largely independent of rising or falling markets. Newgate is focused on providing investment opportunities primarily within core, value-add, opportunistic and development sectors of direct property and across listed and unlisted real estate and infrastructure securities. The Fund's investment team consists of Tim Hannon, Campbell McComb, Darren Brusnahan, Nishant Narayanaswamy and Nicole Merrillees.
Manager Comments	Newgate Real Estate And Infrastructure Fund returned -0.24% for the month of January, compared to the ASX200 Accumulation Index, which declined -5.48%. Since inception, the Fund has an annualised return of 13.31% p.a (Index 6.16%). This return has been achieved with lower volatility of 4.26% than the Index's 12.11%, to give notable Sharpe and Sortino ratios of 2.30 (Index 0.36) and 5.39 (Index 0.42) respectively. The Fund maintained a very conservative position over the month given heightened volatility in global markets. As a result, there were no material contributors or detractors. The fund held a heavy cash weight (90% of Fund net asset value), an average around 5 positions. Positive contributors to the portfolio were Mirvac Group (MGR) and Sydney Airport (SYD. Negative contributors were Folkestone Group (FLK) and Invest Office Fund (IOF). Click Manager's Report to read more.
More Information	Fund Profile Manager's Report

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14 Mar 2016 - Fund Review: Optimal Australia Absolute Trust February 2016

OPTIMAL AUSTRALIA ABSOLUTE TRUST

14 Mar 2016 - Bennelong Kardinia Absolute Return Fund

12 Mar 2016 - Hedge Clippings

11 Mar 2016 - KIS Asia Long Short Fund

11 Mar 2016 - Alexander Credit Opportunities Fund

11 Mar 2016 - Morphic Global Opportunities Fund

10 Mar 2016 - Bennelong Long Short Equity Fund

9 Mar 2016 - Optimal Australia Absolute Trust

8 Mar 2016 - Fund Review: Insync Global Titans Fund January 2016

7 Mar 2016 - Newgate Real Estate and Infrastructure Fund

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