BENNELONG KARDINIA ABSOLUTE RETURN FUND

Attached is our most recently updated Fund Review. You are also able to view the Fund's Profile. 

The Fund is long biased, research driven, active equity long/short strategy investing in listed ASX companies with a seven year track record. The Bennelong Kardinia Absolute Return Fund rose 0.93% in September.

Long positions in Bank of Queensland, Seek and JB Hi-Fi were all meaningful positive contributors. The largest detractors from performance were Share Price Index Futures contracts (hedging long positions), CSL and BHP. Net equity market exposure including derivatives was increased slightly to 29.6% (67.7% long and 38.1% short).

The Fund also has a strong focus on capital protection in negative markets. Portfolio Managers Mark Burgess and Kristiaan Rehder have significant market experience, while the Bennelong Group provide infrastructure, operational, compliance and distribution capabilities.

For further details on the Fund, please do not hesitate to contact us.

Australian Fund Monitors

ATTACHED FILESBennelong Kardinia Absolute Return Fund (pdf format)

Wiser heads than mine (and the market) all predicted that the US debt ceiling debacle would be resolved prior to the deadline simply because the option of not finding a resolution was going to be completely unacceptable. I have to admit to not being as confident based on the view that Obama was intent on defining his presidency on Obamacare, and he had to draw a line in the sand somewhere, having compromised previously. I think I got that part right.

What I failed on was the view that the Tea Party hardheads would cave in as they did, making somewhat of a mockery of their previous rhetoric and arguments.

As it came to pass they (the wiser heads) were correct, but there still seems to be the issue that we are likely to have to go through the whole exercise again early in the new year. That's not to say that the Tea Party minority might not wake up to themselves in the meantime, who knows.  What does seem certain is that Obama scored a major victory, and will be encouraged to continue to stand his ground next time around.

What is interesting is that in spite of the world's largest economy going to the brink of defaulting, the S&P500 was still within a whisker of all-time highs even if volatility did increase over the previous few weeks. That presumably is a reflection on the market's view that QE3 is unlikely to be tapered any time soon under new Treasury Secretary Janet Yellen.

On a different note there was an article in last Friday's Financial Times entitled "Population growth and the labour market" from 1950 through to 2100 which, if you are a student of demographics as an indicator for economic growth and activity, made for interesting reading. In total the global working age population has grown from  1.53 bn in 1950 to 4.54 bn today, and is forecast to reach 6.53 bn by the end of this century.

The breakdown by various countries however is of greater interest and significance with China (currently with a working age population of 1 bn, up from 332m in 1950) and India (800m, up from 223m) and to a lesser degree the US (210m up from 102m) dominating the numbers at present.  Looking forward to 2100 however China's working age population is forecast to decline to 614 million, while India's will increase to 1.1 bn by 2050 before declining to 930 million. The US will steadily increase to 261 million by 2100 with the real game changer being Nigeria, which having had a working age population of only 20 million in 1950, and has less than 100 million now, but is predicted to reach 600 million by 2100. 

Indonesia is currently in fourth place at somewhere north of 150 million, reinforcing the point made to me during the week by Wayne Peters of Allard Partners that 43% of the world's population currently live in China, India and Indonesia, and hence their focus on investing in those three countries. The interesting question of course is not only the growth of each country and region, but as the FT article points out how to find jobs for those of working age, and how to support their variously expanding aging populations. 

Specific results received this week include the following PERFORMANCE and NEWS UPDATES:

The Optimal Australia Absolute Trust recorded 0.43% in September bringing it's since inception (Sept 2008) return to 10.85% vs 5.00% for the ASX 200 Accum. The Fund's risk controls are indicated by the very low annualised volatility of 3.62% vs 15.37% for the Index over the same time frame. 

Despite very rich valuations, defensive yield and financials still seem to attract the majority of fresh money flows in our market, and the Fed's recent actions may continue to limit the perceived utility of valuation for a while longer, dangerous as that is. In this environment, hedging risk has been a frustrating and expensive exercise, although in the Manager's view, an increasingly essential one. Risk still strikes the Manager as being asymmetrically priced, with only low single-digit returns on offer from equity and debt securities if things hold together, and the prospect of much more substantial losses if they do not.

Insync Global Titans Fund has just completed its fourth year with a return of 9.26% (ASX 200 Accumulation 7.03%) and annualised volatility of 8.34% (Index 12.35%) since inception. The main detractors for the month were GlaxoSmithKline, General Mills and SAP. The largest positive contributions came from our holdings in Reckitt Benckiser, British Sky Broadcasting, Safran and Nestle. Safran has more than a 75% market share in narrow-body aircraft engines, an industry with very high barriers to entry.

The Morphic Global Opportunities Fund  returned 0.26% during September and 29.91% for the last 12 months achieved with a notable Sharpe ratio of 2.91. The Fund had a net exposure of 98% and gross exposure of 139% at month-end. The Fund ended the month underweight the US and overweight Japan, Europe and Emerging Markets; reflecting the view that a trend that began in April of industrial and cyclical stocks outperforming more defensive equities is set to continue.

BlackRock Australian Equity Market Neutral Fund has a low overall risk profile with an annualised volatility of 5.69% (13.19% for the Index) since inception in Sept 2001. The Fund returned -0.64% during September.

The Fund had little net exposure to the global risk sentiment effects, with offsetting long mining and short mining services positions. Stock picking within the domestic sectors added value, especially during the lead up to the August reporting season, when many companies made pre-emptive announcements to foreshadow poor results.

FUND REVIEWS that have been updated this week include:

The Bennelong Kardinia Absolute Return Fund The Bennelong Kardinia Absolute Return Fund rose 0.93% in September. Long positions in Bank of Queensland, Seek and JB Hi-Fi were all meaningful positive contributors. The largest detractors from performance were Share Price Index Futures contracts (hedging long positions), CSL and BHP. Net equity market exposure including derivatives was increased slightly to 29.6% (67.7% long and 38.1% short).

EVENTS

An upcoming event that may be of interest for Superannuation member administration and investment operation service providers is the Superannuation Fund Back Office conference coming up on 21-22 October. Visit the International Business Review Conferences website for more details.

A free event being held for Fund Managers next Friday 25 October at KPMG Sydney offices that may be of interest is the HFA Australia Charter Symposium. Register here.

The Asset Allocation Conference is also coming up from 30th October to 1 November 2013 at the Grace Hotel in Sydney. Details are here.

Hedgeopolis New York is being held on 4 November at the Metropolitan Club. Use AFM's discount code "fundmo" to obtain a discount, or contact Adriana Costov for additional information.

Back in Hong Kong, the 26th Annual AVCJ Private Equity and Venture Form is at the Four Seasons Hotel from 12-14 November 2013.

IPARM Australia 2013 is being held in Sydney on 18-19 November on Investment Performance Measurement Attribution and Risk. Speakers include Dr Thomas Gillespie from Aurora Funds Management.

Also on 19 November, at the Renaissance Hotel in Hong Kong - the Art of Asset Management - free for senior asset management professionals from both global and local asset management firms. View the agenda here.

And now for something completely different, a good example of why you should not stop to assist stranded vehicles.

On that note, enjoy the week-end!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

BLACKROCK AUSTRALIAN EQUITY MARKET NEUTRAL FUND

ATTACHED FILESBlackRock Australian Equity Market Neutral Fund August 2013 (pdf format)

Rally on what?

The overnight rally on Wall Street, and the follow on today from the ASX200 would indicate that the "market" is confident that the political stalemate in the US is going to be resolved without, or before, the US defaults on its debt at the end of next week.

While most people would desire that to be the outcome, it would seem to stem more from hope than certainty.  The two sides appear to be coming from the opposite ends of the spectrum, and there seems little goodwill between them. If anything, toes have been dug in on both sides, and talk of a six week debt extension to the ceiling wouldn't seem to justify the market's overnight rally.

Maybe the confirmation of Janet Yellen's appointment had something to do with it, but following Larry Summers's previous withdrawal that was a forgone conclusion anyway.  Yellen's more likely to extend QE than start any early move to taper, but that would still not justify the extent of the Dow's overnight movement.

Meanwhile at home there seems to be improved confidence at the big end of town that is yet to filter down to small business and consumers. As yet there's no clarity on where earnings improvements are going to come from to replace the mining capex and investment boom, and no clarity on how the government will manage its minority in the Senate. What does seem clear is that the Palmer United Party, now with an effective four senators from next July, will have significant influence on any outcomes.

Equally clear is that Palmer himself will certainly liven things up.  Hopefully both he and his senators will be more constructive and flexible than the members of the Tea Party within the Republicans in the US.  

Specific results received this week include the following PERFORMANCE and NEWS UPDATES:

The Insync Global Titans Fund has just completed it's fourth year with a return of 9.26% (ASX 200 Accumulation 7.03%) and annualised volatility of 8.34% (index 12.35%) since inception.

Bennelong Kardinia Absolute Return Fund returned 0.93% for September bringing it's since inception (May 2006) return to 14.08% pa as compared to the ASX 200 Accumulation return of 4.44% pa. The Fund's annualised volatility is 7.85% which is low compared to the Index?s volatility of 14.79%, over the same time frame.

Updated FUND REVIEWS this week included the following Fund Managers:

The AFM Prism Active Equity Fund comprises a portfolio of 5 to 10 underlying Australian absolute return managers each investing in ASX listed equities with the objective of achieving double-digit annualised returns with significantly lower volatility than the underlying equity markets, and a focus on capital protection. To date the Fund has delivered 5.59% and, in keeping with the low volatility mandate, has an annualised standard deviation of 2.48% (since inception in October 2012). The Fund's maximum drawdown is 1.42% as compared to 6.72% for the ASX 200 Acc Index.

Bennelong Long Short Equity Fund is a research driven, market and sector neutral, "pairs" trading strategy investing primarily in large cap stocks from the ASX/S&P100 Index, with a ten year track record and annualised net returns of over 20%. The Fund has had positive annual returns each year, including an 11.95% return in 2008 and 20.6% in 2011, both of which were negative years for the ASX200. The Fund's risk statistics are also sound with maximum drawdown of 12.22% and 71% positive months. Both the Sharpe Ratio at 1.27 and the Sortino ratio at 2.21, indicate a high reward-to-risk ratio.

The BlackRock Australian Equity Market Neutral Fund portfolio consists of approx. 180 stocks in equally weighted long and short portfolios to maximise potential returns while minimising market volatility. The strategy has recorded a return of 12.14% since inception (Sept 2001) as compared to the ASX 200 Accumulation Index return of 8.37% and with a volatility less than one-half that of the Index at 5.7% pa as compared to 13.23% pa. The Fund has also recorded a maximum drawdown of 12.41% as compared to 47.19% for the Index and has had 78% positive months since inception.

EVENTS

An upcoming event that may be of interest for Superannuation member administration and investment operation service providers is the Superannuation Fund Back Office conference coming up on 21-22 October. Visit the International Business Review Conferences website for more details.

If you are visiting Hong Kong, the UCITS Asia 2013 Conference is on 9-10 October. AFM have a 10% discount coupon available, more details here.

The Asset Allocation Conference is also coming up from 30th October to 1 November 2013 at the Grace Hotel in Sydney. Details are here.

Back in Hong Kong, the 26th Annual AVCJ Private Equity and Venture Form is at the Four Seasons Hotel from 12-14 November 2013.

IPARM Australia 2013 is being held in Sydney on 18-19 November on Investment Performance Measurement Attribution and Risk. Speakers include Dr Thomas Gillespie from Aurora Funds Management.

Also on 19 November, is the Art of Asset Management industry event for the asset management community, being held in Hong Kong, more here.

On that note, enjoy the week-end!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

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 cap stocks from the ASX/S&P100 Index, with a ten year track record and annualised net returns of over 20%.
• Since inception in January 2002 the Fund has had positive annual returns each year, including an 11.95% return in 2008 and 20.6% in 2011, both of which were negative years for the ASX200.
•  The Fund's risk statistics are also sound with maximum drawdown of 12.22% and 71% positive months. Both the Sharpe Ratio at 1.27 and the Sortino ratio at 2.21, indicate a high reward-to-risk ratio.
• The consistent returns across the investment history indicates the Fund's ability to provide positive returns in volatile and negative markets and significantly outperform the broader market.

Sean Webster

Research and Database Manager
Australian Fund Monitors

ATTACHED FILESBennelong Long Short Equity Fund September 2013 (pdf format)

AFM PRISM ACTIVE EQUITY FUND

ATTACHED FILESPrism Active Equity Fund August 2013 (pdf format)

September performance:

Based on very early indications, with just over 6% of equity fund's performances received to date, September looks to have been a positive month for the industry, with an average return of 4.4% against the ASX200 Accumulation index which rose 2.19%.

The major caveat to the results to date is the very small sample - 6% - while it is also worth remembering that the ASX200 fell by over 1% on the last day in September. I have no doubt that as other results come to hand the headline number will fall somewhat, but in the meantime the 2013 YTD figure for equity funds is 17.41% (vs ASX200 at 16.15%) and 22.74% on a rolling 12 month basis, vs the ASX200 at 24.21%.

It is also worth remembering that these figures are not adjusted or weighted to funds under management, but rather are a simple average by fund, with the bulk of funds being equity long/short.

ASIC's new disclosure regime:

Yesterday ASIC released its updated Regulatory Guide 240 entitled Hedge funds: Improving disclosure.  Previously ASIC's definition of a hedge fund was governed either by the rather obvious definition that it called itself one, or it had two or more of one of the following five characteristics: A complex investment strategy, use of short selling, use of leverage, use of derivatives, and finally charged a performance fee.

We have always supported this, albeit that frequently just one of the five ASIC criteria (particularly short selling) would have triggered the definition in our opinion.  In any event the key changes would seem to be in the push for increased transparency in a fund's offer documents, which in turn should enable a greater understanding by investors and their advisors. We wholeheartedly support the thrust of this also.

ASIC's RG240 is focused on retail investors, whereas sophisticated or institutional investors are considered to have sufficient knowledge or expertise, or should be able to afford to hire it. Much of ASIC's thrust seems to come from the Trio experience which cost investors over $100 million and while not criticising ASIC in any way, the reality is that a lack of disclosure was not the issue in that failure.  Trio's losses were firstly the result of deliberate fraud on behalf of the management and those close to them, and secondly from the failure by those that should have asked the right questions (mainly the research houses but also those close enough to management who should have known what was going on) not doing so.

While the new RG240 increases the detail and complexity of the definition of a hedge fund, the vast majority already comply with the new increased disclosure regime, or will have little difficulty in doing so. Those that are uncomfortable about the increased transparency will no doubt focus on the institutional investor where ASIC's new regulations won't apply.

Specific results received this week include the following PERFORMANCE and NEWS UPDATES:

The BlackRock Multi Opportunity Fund has a five year track record of 9.00% pa as compared to the ASX 200 Acc Index return of 4.63% and the RBA Cash Rate return of 3.96%. The Fund recorded this return with an annualised standard deviation of 4.44% as compared to the Index number of 15.48% pa. For the month of August the Fund returned -0.28% and the 12 month return is 6.24%.

LHC Capital High Conviction Fund has returned 2.77 times the ASX 200 Accumulation Index since inception in May 2011. The Fund's annualised return is 21.37% pa as compared to the Index with 7.69% pa. This return was achieved with approximately three-quarters of the volatility recorded by the Index.

The BlackRock Australian Equity Market Neutral Fund returned -0.04% during August with a five year annualised return twice that of the ASX 200 Acc Index (9.73% as compared to 4.73% respectively) and less than half the volatility (6.65% compared to 15.48%).

Monash Absolute Investment Fund returned 7.15% during September (ASX 200 Acc 2.19%) with a net exposure of 81% and gross exposure of 91%. The sound risk- reward of the Fund is indicated by the since inception (June 2012) Sharpe Ratio of 2.82 and the largest draw-down of -1.35% as compared to the Index of -6.72%.  The Manager notes that the portfolio more than kept up with the broader market this month despite action taken to protect returns by: trimming some holdings; increasing cash, and; adding to the short positions.

The Bennelong Long Short Equity Fund has a five year performance record of 16.85% vs 4.63% for the ASX200 and an annualised standard deviation of 12.63% compared to 15.48%.

EVENTS

An upcoming event that may be of interest for Superannuation member administration and investment operation service providers is the Superannuation Fund Back Office conference coming up on 21-22 October. Visit the International Business Review Conferences website for more details.

If you are visiting Hong Kong, the UCITS Asia 2013 Conference is on 9-10 October. AFM have a 10% discount coupon available, more details here.

The Asset Allocation Conference is also coming up from 30th October to 1 November 2013 at the Grace Hotel in Sydney. Details are here.

Back in Hong Kong, the 26th Annual AVCJ Private Equity and Venture Form is at the Four Seasons Hotel from 12-14 November 2013.

IPARM Australia 2013 is being held in Sydney on 18-19 November on Investment Performance Measurement Attribution and Risk. Speakers include Dr Thomas Gillespie from Aurora Funds Management.

And now for something completely different, if only I could get my wife's pug Harry to be as well trained as this.

On that note, enjoy the week-end!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Just as markets in the USA had readjusted to Ben Bernanke's new "no taper" policy update, along come negotiations between Democrats and Republicans over budget negotiations with the potential for the US government to run out of funding by mid October. This would force government employees to face taking temporary unpaid leave, delaying payments to the military, and closure of some administrative departments. Naturally members of Congress would continue to be paid as usual.

At stake it would seem is the passage of the Affordable Care Act, or "Obamacare" as it has become known. Presuming that no-one wants to be responsible for the political fallout of the budget not being passed, the focus will then fall on the so called debt ceiling. This currently sits at just under $17 billion or $53,500 per US citizen, and by mid October there will only be $30 billion to meet commitments which includes a $60 billion social security payment due at the beginning of November.

If you want to look at a neat graphic calculator of the actual numbers involved, click here. The Australian version can be seen here.

There's an element of deja vu in this as the same concerns spooked markets two years ago.  However it highlights two other over-riding issues that seem to dominate markets and economies post 2008. The first is that there aren't too many governments around the world that aren't facing increasing outlays, but are not prepared to increase taxation to balance the books.

The second seems to be that politics and politicians are driving markets as much as, or more than fundamentals. This is not only in the US, but also across Europe. The same might be said of China, except there the politicians are expected to control the outcome, at least have a longer time horizon, and don't have to concern themselves over pesky elections to the same degree.

Australia has the same problem as the US and Europe: Everyone seems to want  more welfare and lower taxation - but no-one's prepared to pay for it or give up what they already have. And no-one wants to factor in an increase in the GST.

Specific results received this week include the following PERFORMANCE and NEWS UPDATES:

Pengana Australian Equities Market Neutral Fund completed its fifth year of operation recording an annualised return of 9.60% pa compared to the benchmark (ASX 200 Acc Index) return of 4.63%. Since inception the Fund has an annualised standard deviation of 8.02% compared to 15.48% (Index) and the risk-reward and risk statistics are sound with a Sharpe ratio of 0.7 (0.12 Index) and a Sortino Ratio of 1.06 (0.06 Index).

The Totus Alpha Fund rose 2.1% during August with net exposure of 41%. Since inception in April 2012 the Fund has returned 29.1% (24.2% ASX 200 Acc Index) with a Sharpe Ratio of 1.41, Sortino Ratio of 3.14 and a down capture ratio of -0.84. The Fund also has a negative correlation of -0.209 to the Index.

Allard Investment Fund returned -1.0% during August with an allocation of 67.1% equity and 32.9% cash and fixed income. In terms of geographic allocation the Fund's major allocations are 32.1% HK/China and 13.1% Singapore and in terms of industry the biggest exposure is financial services at 14.5% and conglomerates, 12.2%.

The Intelligent Investor Value Fund returned 1.13% in August and 40.05% over the 12 previous months. The Fund has a since inception (November 2009) annualised return of 14.05% pa as compared to the ASX 200 Accumulation Index of 7.32% return over the same time frame. The Fund's value strategy is shown by the Sharpe Ratio of 0.73 as compared to the Index Sharpe Ratio of 0.32 (since inception).

Updated AFM Fund Reviews were also completed on the following funds this week:

The Insync Global Titans Fund invests in a concentrated portfolio of 15-25 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. The investment strategy has delivered above MSCI ($A) benchmark performance over the medium and longer terms with limited draw-downs and excellent risk statistics. The Sharpe ratio is 0.67 (ASX 200 Acc 0.26) and Sortino ratio 1.17 (ASX 200 Acc 0.28) and are well above those of the ASX with downside deviation approximately one-half of the same Index since inception.

EVENTS

Next Tuesday, 1 October 2013 at 5.30pm sees one of the newer Sydney fund managers, Auscap Asset Management heading to Brisbane to present their current perspective on equities. Tickets are limited, but if interested contact [email protected].

An upcoming event that may be of interest for Superannuation member administration and investment operation service providers is the Superannuation Fund Back Office conference coming up on 21-22 October. Visit the International Business Review Conferences website for more details.

If you are visiting Hong Kong, the UCITS Asia 2013 Conference is on 9-10 October. AFM have a 10% discount coupon available, more details here.

The Asset Allocation Conference is also coming up from 30th October to 1 November 2013 at the Grace Hotel in Sydney. Details are here.

Back in Hong Kong, the 26th Annual AVCJ Private Equity and Venture Form is at the Four Seasons Hotel from 12-14 November 2013.

IPARM Australia 2013 is being held in Sydney on 18-19 November on Investment Performance Measurement Attribution and Risk. Speakers include Dr Thomas Gillespie from Aurora Funds Management.

In the last few week's "Clippings" we have mentioned some notable anniversaries - the collapse of LTCM and Lehman Brothers in particular.  This week's "and now for something different" remembers Australia 11 winning the America's Cup, coincidentally in the same week 30 years later as the Americans boat (skippered by an Aussie I might add) won it back from our New Zealand cousins.  At a lunch to remember the time 30 years ago that the then Prime Minister Bob Hawke donned his famous jacket, he wore it again to take the stage and tell this joke. Take it away Bob ...

On that note, enjoy the week-end!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

AVCJ Private Equity Forum

12-14 November 2013 - Four Seasons Hotel, Hong Kong

AVCJ is delighted to be hosting the 26th annual AVCJ Private Equity & Venture Forum in Hong Kong this November.

What's new in 2013?

• Emerging market focus groups
• Technical workshops
• Women in private equity roundtable
• Sector focus - energy and real estate
• Meet the managing partners breakfast
• Spotlight on family offices

Meet 1,000+ global PE professionals; Network with more than 250 LPs; Hear from 170+ industry leading speakers.

PACKAGES

Diamond (fees include three-day Investment summit on 12-14 November, PE leaders - Summit and VC Summit, refreshments, luncheons, evening receptions and dinner as per the programme; and all conference documents) US$3,895/HK$31,160 each

Platinum (fees include two-day Investment summit on 13-14 November, refreshments, luncheons, evening receptions and dinner as per the programme; and all conference documents) US$3,295/HK$27,260 each

Please feel free to contact Sally from AVCJ at the numbers below:

Sally Au | Sales Executive, Asia Pacific | Incisive Media
T: + 852 3411 4856 | F: + 852 3411 4811

ATTACHED FILESAVCJ Private Equity Forum (pdf format)

INSYNC GLOBAL TITANS FUND

ATTACHED FILESFund Review: Insync Global Titans Fund (pdf format)