NEWS
30 Jun 2014 - Fund Review: Aurora Fortitude Absolute Return Fund May 2014
- The Aurora Fortitude Absolute Return Fund (AFARF) has a 8 year track record investing in ASX listed equities. A Market Neutral overlay is used across a multi strategy approach which allows for flexible asset allocation to maximise returns and minimise risk under a variety of market conditions and cycles.CIO John Corr has over 20 years financial market experience with a strong focus on risk.
- Significant use of low risk "long" derivatives and option overlays has provided positive returns with low volatility during periods of market dislocation. Annualised return since inception is 7.94% with a very low standardised standard deviation of 2.70%. Other risk statistics are impressive and shows the Funds risk philosophy; over 88% of monthly performances have been positive with no losing months in 2008, the Fund's largest drawdown is -2.09% and the Sharpe ratio 1.19.
- ASX listed Aurora Funds Limited was established on the merger of three existing fund management businesses, managing approx. $230m on behalf of more than 2,500 retail and wholesale investors.
Sean Webster
Research and Database Manager
27 Jun 2014 - Hedge Clippings
Earlier this week Hedge Clippings attended the ARRIA Roundtable in Brisbane. For those not familiar with ARRIA it is a relatively recently formed group of investment advisers, generally unaligned or independent from the major banks or product issuers, whose objective is to raise their knowledge of Real Return Investments, and as a result improve the investment outcomes of their clients.
Hence the name ARRIA, which stands for the Association of Real Return Investment Advisers with Real Return defined as "investments or strategies other than long only, buy and hold, Static Asset Allocation (SAA) to traditional asset classes". For pretty obvious reasons Hedge Clippings and ARRIA are pretty much on the same page when it comes to wanting to raise the knowledge of, and to improve, the investment outcomes of such strategies.
However the discussion in Brisbane spent some time discussing whether Real Return was the correct term, or even the correct asset class given that there are a myriad of other terms which are also in use to broadly define the same sector. These include Absolute Return, Hedge Funds and Alternative Investments, none of which necessarily fit into the long only, buy and hold or SSA of traditional asset classes.
Definitions are difficult, especially when one is talking about investment products which don't fit into a neatly defined bucket or group. The investment industry is full of jargon and terminology at best, and as any investor would know there is no such thing as perfection, otherwise everyone would do the same thing. Asset consultants, research houses and the overall advisory industry like or need to be able to pigeonhole products either to make their life easier, or to make their business more defensible.
By necessity ASIC likes to pigeonhole products as well, and defines a hedge fund as having two or more of five specific features. However an increasing number of long only or traditional investment products now include one of these, namely charging a performance fee. Many others now make some use of one of ASIC's other defining features, namely the use of derivatives.
Apart from the confusion that can result, (or in the case of ARRIA's meeting, considerable discussion) there are a number of important and far-reaching results and implications from specific product categories and definitions. ASIC won't allow fund managers to issue a short form PDS for a product categorised as a hedge fund. Many Approved Product List's or APL's use by the retail advisory industry either won't include or limit the use of products which might be termed "Alternatives". The ASX doesn't include long form PDS products as part of it's new mFund offering.
Insurance companies providing professional indemnity cover to advisers take an equally structured view, and thus many advisers are unable to recommend many funds to their clients simply because they are unable to easily tick the right boxes for their APL.
What is often missed in all this debate about product buckets and box ticking is that a large number of the funds in question are not investing in a different asset class at all. Rather they use a different strategy or investment style to invest in the same underlying asset, whether it be equities, commodities or fixed income.
This is inconvenient at best for the investor as many such funds provide what the investor is looking for at the end of the day, namely an attractive return at an acceptable level of risk. Whether this is provided by a Real Return Fund (defined as one targeting an investment return above inflation) or an Absolute Return Fund (defined as targeting a return above zero), a Hedge Fund which seeks to avoid risk or reduce volatility, or a combination of above, the bottom line is Performance and Risk, or a combination of the two.
No doubt none of this will change the debate about which bucket or name to use, but as Harold Geneen from IT and T once said: "Words are words, and promises are promises. Only performance is reality."
For advisers or fund managers who would like more information on ARRIA, their website can be found here, or you can send their General Manager, Philip Reid an email.
Specific results received this week include the following PERFORMANCE and NEWS UPDATES:
The KIS Asia Long Short Fund returned 0.21% during May and 11.23% for the year ended May 2014.
May returned a strong 2.60% for the Allard Investment Fund with the annual return coming in at 5.05%.
The Cor Capital Fund returned -0.26% during May and 3.14% for the previous 12 months.
At a volatility of 0.73%, Supervised High Yield Fund returned 0.61% during May bringing annual performance to a solid 7.75%.
With it's annual performance recording 31.12%, the Avenir Value Fund returned 1.41% during May.
The Laminar Credit Opportunities Fund returned 0.62% during May and a sound 11.78% for the prior twelve months.
Insync Global Titans Fund took advantage of stronger equity markets and returned 1.70% during May with the annual return 12.50%.
A sound return in a choppy market, the Auscap Long Short Australian Equities Fund returned a 3.82%, with the full year return at 55.82%.
Aurora Fortitude Absolute Return Fund returned 0.19% during May with annual volatility of 1.00%.
The Microequities Deep Value Microcap Fund has a robust 12 month return of 28.56%.
The 12 month return is now at 42.05% for the Totus Alpha Fund with performance in May of 3.99%.
Fund Reviews released this week included:
Bennelong Alpha 200 Fund, still in it's first year.
14-15 August in Sydney: Alternative Investments Conference - Investigating the rise and rise of non-traditional high yield and low risk investment products, strategies and allocation in an era of prolonged volatility and low returns.
If you would like your Event listed in our calendar, please contact us.
And now for something completely different. This link outlines the efforts of one well-meaning and well-to-do hedge fund manager in the USA seeking to combine his interest and goats with the interests of the residence of a small part of the city of Detroit. As admirable as that may be he might have missed the fact that goat is one of the most commonly eaten meats in the world, and it may just be that his goats disappear more quickly than he anticipates.
On that note, I hope you have a safe and happy weekend.
Best wishes,
Chris
CEO, AUSTRALIAN FUND MONITORS
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Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy. For more information visit www.cpresearch.org.au or contact me by email.
27 Jun 2014 - Fund Review: Bennelong Alpha 200 Fund May 2014
- The Bennelong Alpha 200 Fund is a new fund with a 6 month track record. The Fund is broadly modelled on the strategy used for Bennelong's original Equity Long Short Fund which uses a market neutral "pairs trading" approach to invest in Top 100 stocks, and which has been managed by Richard Fish since the inception of BLESM in 2002.
- The Alpha 200 Fund however primarily invests within the top 200 by market capitalisation, using a similar "pairs trading" approach while remaining broadly market neutral on a cost basis.
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The Fund will hold 70 - 90 stocks comprising 35 to 45 pairs,although it can hold up to 100 stocks and 50 pairs. Each pair contains one
long and one short position each of which is thoroughly researched and,where possible, from the same market sector. The pair positions are dollar neutral at cost, limited in terms of sector exposure, and give theportfolio a target beta of zero over time.
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In addition to Richard Fish, the team is composed of Sam Shepherd who joined BLESM from Credit Suisse, where he ran the Melbourne institutional equities desk. Shepherd's 20 year experience also covers JP Morgan and Norwich Investment Management. Tim Hall recently joined BLSEM as a specialist mid and small-cap portfolio manager to work on the expanded universe of the 200 Alpha Fund. The team is supported by experienced investment analyst, Sam Taylor.
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Sean Webster
Research and Database Manager

26 Jun 2014 - Avenir Value Fund
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Fund Overview | The Fund will invest in securities where Avenir believes the company is simply mis-priced and deeply undervalued and offers significant potential for revaluation. The Fund will also invest in companies that are subject to specific corporate events such as mergers, acquisitions, restructurings, recapitalisations, spin-offs, demergers, management change, distressed situations, and other sharply delineated corporate events. The Fund will also selectively invest in short positions in companies where Avenir believes the company is significantly overvalued or where the company's business model is broken or structurally challenged. |
Manager Comments | Notable were the Sharpe ratio of 3.97 (Index 1.49) and the Up and Down Capture ratios of 0.75 and -1.63 respectively. The Fund's top ten holdings were 53% of NAV with top fifteen holdings 66%. In terms of geographical exposure the US was 33%, Western Europe 12% with cash at 20%. |
More Information | » View detailed profile of this fund |
25 Jun 2014 - Supervised High Yield Fund
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Fund Overview | The fund will invest in all forms of marketable floating and fixed income debt securities, such as asset backed debt securities, residential mortgage backed securities, corporate debt, regional and sovereign debt securities, debt/equity hybrid securities, equities and currencies. All these investments will be either listed or traded in a market where prices can be independently verified. The fund may also invest in interest rate swaps, options over authorised investments and exchange traded futures contracts. All these will be either listed or traded in a market where they can be independently valued. |
Manager Comments | Since inception annualised return is 11.01% with a volatility is 2.20%. The Sharpe ratio 3.18 and the Fund has 98% positive months. |
More Information | » View detailed profile of this fund |
24 Jun 2014 - Cor Capital Fund
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Fund Overview | The Cor Capital Fund is a Multi- Asset Fund which combines a pre-determined strategic asset allocation with active but systemised rebalancing to generate returns and manage volatility whilst maintaining transparency and liquidity. The Fund strategy is not reliant on accurate market predictions, forecasts or timing for success. Returns are generated in a number of ways; 1) by maintaining sufficiently large positions in a diverse group of asset classes, 2) via the 'volatility harvesting' consequences of active rebalancing, and 3) from the offsetting behaviour of certain asset classes under specific conditions. The combined portfolio is expected to exhibit relatively low volatility and low turnover. In the interests of avoiding complexity, maintaining liquidity, and minimising reliance on third parties, the Fund strategy does not employ gearing, derivatives or short-selling. |
Manager Comments | The total return since inception in August 2012 was 8.7 percent or 4.7 percent per annum. Calendar year to date total return is 2.15%. During May bonds were the best performer in the portfolio (+1.33%) followed by equities (+0.70%). Gold in Australian dollar terms fell 3.27 percent which pushed the overall return for the month into the red. In line with the Fund strategy of rebalancing the portfolio away from popular assets to those that are 'unloved', the Manager has reduced the investment in equities and increased the Fund's holding in gold bullion after a breach of weighting limits at the end of May. |
More Information | » View detailed profile of this fund |
24 Jun 2014 - Allard Investment Fund
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Manager Comments | At the end of May the asset breakdown of the portfolio stood at 76.9% invested in equities and 23.1% held in cash and fixed income. In terms of geographical disposition the major holdings are HK/China 41.9%, Singapore 13.1% and S Korea 8.7%. Industry exposures are Financial Services 18.6% and Conglomerates 13.1%. The top five holdings are 41.5% of the portfolio. |
More Information | » View detailed profile of this fund |
23 Jun 2014 - 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 | There is an old stock market adage of "sell in May and go away". Academic studies have found that there is some degree of seasonality over this period but this is skewed by some extreme movements such as the collapse of LTCM in 1998 and the October 1987 stock market crash. This May, equity markets were generally higher with the MSCI world index +1.6%, the US Markets were a notable outperformer with the S&P500 +2.1% and the NASDAQ composite +3.1%. One notable weak area was the price of Iron Ore which continued to fall in May as it has for the year so far. This is obviously detrimental to Australia as Iron Ore represents circa 20% of Australia's exports. This may lend itself to a softening bias from the RBA, especially if the Australian budget leads to slower growth as well. Anecdotally we have recently noticed that Australian assets, such as the Australian dollar itself and Australian equity index futures, seem to 'catch a bid' during US market hours but this fades in Australian market hours. This would seem to indicate a more positive external view of Australia. That is also seen in the M&A events announced this month with more than 80% of the buying coming from offshore entities. |
More Information | » View detailed profile of this fund |
23 Jun 2014 - Laminar Credit Opportunities Fund
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Fund Overview | 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 | Month-end exposures were RMBS 64%, Listed Securities 4%, Corporate 16% and Short Dated Loans 13%. Cash holdings 3% were of NAV. While risk assets have experienced a steady grind higher this year, the interest rates market has shifted around. Yields on US 10yr treasuries hit a recent high of 3% in January. They since rallied to 2.44% and recently sold off to 2.6%. While this market has not been overly volatile, it has caused some anxiety with fixed income fund managers with an interest rate exposure. |
More Information | » View detailed profile of this fund |
20 Jun 2014 - Insync Global Titans Fund
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Manager Comments | Since inception the Fund has delivered 10.14% pa with a volatility of 8.43%. Key positive contributors for the month came from our holdings in Reckitt Benckiser, Zimmer, Directv, Express Scripts and Discover. The main negative contributors were Coach, Safran and Wyndham. 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. |
More Information | » View detailed profile of this fund |