What a difference a year makes! If you're getting older (like me) another year under the belt - sometimes literally - doesn't change much except to add a fraction more experience, a couple of kilo's move downwards from the chest, while on the negative side one subtracts a few grey cells.

If you're at the other end of the scale, and just arrived into the world like young Molly, the latest addition to the extended Gosselin "Brady bunch", then a year makes a massive difference, as she grows, and goes, from crawling to walking. OK, so she might not be reading this, but I'm sure you get the picture.

To most investors however an extra year falls between the two, depending on what year it is, or was, and where on the timeline of life one sits.

I was reminded of this during the week by Sean Webster, AFM's Head of Research, who had put together some tables and charts of one, five and ten year returns for a range of absolute return and hedge fund strategies, comparing them against the ASX200. In addition to the wide diversity of returns of each strategy from year to year, the headline statistics looked pretty impressive, and from the perspective of the annualised returns of the funds and the ASX, reasonably consistent.

For the record to December 2013 the annualised returns of each were as follows:

Over ten years the ASX200 Accumulation index returned 9.63%, while hedge funds returned 10.95%.

Over five years the ASX200 returned 12.45%, while hedge funds returned 12.57%.

Not bad, and pretty consistent as mentioned earlier, except for the range of returns by individual sector or strategy which varied dramatically.

Add in one year though to take in 2008, and what a difference a year makes:

Over six years the ASX200 returned 1.72% per annum, while hedge funds returned 5.91%

If there was one consistent statistic over all three time frames it was their respective levels of risk, with hedge funds running at half the volatility of the underlying market which ranged from 13.21% (five years), 13.53% (over ten years), to 15.79% (over six years), compared with 6.90%, 7.80% and 8.75% from hedge funds.

Whichever the time frame, the ASX200's volatility was invariably higher than its return.

And on that sobering note..

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

Morphic's Global Opportunities Fund primarily consists of Global listed shares, and will generally have at least 50% of its net assets invested in same. The fund returned 34.52% for the previous twelve months.

The Optimal Australia Absolute Trust returned 0.57% during January, a weak month for domestic equities, and 1.60% for the last twelve months with a volatility of 1.83%. Since inception in September 2008 the annualised return is 10.34%.

Bennelong Kardinia's Absolute Return Fund is an Australian domiciled equity long/short fund investing in ASX listed securities. The fund has returned 9.91% over the previous twelve months.

The Aurora Fortitude Absolute Return Fund returned 0.32% during January and 8.12% for the previous 12 months with a very low volatility of 1.39% (S&P ASX 200 Accum 11.54%).

Insync's Global Titans Fund investment strategy is driven by fundamentals combined with active risk management. The fund returned 23.33% over the last year with a Sharpe ratio of 2.47.

FUND REVIEWS RELEASED THIS WEEK:

BlackRock's Multi Opportunity Fund current strategy has returned 8.85% pa since inception (July 2004), annualised volatility of 4.14% and 13.88% and only three negative months since May 2010.

FUTURE EVENTS

21 February 2014 in Sydney: AIMA's Hedge Fund Regulatory Update provides an update on Hedge Fund regulations including the Investment Manager Regime; ASIC Regulatory Guides 166 and 133 plus more. No charge to attendees.

27-29 March 2014: Superannuation Fund Back Office: 2014 Forum in Sydney convenes those responsible for superannuation member administration and investment operation services. It has been designed to explore emerging efficiencies and best practice in a number of key areas.

If you know of any upcoming hedge fund industry Events, or would like your Event listed in our calendar, please contact us.

And now for something completely different, I would simply like to wish my beautiful wife a Happy Valentines Day. As they say, "happy wife, happy life".

On that note, I hope you have a happy and safe weekend.

Best wishes,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

Australian Fund Monitors are helping to raise awareness to support research into prevention and cure for cerebral palsy.  

Cerebral palsy is the most common physical disability in childhood. But despite the incidence of CP, on average only $1 million is invested into CP research each year. To put that into perspective, Australia spent over $10 million on New Year's Eve fireworks last year. We're not suggesting that fireworks money should be spent on CP research, but it just goes to show how drastically underfunded research into cerebral palsy is.

If you believe, like us, that something must be done about this, please sign the pledge and share with your friends today. Your name will help us raise awareness for more CP research funding. Thank you! For more information visit www.cpresearch.org.au or contact me by email.

BLACKROCK MULTI OPPORTUNITY FUND

ATTACHED FILESBlackRock Multi Opportunity Fund AFM Review - December 2013 (pdf format)

This week's round table forum organised by the Hedge Fund Association was well attended by a diverse range of fund managers and service providers, although probably less well by investors. A number of speakers gave interesting and relevant presentations, with the overall theme seeming to be standards around hedge fund reporting, structure, fees and transparency, with a particular emphasis on traps in store for the unwary investor.

Much of the forum centered around the UK based, and Northern hemisphere focussed Hedge Fund Standards Board, (HFSB) and the Open Protocol risk aggregation and reporting initiatives (previously known as OPERA). Both the HFSB standards and OPERA seem eminently logical and sensible, although understandably orientated towards the requirements or desires of institutional investors, and as a result the larger funds in which they generally invest.

However the relevance and thrust of both are entirely appropriate and applicable to the Australian absolute return and hedge fund sector, even if by and large most local managers and funds would broadly comply with the main thrusts of the HFSB, perhaps with some greater transparency around fund expenses. Meanwhile if fund managers are serious about attracting inflows from large institutional investors, either at home or abroad, they will in due course have little option but to adopt the reporting transparency of Open Protocol.

Australia's regulatory systems ensure retail investors in hedge funds are pretty well informed, even if ASIC's requirements appear broader than those detailed in HFSB's Standards, which run to 37 pages. Of course there have been a few well, and some not so well, publicised lapses in standards from some managers. However there is only so much the regulator can do before the event, so it would seem to be up to the collective power of investors to take over. As this is easier said than done, service providers, platforms, asset consultants and research houses should take the initiative.

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

Pengana Asia Special Events (onshore) Fund returned 1.22% over December and 11.55% for the previous twelve months. The Fund's strategy has seen a very volatility of 2.31% as compared to 11.43% (S&P/ASX 200 Acc) for CY2013.

The Cor Capital Fund returned -0.22% during December and 1.69% for the calendar year with a low volatility of 6.83%.

Bennelong Long Short Equity Fund returned -2.32% during January, a difficult market both globally and in Australia, with the twelve month return at 19.07%.

FUND REVIEWS RELEASED THIS WEEK:

AFM's updated Fund Review for Optimal Australia's Absolute Trust December 2013 has been released. The fund is characterised by very low risk with an annualised standard deviation of 3.60% and a Sharpe Ratio since inception of 1.73.

Morphic's Global Opportunities Fund returned 3.85% in December and 42.49% for the previous twelve months with a volatility of 9.10% p.a.

The Aurora Fortitude Absolute Return Fund is characterised by steady returns and very low risk. Since inception (March 2005) the Fund has returned 8.16% pa.

FUTURE EVENTS

NEXT WEEK on Wednesday 12 February 2014: Investment Administration Conference - Efficiency in a Regulated World. Doltone House, Hyde Park, Sydney. Now in it's 17th year, this is Australia's largest annual event for custody, funds management administration, and technology.

21 February 2014 in Sydney: AIMA's Hedge Fund Regulatory Update provides an update on Hedge Fund regulations including the Investment Manager Regime; ASIC Regulatory Guides 166 and 133 plus more. No charge to attendees.

27-29 March 2014: Superannuation Fund Back Office: 2014 Forum in Sydney convenes those responsible for superannuation member administration and investment operation services. It has been designed to explore emerging efficiencies and best practice in a number of key areas.

If you know of any upcoming hedge fund industry Events, or would like your Event listed in our calendar, please contact us.

And now for something completely different, if you need something to do in Sydney, why not have a look at the Chinese New Year Festival Programme, there are still plenty of events going on this weekend to celebrate Chinese New Year.

On that note, I hope you have a happy and safe weekend.

Best wishes,

Chris
CEO, AUSTRALIAN FUND MONITORS

Connect with me on LinkedIn Twitter Facebook

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.

Investment Administration Conference - Efficiency in a Regulated World

February 12, 2014 | Doltone House Hyde Park, Sydney, NSW

The Investment Administration Conference is Australia's largest annual event for custody, funds management administration, and technology. Now in its seventeenth year, the conference will explore efficiency in a regulated world. This event is presented in association with The Australian Custodial Services Association (ACSA).

There will be updates on:

• The future of custody;
• Data efficiency, management and security;
• Case studies of successful mergers;
• Software and other industry vendors;
• A review of the Stronger Super reforms, including first reporting on MySuper;
• A discussion on tax and audit matters;
• Case studies on innovation and efficiency from industry thought leaders;
• A look at what the first major review of Australia's financial system will mean for the custody and investment administration sectors;
• and many opportunities to network with your peers.

Attendee profile:

• Super Funds - Chief investment officers, Chief executive officers, legal and compliance, middle and back office;
• Fund Managers - operational management and staff;
• Custodians - management, operations and sales;
• Software and other industry vendors.

Pricing from 1 January, 2014:

General admission         $845 + GST

View the Agenda here.

For further information and details on how to register, please click here.

ATTACHED FILES20140212 IAC Agenda (pdf format)