OPTIMAL AUSTRALIA ABSOLUTE FUND

Attached is our most recently updated Fund Review on the Optimal Australia Absolute Fund.  

We would like to highlight the following aspects of the Fund:

• Optimal Australia is a specialist Australian equity investment manager established in 2008.
• The Fund's long/short equity strategy portfolio typically has a low but variable net market exposure comprising 40 to 65 stock broadly selected from within the ASX200.
• The investment team comprising George Colman, Peter Whiting and Stephen Nicholls have close to 90 years combined experience in equity markets.
• Consistent out-performance of the market: Approximately 84 % of monthly performances have been positive with a largest drawdown of -1.38%.

Research and Database Manager
Australian Fund Monitors

ATTACHED FILESFund Review: Optimal Australia Absolute Trust (pdf format)

BENNELONG LONG SHORT EQUITY FUND

Attached is our most recently updated Fund Review on the Bennelong Long Short Equity Fund.  

We would like to highlight the following aspects of the Fund:

• 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% .
• Portfolio Manager Richard Fish has over 25 years market experience, while Bennelong Funds Management, who have over $4.5 billion in FUM across various funds, provide infrastructure, operational and compliance functions.
• The Fund's Investment history commenced in January 2002 and has 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.
• 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 (pdf format)

The debate on the timing and extent of the Fed's QE taper swung back in favour of "sooner rather than later" overnight as US 10 year yields climbed to their highest levels in two years, driven by a drop in unemployment claims, an improvement in the outlook for home building, and the US cost of living increasing for the third month in a row. With the US economy being so consumer centric it is no surprise that the jobs data has such a close correlation to everything else.

US Bond yields weren't the only ones affected.  Ten year yields were at their highs for 18 of 24 markets tracked by Bloomberg, while 65% of economists in Bloomberg's survey believe the Fed will start to taper at their next meeting, scheduled for mid September, which was up from 50% the previous month.

Equity markets were weak over night as a result, and as we have pointed out before, no one can claim they weren't warned that QE wouldn't last forever.  The S&P500 has risen 150% since its lows in early 2009, and has risen 20% in 2013 YTD.  For the time being at least the competing forces of the Fed's tapering plans vs an improving economy are likely to keep investors on the sidelines.

Reporting season won't help, both at home and in the US. Even though 72% of companies in the S&P500 index that have reported quarterly earnings to date have exceeded analysts' estimates, those that miss result in significant price falls.

August can traditionally be a difficult month for long/short managers as a result, although on a year to date basis to July AFM's index of equity funds has returned 11.27% against the ASX200 Accumulation Index return of 10.88%, with almost 30% of all funds outperforming.

Some specific results received this week include the following Performance and News Updates:

Optimal Australia Absolute Trust returned 0.35% over July bringing it's since inception (September 2008) return to 11.11% pa. The fund's risk statistics are notable. Downside capture ratios are -0.11, -0.12 and -0.22 over the last 12, 24 and 36 months respectively indicating that, on average, the fund has positive returns when the overall market is negative. Specifically, the fund has had positive monthly returns of 0.33%, 0.39% and 0.48% when the market is negative over the previous 12, 24 and 36 months.

The Pengana Australian Equities Fund returned 2.00% for July and now has an annualised return of 13.10% pa since inception in July 2008. As at 31st July, cash (including notes and preference shares) represented 28% of the Fund. The top five holdings by value were: DUET Group, ANZ Bank, Telstra, Resmed and the Caltex Group.

The Aurora Fortitude Absolute Return Fund returned 1.13% during July bringing it's since inception (Feb 2005) return to 8.29% pa with a very low volatility of 2.81% pa and maximum drawdown of 2.09%.

BlackRock Australian Equity Market Neutral Fund returned 1.92% for July. The since inception (August 2001) return is 12.23%.  The Fund's risk characteristics are notable with an annualised standard deviation of 5.71% and largest drawdown of -12.41% since inception, as compared to the ASX 200 Accumulation numbers of 13.27% and -47.19% respectively. In addition, over the same time frame, the Fund's up capture ratio is 0.11 and down capture ratio -0.60.

Updated Fund Reviews were also completed on the following funds:

The Morphic Global Opportunities Fund is an early stage, boutique, Sydney-based fund established in 2012 with experienced CIO's, and an investment team of 6 including a risk manager. The Board has a majority of independent members with significant risk and investment experience. The Fund is a global equity long/short manager with a long bias and a macro-economic overlay. The mandate allows the Fund to short sell, use derivatives and invest in assets such as commodities & currencies. Portfolio construction is stock selection agnostic with a bias to value based and momentum strategies. Risk management is a primary consideration in portfolio construction.

Morphic's philosophy is that only funds with flexible hedging strategies will be able to deliver acceptable, steady, real, absolute returns over the investment cycle.

Bennelong Kardinia Absolute Return Fund is a boutique Australian based Fund Manager established in August 2011 in conjunction with the Bennelong Group to continue the management of the Herschel Absolute Return Fund. Long biased, research driven, active equity long/short strategy investing in listed ASX companies with a seven year track record and an annualised return of 14.13% net of fees. Portfolio Managers Mark Burgess and Kristiaan Rehder have significant market experience, while the Bennelong Group provides infrastructure, operational, compliance and distribution capabilities.

Key Performance and Risk Statistics indicate an attractive risk/reward profile, and a strong focus on capital protection in negative markets.

For something completely different - the dark and sultry tones of Leonard Cohen.

On that note, I hope you have a happy and healthy weekend!

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

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MORPHIC GLOBAL OPPORTUNITIES FUND

ATTACHED FILESFund Review: Morphic Global Opportunities Fund (pdf format)

BENNELONG KARDINIA ABSOLUTE RETURN FUND

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

Key points regarding the Fund are:

• Kardinia is a boutique Australian based Fund Manager established in August 2011 in conjunction with the Bennelong Group to continue the management of the Herschel Absolute Return Fund.
• Long biased, research driven, active equity long/short strategy investing in listed ASX companies with a seven year track record and an annualised return of 14.13% net of fees.
• Portfolio Managers Mark Burgess and Kristiaan Rehder have significant market experience, while the Bennelong Group provide infrastructure, operational, compliance and distribution capabilities.
• Consistent top decile long short equity sector performance with Key Performance and Risk Statistics indicating an attractive risk/reward profile. There is a strong focus on capital protection in negative markets.

Sean Webster

Research and Database Manager
Australian Fund Monitors

ATTACHED FILESFund Review: Bennelong Kardinia Absolute Return Fund (pdf format)