In last week's Hedge Clippings on the latest changes to Australia's superannuation system I remarked that "few comments seen so far have been negative". What has transpired of course is that on closer inspection the numbers and assumptions provided by Treasurer Swan were to put it politely, a touch rubbery.

Swan proudly claimed that the new 15% tax on superannuation pension incomes over $100,000 would only affect those with fund balances of $2 million. His assumption was based on a fund returning 5% per annum, which coincidentally is the annualised return from the ASX 200 over the past 10 years. What most investors would recognise is that this return is not only unattractive, but that for the first five years the return of the ASX 200 averaged closer to 20%. The following three years are seared into most investor's memory, and the return in the past 12 months has yet again hit 20%.

So in six years in the last decade a relatively modest retirement balance of $500,000 could have triggered the new 15% tax, assuming an allocation of 100% to equities and that the market's gains were realised. Swan also claimed, or tried to have everyone believe, that all this was fair and reasonable based on taxing the rich who were ripping the system off. He was also aghast at any comparisons between his initiatives (although many believe they will be unlikely to come into force prior to the election in September) and the haircut that investors in Cypriot banks have just taken.

It is worth remembering that funds allocated to superannuation during the 40 year accumulation phase are locked in. People commit, willingly or otherwise, to superannuation over a long period of time and should be able to expect that the basis for doing so remains intact without politicians of the day, who have been unable to make their books balance, raiding it. Retrospective tax changes, which in effect is what Swan is proposing, are not as far away from Cyprus as he would have us believe.

Meanwhile on to fund performance in March. Against a backdrop of the ASX 200 accumulation index which lost 2.27%, and with just over 40% of fund returns to hand, the average return was minus 0.25% with 54% of funds providing positive returns, and 85% outperformed the index. View full details here.

Performance and News Updates on www.fundmonitors.com this week:

Platinum Asset Management's International Fund's overweight position in Japanese equities continued to contribute to the Fund's recent six-month performance of 12.17%, much in line with their annualised performance since inception in April 1995 of 12.08%.

Morphic Asset Management's Global Opportunities Fund, which was launched in August 2012 and is headed by industry veteran Jack Lowenstein (ex Hunter Hall deputy CIO) returned 0.99% in March, taking six month performance to 9.34%. The new fund invests in globally listed shares with a macro overlay.

The Aurora Fortitude Absolute Return Fund returned 0.42% in March. The Fund has the distinction of providing positive returns every year since inception in 2005, and in every month during the GFC in 2008.

SEI Knowledge Partnership release their sixth annual survey of 107 global institutional hedge fund investors ranging in size from less than $500 m to more than $20 billion in assets. The survey concludes that "while it is clear that the hedge fund industry is here to stay, there is no doubt that the industry's value proposition is being seriously questioned, and not only by investors".

Bennelong Kardinia's Absolute Return Fund continued its consistent long term performance track record. The fund's March return was +1.42%, taking 12 month performance to 14.4% and their annualised return since inception in May 2006 to 14.44%.

Meanwhile Bennelong stablemate, the market neutral Bennelong Long Short Equity Fund (BLSEF) returned 0.69% in March taking 12 month performance to 15.46% and an annualised return since inception in January 2003 of 20.33%. The BLSEF remains closed to new investors.

And now for something completely different, while on the subject of Cyprus and just in case you thought the "best of" anything awards really mean that.

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

Regards,

Chris

CEO, AUSTRALIAN FUND MONITORS

SEI's sixth annual survey of institutional hedge fund investors was conducted in November 2012 by the SEI Knowledge Partnership. Online questionnaires were completed by senior investment professionals at 107 institutions. 

Endowments and foundations account for 19% of all survey respondents. Pension plans account for another 18% of respondents, with public plans dominating. Family offices account for 9% of responses. Funds of hedge funds (FoHF) accounted for one-third of all responses. FoHF data was tabulated separately from other institutional investor responses. Remaining responses came from banks, insurance companies, and non-profit organisations.

To read the full report, please click here.

ATTACHED FILES6 Ways Hedge Funds need to Adapt now (pdf format)