Monash Absolute Investment Fund

Fund Strategy

The Monash Absolute Investment Fund ARSN 606 855 501 (Fund) seeks to implement the investment strategy by investing in a diversified portfolio of predominantly Australian equities (long and short), with overseas assets expected to average no more than 5% over time.

The investment strategy is Benchmark Unaware and there is no predetermined asset allocation; rather, the Fund only invests when suitable opportunities are identified. As such, asset exposures may vary significantly over time and without notice.

The Fund seeks to only invest in compelling opportunities. To identify these investment ideas, Monash Investors primarily employs fundamental, bottom-up company research and the judgement of its experienced portfolio managers.

Monthly Performance Report: April 2020

Monthly Update

For the month of April the portfolio was up 20.69 % (after fees). This compares to the S&P/ASX200 which was up by 8.78%, and the Small Ords, which was up by 14.27%.

This brings the financial year performance for the portfolio to -2.17% (after fees) compared to  S&P/ASX200 down by -13.78%, and the Small Ords, which is down by -13.00%. April saw a strong and rapid rally continuing off the low that occurred on the 23rd of March.

Over the two months, the daily moves in the ASX200 have been extreme, with moves greater than 2% occurring on 11 days.

It has been a challenging time to manage portfolios, but our portfolio has come through it better than most, from what we can tell from public unit prices. We have endeavoured to keep you as informed as we can during this time with interim updates and articles.

Monthly Portfolio Metrics

Outlook Stocks (Long)21 Position: 91%
Outlook Stocks (Short)1 Positions: -2%
Event, Pair and Group (Long)2 Positions: 10%
Event, Pair and Group (Short)0 Positions: 0%
Cash2%
Gross Exposure103%
Net Exposure98%
Beta0.47

Return Summary Since Inception1(after all fees)

Since Inception (p.a.)8.29%
1 Month 20.69%
3 Months-14.43%
6 Months-10.84%
FYTD -2.17%
1 Year 0.61%
3 Years 6.88%
5 Years 4.08%
Cumulative 86.56%

1Inception date of Fund is 2 July 2012.

Portfolio Analytics Since Inception

Sharpe Ratio0.42
Sortino Ratio0.66
Standard Deviation (p.a.)14.98%
Positive Months62%
Maximum Drawdown-29.10%
Avg Gross Exposure90.00%
Avg Net Exposure78.20%
Avg Beta0.59
Avg VAR1.20%

In February and March 2020, uncertainty around the impacts of COVID-19 was at an all-time high and fear was at its peak. The Western world was only beginning to face the epidemic with exponential infection rates, mounting deaths, shortages in medical staff, equipment and no vaccine or effective treatment measures in sight.

During April, we noted levels of uncertainty falling, allowing markets to price expectations beyond COVID-19 with the worst of the pandemic appearing behind us. Drug company Gilead released promising drug trial results for its Remdesivir drug and we saw positive progress on potential vaccines. Most notably, social distancing coupled with extensive testing and contact tracing has emerged unequivocally as the effective solution to the health care crisis. Unfortunately, this solution comes at significant economic and social disruption and cost. However, this disruption is temporary and central banks and governments have undertaken unprecedented measures to support businesses with liquidity. The productive capacity of the economy has not been permanently destroyed, at the cost of expanded government deficits and debt levels.

In early April, we noticed this decline in uncertainty and accordingly covered the majority of our short positions. In addition, we continued to deploy our cash to purchase high-quality companies with established operations at material discounts (60% or above upside) to intrinsic value. We also rebuilt existing positions. Whilst we expect short-term earnings results to be weak, we look through short-term disruptions and calculate valuations for ourselves on medium-term discounted future cash flows. We believe the market had been too near-term focused. Based on this outlook, we started April with 34% cash, by mid-April we reached close to 100% fully invested.

A common theme many observed in April was that valuations are high relative to long term historical price-to-earnings (“PE”) ratios. This is true, compared to the often cited 10-year cyclically adjusted PE ratios. However, as shown in the chart below, interest rates are at record lows, and stock prices must be seen in that context.  Given world debt-to-GDP ratios, there is little chance the world’s central banks can raise them any time soon without catalysing a catastrophic sell-off and wrecking pensions worldwide. We therefore believe these valuation levels may be with us for some time longer. Interest rates may rise in the future, but only if the economy has improved to such a point that its liquidity is sufficiently robust.

Our response in April 2020 benefitted from Monash Investors’ benchmark unaware mandate. Being benchmark unaware in times of significant volatility is an advantage. The post Global Financial Crisis recovery had largely been dominated by a period of low volatility. Low volatility generally yielded low-tracking errors amongst benchmark-aware funds. This meant that these funds were not forced to buy/sell equities because their tracking error did not exceed their threshold. But in current times of high volatility, tracking errors can easily, and materially, exceed thresholds. Given our benchmark unaware mandate, we were not forced to prematurely sell stocks or lock in short term losses.

Our ability to respond to changes in market signals with agility and better position the portfolio is one of the core advantages of the Monash Investors strategy. As at the end of April, Monash Investors remains bullish, but dynamic. Whilst COVID-19 infection and death rates are improving, resurgence remains a risk we’re watching closely. Countries like Singapore have demonstrated that we have to remain vigilant and social distancing protocols may return, extending the period of economic disruption and recovery.

As we demonstrated in February, if the market signals change or uncertainty increases, we will respond accordingly to best align the portfolio for our investors.

Please click here for a recent interview with Simon Shields (Principal, Monash Investors) on our current market views.

Key Fund Information

FUM$21m
Minimum Investment$20,000
Management Fee1.5375% p.a.
Performance Fee20.5% above the RBA Cash Rate with High Water Mark
Pricing FrequencyDaily
Distributions Annually
APIR CodeMON0001AU
Morningstar CategoryAlternatives Strategies

For all business development enquiries, please contact

QLD, SA,WA,NT: Andrew Fairweather
Winston Capital partners (Acting on behalf of Monash Investors)

P. +61 401 716 043
E. Andrew@winstoncapital.com.au

NSW, ACT, VIC, TAS: Stephen Robertson
Winston Capital partners (Acting on behalf of Monash Investors)

P. +61 418 387 427
E. stephen@winstoncapital.com.au

For all investor enquiries, please contact

Link Fund Solutions Pty Ltd (Acting on behalf of the Fund)

P. +61 2 9547 4311
E. LFS_registry@linkgroup.com

Monash Absolute Investment Fund Unitholder Services, GPO Box 5482, Sydney NSW 2001

For all other enquiries

E. contactus@monashinvestors.com

Cumulative Return Since Inception

Gross/Net Exposure Since Inception

Invest with us

We would welcome you as a co-investor in the Fund.

Important Information

This document is issued by Monash Investors Pty Limited ABN 67 153 180 333, AFSL 417 201 (“Monash Investors”) as authorised representatives of Winston Capital Partners Pty Ltd ABN 29 159 382 813, AFSL 469 556 (“Winston Capital”) for the provision of general financial product advice in relation to the Monash Absolute Investment Fund ARSN 606 855 501 (“Fund”). Monash Investors is the investment manager of the Fund. The Trust Company (RE Services) Limited ABN 45 003 278 831, AFSL 235 150 (“Perpetual”) is responsible entity of, and issuer of units in, the Fund. The inception date of the Fund is 2nd July 2012.
The information provided in this document is general information only and does not constitute investment or other advice. The content of this document does not constitute an offer or solicitation to subscribe for units in the Fund or an offer to buy or sell any financial product. Accordingly, reliance should not be placed on this document as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation. Monash Investors, Winston Capital and Perpetual do not accept liability for any inaccurate, incomplete or omitted information of any kind or any losses caused by using this information. Any investment decision in connection with the Fund should only be made based on the information contained in the disclosure document for the Fund. A product disclosure statement (“PDS”) issued by Perpetual dated 12 September 2017 is available for the Fund. You should obtain and consider the PDS for the Fund before deciding whether to acquire, or continue to hold, an interest in the Fund. Initial Applications for units in the Fund can only be made pursuant to the application form attached to the PDS.
Performance figures assume reinvestment of income. Past performance is not a reliable indicator of future performance. Comparisons are provided for information purposes only and are not a direct comparison against benchmarks or indices that have the same characteristics as the Fund.
Monash Investors, Winston Capital and Perpetual do not guarantee repayment of capital or any particular rate of return from the Fund and do not give any representation or warranty as to the reliability, completeness or accuracy of the information contained in this document. All opinions and estimates included in this document constitute judgments of Monash Investors as at the date of this document are subject to change without notice. Perpetual is not responsible for this document.

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