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: August 2020

Monthly Update

The Fund’s performance during reporting season was very good. For the month of August, the Fund rose 10.06% (after fees). This compares to the S&P/ASX200 that was up 2.83%, and the Small Ords up 7.24%.

The Fund also continues to do very well relative to the markets for the calendar year to date with the Fund up 10.05% (after fees) while the S&P/ASX200 is down -7.43%, and the Small Ords is down -1.28%. The Fund’s strong run of performance now extends over three years. On a rolling 3 year basis to 31 August, the Fund is up 13.62% pa (after fees) despite holding on average 18% cash over that time. This compares to the S&P/ASX200 that was up 6.10% pa, and the Small Ords which was up 8.02%

This month’s positive return came from a wide cross-section of the Fund’s holdings. Out of the top 20 stocks in the Fund’s portfolio, 8 were major contributors to performance and no stock significantly detracted over the month.

Monthly Portfolio Metrics

Outlook Stocks (Long)20 Position: 85%
Outlook Stocks (Short)0 Positions: 0%
Event, Pair and Group (Long)3 Positions: 12%
Event, Pair and Group (Short)1 Positions: -2%
Cash4%
Gross Exposure99%
Net Exposure96%
Beta0.59

Return Summary Since Inception1(after all fees)

Since Inception (p.a.)10.75%
1 Month10.06%
3 Months8.53%
6 Months19.11%
FYTD13.89%
1 Year14.29%
3 Years13.62%
5 Years7.65%
Cumulative130.24%

1Inception date of Fund is 2 July 2012.

Portfolio Analytics Since Inception

Sharpe Ratio0.55
Sortino Ratio0.93
Standard Deviation (p.a.)15.84%
Positive Months63%
Maximum Drawdown-29.10%
Avg Gross Exposure90.20%
Avg Net Exposure78.60%
Avg Beta0.59
Avg VAR1.20%

In the commentary below we highlight a stock which had its weight increased in August and is now one of the Fund’s major holdings.

People Infrastructure (ASX: PPE) rose 9% on the day of its full year result[1], and 42% over the month.

PPE is a workforce management company providing staffing, business and operational services to organisations in Australia and New Zealand. It operates in sectors with strong economic tailwinds such as Healthcare, Community and Information Technology. PPE enjoys market leading profitability by focussing on sectors where it holds a demonstrable competitive advantage. Over the last five years it has achieved earnings growth of 20% p.a.  The business outlook for PPE is strong. It utilises a scalable technology platform to service existing customers whilst expanding into high growth sectors with good margins. It maintains a resilient organic growth profile that is cash generative. It leverages its core capabilities and cash to pursue accretive acquisitions in key growth areas. PPE’s acquisitions to date have performed well and we anticipate its acquisition focus to be a recurring strategy with clear opportunities for high-margin growth.

Like all businesses, PPE was adversely affected during the onset of the COVID-19 outbreak due to general business weakness from lockdowns and uncertainty in its operational environment. This led to a fall in the share price and a capital raise via private placement in early April to strengthen its balance sheet position. We participated in this placement. In particular, PPE’s nursing business was negatively impacted by a significant reduction in hospital utilisation and operations as the government prepared for a large domestic outbreak. However, as shown in the chart below, a strong recovery ensued when hospitals reopened due to a large backlog of operations. The second wave in Victoria has actually resulted in an increase of 17% in PPE’s Victorian nursing business as hospitals have opted not to restrict operations to the same degree.

[1] https://www.asx.com.au/asxpdf/20200825/pdf/44lvd65tdj0155.pdf

Since the initial lockdown, PPE’s operations bounced back quickly. The business is performing well, winning national tenders across hospitals and aged care and growing into home care resource management. It reported above expectations for FY20 with revenue growth of 34.5% during a tough year.

Despite its good track record and strong outlook, PPE trades on only 13x its FY21 P/E.  Historically labour hire companies do trade on lower multiples than the market average. However, we expect that PPE will re-rate over time with the demonstration of strong organic growth plus growth due to acquisitions. Based on our expectations of future cashflows generated by PPE our price target is more than 100% above the current share price.

Key Fund Information

FUM$15m
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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