Monash Absolute Investment Fund

Lonsec

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: February 2019

Monthly Update

For the month of February, the portfolio was up by 3.49% (after fees) compared to the S&P/ASX200 up 5.98% and the Small Ords which was up +6.78%.  It’s been a strong start to the calendar year with the portfolio up 11.77% (after fees) compared to up 10.08% and up 12.72% for the two indices respectively.

With the couple of months we just had, we have almost made up for the very weak December quarter. As a result for the financial year to date the Fund is now down -0.67% (after fees) compared to up 2.56% and down -1.65% for the two indices respectively.

February is the month where most stocks report their half-year results. It can lead to some dramatic moves in stock prices, and so it did this time

 

Monthly Portfolio Metrics

Outlook Stocks (Long)22 Position: 83%
Outlook Stocks (Short)1 Positions: -3%
Event, Pair and Group (Long)3 Positions: 14%
Event, Pair and Group (Short)1 Positions: -8%
Cash14%
Gross Exposure106%
Net Exposure86%
Beta0.57

Return Summary Since Inception1(after all fees)

Since Inception (p.a.)8.35%
1 Month3.49%
3 Months2.76%
6 Months-3.72%
FYTD-0.67%
1 Year-2.87%
3 Years1.17%
5 Years3.56%
Cumulative70.71%

1Inception date of Fund is 2 July 2012.

Portfolio Analytics Since Inception

Sharpe Ratio0.60
Sortino Ratio1.08
Standard Deviation (p.a.)10.25%
Positive Months60%
Maximum Drawdown-15.21%
Avg Gross Exposure89.00%
Avg Net Exposure76.90%
Avg Beta0.57
Avg VAR1.20%

Click here for Glossary

Of all the stocks in the portfolio, Lovisa (ASX: LVH) had the best jump in share price on its result day, up 20%, and it rose 39% for the month. The best return for the month came from Leigh Creek (ASX: LCK) which delivered +75% stock price return for the month due to its successful pre-commercialisation demonstration.

Leigh Creek (ASX: LCK)

Leigh Creek is an energy company that is in the process of upgrading its very large syngas 2C Resource of 2,964PJ in South Australia, which represents 7.8% of Australian East Coast Gas resources, to a 2P Reserve. This upgrade to 2P should occur in the next month or so, now that the company has successfully demonstrated its safety and commerciality through a trial operation.

The company uses Underground Coal Gasification (UCG) to extract gas from coal. The gas can generate electricity, be sold as natural gas via a pipeline, or be used to create urea for fertiliser. Given Australia’s well publicised issues with high gas prices, and the need to provide employment and reliable power generation in South Australia, both Labor and Liberal South Australian governments have been highly supportive.

The bar chart below puts the size of this resource in perspective.  If even only half of the 2C resource is certified as 2P, it will be one of the top 10 reserves in eastern Australia.

To date, the market has been sceptical of LCK’s ability to successfully prove up and commercialise its reserves because of the misadventures of the now delisted Linc Energy (ASX: LNC) at its Chinchilla UCG operation in Queensland. This scepticism is demonstrated in the next chart, which compares the price/GJ of EV/Resource for ASX listed peers (Attributable 2C Energy Resources).

Our average entry price into LCK is about 17c per share which is where it was at the time that chart was created.  It closed the month at 21c per share.  We expect a jump in the share price from here, when a substantial proportion of its 2C resources get upgraded to 2P, and we are optimistic that they will given the energy content and flow rates reported.

However, we see the value for shareholders only being fully realised when LCK is able to announce a formal partnership of some sort to commercialise the deposit.  There is certainly plenty of interest at this early stage. The company reports[1] that it recently invited expressions of interest (EOI) from parties for up to 50PJ per annum to be produced from Leigh Creek. As a result the Company has received over a dozen formal responses from several of Australia’s largest gas retailers and users. LCK states that it will continue these discussions on an ongoing basis and will advise the market accordingly of any material developments.

[1] https://www.asx.com.au/asxpdf/20190226/pdf/442z0j8s6bk2g7.pdf

Key Fund Information

FUM$40m
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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