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: October 2018

Monthly Update

For the month of October, the portfolio was down by -5.73% (after fees) compared to the S&P/ASX200 down -6.05% and the Small Ords down -9.60%.

The portfolio has also beaten the market over the financial year to date, being down by -2.98% (after fees) compared to -4.61% and -8.60% respectively. We see the pull back as a correction which has now largely run its course.

Going into October net cash was sitting at about 36% and reached a peak of 40%. This high cash weighting was an outcome of taking profits/exiting positions and our view that there were relatively few stocks around that could meet our investment hurdles. However, with the pull back in the market, particularly for quality high growth stocks, we began to re-invest the cash, so that by the end of the month net cash was down to 23%. 

Monthly Portfolio Metrics

Outlook Stocks (Long)18 Position: 62%
Outlook Stocks (Short)1 Positions: -3%
Event, Pair and Group (Long)6 Positions: 23%
Event, Pair and Group (Short)1 Positions: -5%
Cash23%
Gross Exposure93%
Net Exposure77%
Beta0.57

Return Summary Since Inception1(after all fees)

Since Inception (p.a.)8.41%
1 Month-5.73%
3 Months-6.12%
6 Months0.67%
FYTD-2.98%
1 Year-2.35%
3 Years0.43%
5 Years3.57%
Cumulative66.75%

1Inception date of Fund is 2 July 2012.

Portfolio Analytics Since Inception

Sharpe Ratio0.66
Sortino Ratio1.22
Standard Deviation (p.a.)9.42%
Positive Months61%
Maximum Drawdown-15.21%
Avg Gross Exposure87.90%
Avg Net Exposure76.10%
Avg Beta0.57
Avg VAR1.16%

Click here for Glossary

Portfolio Activity

Selling before the fall

The portfolio benefitted early in the month from a sell down in our Afterpay (ASX: APT), Nearmap (ASX: NEA) and Emeco (ASX: EHL) positions which were reduced by about half, as we took profits from their strong share price runs.  While we did not completely exit these holdings, we did reduce them by more than half.

The performance of these shares over the month, -30% for APT, -21% for NEA, and -17% for EHL while dramatic were not due to business issues, but rather, typical for such high growth stocks this month.

Lovisa (ASX: LOV)

The one stock in the portfolio that did have a business issue was Lovisa and although it was only a minor issue, it was not the month to disclose bad news. Ultimately its stock price fell 26% for the month.

Lovisa reported a slow down in its like for like sales from around +2% to -0.9%. To put this in perspective, this reduces its analyst forecast sales growth this year from 18% to about 15%. Its overall sales growth is driven by its global store roll out, which is accelerating, rather than it’s like for like sales. Lovisa was one of the largest positions in the portfolio, so the fall in its share price effected portfolio performance considerably.

Kogan (ASX: KGN)

It’s worth noting that we had absolutely no exposure to Kogan, which fell 50% during October.  Kogan updated the market that it had a slow down in sales growth due to changes in the GST regime for imports, a rising advertising spend and a fall in margins.

Kogan is a stock we follow closely and have made money previously from both its rise and its fall. Its share price volatility is inconsistent with the quality of the company, and we expect it will continue to provide opportunities for us.

Buying back in

We do not view the stock market as being in danger of a crash, which is typically accepted to be a 20% fall from its high. Rather we see the market as merely going through a correction, which is typically defined as a 10% fall.

Our confidence stems from the strength and momentum of the global economy, and the persistency of low inflation and low interest rates.  While inflation and rates should rise a little, they are signs of a world economy doing well, not poorly. As a result profits and stock prices should continue to grow.

So we see the pull back as a valuation correction, and an opportunity to gain exposure at great prices to stocks that have been unreasonably penalised.

The first phase of this was to rebuild some of the positions in which we had been recently taking profits, such as APT, NEA and EHL.

The second phase was to take a diversified approach to picking up some of the higher growth and higher quality companies, which had suffered a severe pull back in share price. 

Our approach has been to purchase a dozen businesses across 4 broad categories. The businesses all have a broad revenue base, which is typically spread widely by numbers of customers and geographies, and are less likely to suffer setbacks. Half are ASX 100 market cap companies and the others are generally not far outside the 100. They all are highly liquid.

  1. High Growth, low maturity
  2. High Growth, more mature
  3. High Quality, moderate growth
  4. High Quality, low PE

These are group trades, where we are taking a basket approach, and our exposure to each of these companies is relatively low. It is not the individual weights that will drive the outcome, rather it is our confidence that we are able to achieve exposure to these companies as a group, at great prices.

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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