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: January 2020

Monthly Update

For the month of January, the portfolio was up 4.20% (after fees) compared to the S&P/ASX200 up 4.98% and the Small Ords, which was up 3.38%.

Financial year 2020 has been going well. For the seven months since 30 June, the portfolio is up 14.32% (after fees) compared to the S&P/ASX 200 up 8.20% and the Small Ords, which was up 7.40%.

Over the last year, the portfolio has benefitted from holding companies that are not just growing strongly, but are also meeting or exceeding the market’s expectations for their growth. On the other hand, we have generally avoided companies that have missed their growth expectations.

Heading towards the February reporting season, a number of companies had January “confessions” to make. While the portfolio generally avoided the disappointers and was the beneficiary of good news, we were on the wrong side of one announcement.

Monthly Portfolio Metrics

Outlook Stocks (Long)19 Position: 75%
Outlook Stocks (Short)2 Positions: -5%
Event, Pair and Group (Long)3 Positions: 12%
Event, Pair and Group (Short)0 Positions: 0%
Cash18%
Gross Exposure92%
Net Exposure82%
Beta0.58

Return Summary Since Inception1(after all fees)

Since Inception (p.a.)10.83%
1 Month4.20%
3 Months4.19%
6 Months9.06%
FYTD14.32%
1 Year32.17%
3 Years11.26%
5 Years8.12%
Cumulative118.01%

1Inception date of Fund is 2 July 2012.

Portfolio Analytics Since Inception

Sharpe Ratio0.86
Sortino Ratio1.60
Standard Deviation (p.a.)10.15%
Positive Months63%
Maximum Drawdown-15.21%
Avg Gross Exposure89.80%
Avg Net Exposure78.30%
Avg Beta0.58
Avg VAR1.20%

Winners

Electro Optic Systems (ASX: EOS) +42%

In previous monthly updates, we wrote at length on EOS.  Recently, we were so bold as to include it as our contribution to Livewire’s series ‘One thing investors can’t ignore in 2020’. We were the only fund manager to contribute a stock – the others made non-stock specific observations about threats and opportunities in 2020.

EOS has rewarded our confidence early, making two significant announcements in January. The first confirmed the progress of its US business[i], which is entering into a Special Security Arrangement with the US Department of Defence to permit it to undertake classified contracts in the US. The second was the acquisition of a microwave communications business, a step in ultimately migrating EOS’s space communications customers to laser broadband[ii].

Afterpay (ASX: APT) +32%

Afterpay continues to attract enormous media interest, which is to be expected from a company that has in the last 5 years invented the “Buy Now Pay Later” category, been used by 17% of the Australian purchasing population, has 3 million active customers here, and another 3 million combined in the USA & UK.

Market scepticism is falling away, because Afterpay is continuing to execute successfully on this global opportunity, APT’s share price re-rated in January, ahead of its earnings announcement to come in February.

Losers

As noted earlier, its been unusual for us to be on the wrong side of trading updates over the last year. In January however, we did suffer one, and narrowly avoided another.

Nearmap (ASX: NEA) -33%

NEA sold off hard on a downgrade[iii]. Elevated churn in the US and slowdown in Australia were the key concerns. They also disclosed a number of “one-off” issues – which is common occurrence when a company is looking to make excuses for a poor result, but taken in their stride if things are going well.

Fortunately, we had completely sold out ahead of this announcement.  Our sell down was initially triggered by observing a significant rise in the amount of NEA short sold, which we use as an early warning flag.  We completed our sell down following additional analysis that reduced our confidence further.

Kogan (ASX: KGN) -32%

While Kogan increased its sales strongly (+16% versus the previous corresponding quarter) and this was a positive surprise, it’s gross profit didn’t keep up (only growing +9%)[iv]. The market focussed on the sales mix change between high margin third party brands (sales down) and lower margin market place (sales up). Another concern was in the mobile phone division, where sales were weaker than expected. Kogan remains a strongly growing business.

[i] https://www.asx.com.au/asxpdf/20200131/pdf/44dph6f8f9gfsd.pdf

[ii] https://www.asx.com.au/asxpdf/20200128/pdf/44dk0v5shctbm0.pdf

[iii] https://www.asx.com.au/asxpdf/20200130/pdf/44dm5mlytgj0q3.pdf

[iv] https://www.asx.com.au/asxpdf/20200120/pdf/44dcmfzpwjkbm5.pdf

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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