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: October 2020

Monthly Update

For the month of October, the portfolio decreased by -0.04% (after fees). This compares to the S&P/ASX200 that was up 1.93%, and the Small Ords up 0.46%.

Despite a flat month, the Fund’s financial year to date return has been good. Since 30 June 2020, the portfolio is up 11.91% (after fees). This compares to the S&P/ASX200 that was up 1.48%, and the Small Ords up 6.15%.

Some of the Fund’s stocks have done particularly well at times in this volatile market, which has led to a number recently having their weight trimmed or even exited. There were also a couple that were exited due to “Sign Post” misses.

While there have been opportunities to add to holdings, the net effect was an increase in the cash weight from 4% to 16%. As a result, the number of “Outlook Stocks” in the portfolio fell from 18 to 15.

Monthly Portfolio Metrics

Outlook Stocks (Long)15 Position: 68%
Outlook Stocks (Short)0 Positions: 0%
Event, Pair and Group (Long)5 Positions: 18%
Event, Pair and Group (Short)1 Positions: -2%
Cash16%
Gross Exposure87%
Net Exposure84%
Beta0.59

Return Summary Since Inception1(after all fees)

Since Inception (p.a.)10.54%
1 Month-0.04%
3 Months10.13%
6 Months23.49%
FYTD13.95%
1 Year10.10%
3 Years10.51%
5 Years6.95%
Cumulative130.39%

1Inception date of Fund is 2 July 2012.

Portfolio Analytics Since Inception

Sharpe Ratio0.55
Sortino Ratio0.92
Standard Deviation (p.a.)15.69%
Positive Months62%
Maximum Drawdown-29.10%
Avg Gross Exposure90.30%
Avg Net Exposure78.80%
Avg Beta0.59
Avg VAR1.20%

For example, Afterpay Ltd (ASX: APT) was last purchased in September. At that time, the stock’s weight in the portfolio was increased from 4.5% to 7% at an average price of $77. Now APT is a stock that is rarely out of the news. During the month, it had three announcements[1]:

  • AUSTRAC was to take no action following its audit
  • APT is working with Westpac to start offering savings accounts and cash flow tools
  • Business update

All three of these announcements were positive, and the APT share price rose towards (but didn’t reach) our price target. We took the opportunity to cut the APT weight back to 4%, which at a price of $100 per share (our average selling price) had grown to an 8.5% weight in the portfolio. It is not that we don’t like Afterpay as a business, or that we don’t think it’s still somewhat cheap.  It’s just that it now has less than 60% upside to our price target.

On the other hand, during the month Kogan.com Ltd (ASX: KGN) got quite close to our price target and was exited completely. Kogan had previously re-entered the portfolio with a 5% weight at a price of $17.80 per share in August. Kogan had no significant announcements during October but its share price ran, and it had grown to a 6.5% holding in the portfolio. We took the opportunity to exit at an average price of $23 per share.

During the month the portfolio took some hits too, here are the top three detractors.

Jumbo Interactive Limited (ASX: JIN) fell -13%.  Jumbo’s revenue benefits from customers chasing jackpot prize pools. This quarter there have been a comparatively low number of just 8 jackpots (OzLotto/Powerball draws with A$15m+ Div 1 prize) vs 13 in the previous corresponding period[2]. Whilst it is a comparatively lower number of jackpots, this is within historic ranges as jackpot numbers rise and fall cyclically. We expect the JIN share price will recover strongly as the frequency of jackpots picks up.

Lovisa Holdings Ltd (ASX: LOV) fell 9%. Lovisa had a trading update in October[3].  Same store sales growth is improving however it is well behind the recovery rate of most ASX listed retailers, reflecting the reality that there are currently less women dressing up and going out to work or socialise, due to COVID-19. The proposed second lock-downs in France and the United Kingdom also placed some pressure on the share price during this period.

Uniti Group Limited (ASX: UWL) fell 17%.  UWL is engaged in a takeover battle for Opticomm (ASX: OPC) and has had to increase its offer to match a competing bid[4].  Our price target for UWL is driven by its organic growth, but its price jumped when it first made the move to take-over OPC. While it claims the earnings per share (EPS)[5] accretion due to the takeover would still be greater than 10% at the most recent bid, it’s no longer as good a deal as it would have been. Accordingly the share price has softened to reflect a less accretive, but still attractive acquisition price for OPC.

[1] https://www2.asx.com.au/markets/company/apt

[2] https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02301317-2A1259877?access_token=83ff96335c2d45a094df02a206a39ff4

[3] https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02295862-3A553016?access_token=83ff96335c2d45a094df02a206a39ff4

[4] https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02297341-2A1258092?access_token=83ff96335c2d45a094df02a206a39ff4

[5] EPS is the earnings per share which indicates the profitability of a company

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

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

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

P. +61 400 248 435
E. cameron@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

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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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