Monash Absolute Investment Fund

Monthly Performance Report: March 2021

In March, the portfolio rose 1.62% (after fees). This compares to the S&P/ASX200 that was up 2.44%, and the Small Ords, which was up 0.79%. For the financial year to date, the portfolio is up 41.41% (after fees).  This compares to the S&P/ASX200 that was up 18.02%, and the Small Ords, which was up 22.79%.

The market rotation continued with many high growth stocks and COVID “winners” falling double-digit percentages. Over the last few months the cash weight has been building as positions have been trimmed in the “winners” stocks and completely exiting stocks that have met target prices, such as Afterpay (ASX: APT) or have sold out following a change of view, such as Kogan (ASX: KGN). In general, this selling was well timed, and reduced the portfolio’s exposure to underperforming stocks.

It has now been a full 12 months since the low point of COVID’s impact on global equity markets.  It was a period where our flexible mandate was of great benefit to the Company’s performance, as we were able to sell and short stocks without regard to the fact that the cash weight was rising, and then cover and buy at low prices. At Monash Investors our investment philosophy and approach is quite different from other managers, and even from our long/short peers. This applies to our shorts as well as our longs.  In both cases, we tend to have fewer positions, but our payoff requirements are higher.  There are always fewer shorts in the portfolio than longs, as absolute shorts tend to be much harder to find. In order to avoid concentration risk for shorts, short weights are less than half the size of the longs.  As a result, total short holdings have only averaged 5-6% of the portfolio since inception, typically spread between 2-3 stocks at a time but the number of stocks will increase if there are more opportunities.

This has occasionally raised the question of why we bother doing it. Well the answer is it generally adds some value, and it can at times make an oversized contribution to the portfolio. The 12 months to 31 Jan 2021 (for which we have a contribution analysis below) demonstrates such a period.

The table below shows that over the 12 months, the shorts contributed 11.6% to the return for the year, which was about 1/3 of total return for that particular time period.  In the year to 31 January, there was an average weight in shorts of only 1.8% per stock, and on average they fell by 33% while we held them. The average holding period was a brief 2.5 months per stock.  The overall size of the short positions swung around between 2% and 16%, and averaged 5% for the year.

The key to making money in these positions was our strong view on stock price, driven by bottom up analysis that quickly incorporated new information. Our forecasts are supported by the playing out of recurring business situations or recurring patterns of behaviour.  It is also important to know when to cover the shorts and lock in investment gains, here our focus on valuation provides the insight.  As always selling/covering discipline is a key driver of the investment returns we are able to generate.

Monthly Portfolio Metrics

Outlook Stocks (Long)11 Positions: 59%
Outlook Stocks (Short)2 Positions: -2%
Event, Pair and Group (Long)3 Positions: 14%
Event, Pair and Group (Short)0 Positions: 0%
Cash28%
Gross Exposure75%
Net Exposure72%

Return Summary Since Inception1(after all fees)

Since Inception (p.a.)12.76%
1 Month1.62%
3 Months4.27%
6 Months24.04%
FYTD41.41%
1 Year84.95%
3 Years18.20%
5 Years11.11%
Cumulative185.90%

1Inception date of Fund is 2 July 2012.

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.

Portfolio Analytics Since Inception

Sharpe Ratio0.67
Sortino Ratio1.19
Standard Deviation (p.a.)16.15%
Positive Months63%
Maximum Drawdown-29.10%
Avg Gross Exposure90.20%
Avg Net Exposure78.90%
Avg Beta0.63
Avg VAR1.23%

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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