16 April 2012
The Bennelong Kardinia Absolute Return Fund (the Fund) is now available to retail investors with a minimum investment of $20,000. The long short Australian equity fund is managed by Kardinia Capital, which is majority-owned by co-portfolio managers Mark Burgess and Kristiaan Rehder in partnership with Bennelong Funds Management.
The Fund's long-term objective is to achieve double digit annual rates of return without compromising its focus on capital preservation. Core to the strategy is long-term fundamental stock selection to create a high conviction portfolio of between 20-50 stocks.
Jarrod Brown, Bennelong Funds Management Chief Executive Officer, said he was very pleased by the level of interest in the fund to date.
"The Fund has had strong performance since its inception in May 2006 when it operated under another trustee," said Jarrod. "The strategy's ‘Highly Recommended' rating from Zenith Investment Partners flagged the calibre of the team, their experience and track record. Not surprisingly, the Fund has already attracted a lot of positive attention from asset consultants and investors alike."
Hedge funds and risk
Portfolio Manager of the Bennelong Kardinia Absolute Return Fund, Mark Burgess, said "Hedge funds are often perceived as a risky proposition in the Australian marketplace. However, the reality is quite the reverse. Due to the flexibility of their investment mandates and the ability to hedge market risk, most well-managed hedge funds have outperformed underlying asset classes in recent times - and have delivered those returns with lower volatility or risk. Having the ability to profit from stocks falling as well as rising significantly increases the investment opportunity set, which is advantageous."
Weathering the GFC
The Global Financial Crisis was a great test of the capital preservation capability of fund managers. "A number of hedge fund managers got themselves into difficulty by using financial leverage," said Mark. "Gearing works well in a rising asset value environment, but in a falling market, it has the opposite effect.
"At Kardinia Capital, we don't use financial leverage. We have very robust guidelines around risk. At the portfolio level, we have rules around our gross and net market exposure and at the individual stock level, we use stop losses. From time to time, we also use share price index futures contracts to protect the overall portfolio from falls in the market.
"This served us well during the GFC. In the 2008 calendar year, the Fund achieved a small positive return whilst the Australian equity market fell over 40%," said Mark.
Capital preservation and growth
Mark believes the Bennelong Kardinia Absolute Return Fund is a powerful combination of capital preservation and growth.
"In a strong market environment, we look to capture as much of the upside as possible without having all the capital at risk. But more importantly, in a negative market, we go into capital preservation mode and aim to protect the capital until the markets have recovered," said Mark.
"Our return has had a relatively low correlation with the underlying Australian equities market. In a portfolio context, this reduces the overall volatility of returns and smoothes out the return profile."
Since inception, the Fund has delivered an annualised compound return of 14.44% against an annualised compound benchmark return of 5.27%*. In contrast, the All Ordinaries Accumulation Index returned 1.50% per annum over the same period.