Monash Absolute Investment Fund is a long/short Australian equity fund. It has a Long Bias and an Absolute Return Focus. It has a return target of 12-15% per annum after fees over a full Market Cycle, while seeking to preserve investor capital each financial year.
In May, the Fund fell -6.3% (after fees) giving back its positive return of April. This compares to a decrease of -3.3% for the Small Ords. However, we remain ahead of the Small Ords over the last two months and very significantly ahead of it over medium to long term time periods. For the 12 months the Fund is up 2.0% compared to the Small Ords which is down -5.8%.
As a high conviction manager we do get impacted from short term swings in share prices. We have shown over the medium to long term that our investment approach rewards investors.
Monash Investors was established in 2012, and since that time on average 91% of the stocks in our portfolio have been outside the S&P/ASX 100. The Small Ords comprises the 200 stocks in the S&P/ASX 300 that excludes the largest 100.
Despite being stock size agnostic in our approach, the overwhelming number of stocks that have met our investment criteria have been small cap, and this is where we have had our best payoffs as investors. To put the size of these companies in perspective, the largest Small Ords stocks have market capitalisations of about $4 billion and the smallest ones about $100m.
Given our overwhelming exposure to small cap stocks, going forward we will be re-naming the portfolio to reflect this. This will help us position the fund as a product that is relevant to a larger number of investors.
What is Monash Absolute Investment Class A Monash Absolute Investment Class A is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Long Short Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Monash Absolute Investment Class A has Assets Under Management of 33.00 M with a management fee of 1.54%, a performance fee of 2.10% and a buy/sell spread fee of 0.6%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Monash Absolute Investment Class A has returned 5.54% in the last month. The previous three years have returned 1.55% annualised and 15.99% each year since inception, which is when the Monash Absolute Investment Class A first started.
How is risk measured in this investment product? There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Monash Absolute Investment Class A first started, the Sharpe ratio is NA with an annualised volatility of 15.99%. The maximum drawdown of the investment product in the last 12 months is -9.51% and -29.09% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product? Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Monash Absolute Investment Class A has a 12-month excess return when compared to the Domestic Equity - Long Short Index of -4.94% and -2.29% since inception.
Does the investment product produce Alpha over its Peers? Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Monash Absolute Investment Class A has produced Alpha over the Domestic Equity - Long Short Index of NA% in the last 12 months and NA% since inception.
What are similar investment products? For a full list of investment products in the Domestic Equity - Long Short Index category, you can click here for the Peer Investment Report.
What level of diversification will Monash Absolute Investment Class A provide? Monash Absolute Investment Class A has a correlation coefficient of 0.8 and a beta of 1.38 when compared to the Domestic Equity - Long Short Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers? For a full quantitative report on Monash Absolute Investment Class A and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Monash Absolute Investment Class A with the ASX Index 200 Index? For a full quantitative report on Monash Absolute Investment Class A compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the Monash Absolute Investment Class A to do my own analysis? To sort and compare the Monash Absolute Investment Class A financial metrics, please refer to the table above.
Has the Monash Absolute Investment Class A been independently verified by SMSF Mate? This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
How can I invest in Monash Absolute Investment Class A? 
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Comments from SMSF Mates SMSF Mate does not receive commissions or kickbacks from the Monash Absolute Investment Class A. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - March 31, 2023 In March, the Fund fell 0.9% (after fees). This compares to a decrease of 0.2% for the S&P/ASX200 and a fall of 0.7% for the Small Ords.
Following on from the reporting season month of February, March was a relatively quiet month with little news from our companies.
Our best contributor for the month was REA Group (realestate.com.au ASX: REA) which rose by 12%. REA made no stock exchange announcement this month, but an improvement in property prices was widely reported in the media.
Australian house prices recorded their first rise in 11 months, with capital city values appreciating by 0.6% in March. The falls had bottomed out in February with a modest decline of only 0.1%. Sydney led the gains in March at 1.4%, followed by Melbourne at .6%.
Speculation by commentators of a pause in RBA interest rate rises towards the end of the month perhaps also helped. The RBA had increased interest rates 10 times in a row for a total rise of 3.5%, so a pause to give some time for previous increases to work their way through the economy, and to assess their full impact before adding further rises, was already overdue.
Performance Commentary - February 28, 2023 In February, the Fund fell 4.5% (after fees). This compares to a decrease of 2.5% for the S&P/ASX200 and a fall of 3.7% for the Small Ords.
Lower overseas markets provided a soft lead for the ASX, with the S&P500 falling 2.4% for the month. Concerns about the extent of further RBA rate rises in response to the latest inflation figures also contributed to the ASX weakness. While inflation has fallen from its peak of 8.4% for calendar year 2022, the 12 months to 31 January was still very high at 7.4%.
February was a company results reporting month. A common theme during this reporting season was weak like-for-like growth, and the impact of inflation on margins.
Over the course of last year we had tilted our portfolio towards stocks that are less exposed to the economic cycle, but rather have strong structural growth and pricing power. As a result our stocks have been doing relatively well as businesses. 9 out of our top 10 holdings reported first half results in February. Following these results, analyst consensus changes to their FY24 earnings forecasts resulted 6 upgrades, 1 downgrade and 2 had no meaningful change.
Unfortunately the positive achievements of the companies were not reflected in the overall return of the portfolio, and we somewhat underperformed the market. The portfolio consists of high-quality companies with long-standing pricing power and reputable management teams. We remain positive on their outlook and future valuations. We will provide greater details on this during our postreporting season webinar on Tuesday the 14th of March. We continue to identify compelling investment opportunities.
We have seen in the past that as our companies execute on their business opportunities, the market will eventually recognise this in their share prices. This is what has driven our longer term investment returns namely our ability to continue to identify compelling opportunities.
Performance Commentary - December 31, 2022 In December, the Fund fell 4.26% (after fees). This compares to a decrease of 3.21% for the S&P/ASX200 and a fall of 3.73% for the Small Ords. The relative performance of the portfolio this month was hampered by a lack of exposure to the gold and REIT sectors, which rose strongly.
There was no bad news announced by any of our larger holdings, but a few of them fell by double digit amounts regardless, in the weak market. On the other hand we did benefit from our shorts in Lithium producers.
2022 was a very tough year for investors, with central banks rapidly increasing interest rates in response to their concerns over inflation. Near the start of the year we wrote that higher growth stocks, small caps and low liquidity stocks tend to underperform with such conditions. This proved to be truer than we hoped, as reflected in the one year total return of the Small Ordinaries being negative 18.4%.
We continued to see bad news regarding the consumer in December, which has led us to pre-emptively trim by a further third our holdings in retailers. It’s not that we think our companies are doing poorly, they are outstanding businesses, but the combination of reasonably high valuations and emergent earnings headwinds indicate attractive entry points remain further on the horizon.
Performance Commentary - November 30, 2022 In November, the Fund rose 0.95% (after fees). This compares to an increase of 6.58% for the S&P/ASX200 and a rise of 4.92% for the Small Ords.
After a strong run of months beating the market, we finally had one where we underperformed it. We are still well ahead of the market for the rolling six months where the Fund is up 7.47% (after fees) compared to the ASX200 up 3.51% and the Small Ords down -3.37%.
The difference this month was resources, which has been on a two month tear. Of the best performing ASX200 stocks this month 17 were resources, and their average rise was 29% over November. But picking swings in commodity prices, such as gold or iron ore, is not the sort of reliable recurring business situation that we look for in selecting investments. Consequently our portfolio is typically well underweight resources compared to the market, and this has served us well over time.
Most companies have their AGM in November, and this was the primary source of news that drove stock price movements within our portfolio.
Our best contributor was Johns Lyng Group (ASX: JLG), which the market feared would take the opportunity to downgrade, but rather reconfirmed its guidance. To quote the CEO “our business is flying”. We also had a major contribution from a company we were short. It continues to have inventory problems and conceded for the first time that it will need to cut prices to clear stock, which will have a significant effect on its margins.
Performance Commentary - October 31, 2022 In October, the Fund rose 7.17% (after fees).This compares to an increase of 6.04% for the S&P/ASX200 and a rise of 6.46% for the Small Ords.
There have been large swings, up and down, in the market over the last 6 months, but it has generally trended down. Smaller stocks have been particularly disappointing. During this volatile period, the Fund’s flexible mandate showed its strength. It allowed us to establish a significant cash weight and proactively adjust our long and short positions when markets reached extremely overbought and oversold levels. Over this time the Fund rose 0.94% (after fees) compared to a fall of -5.41% for the S&P/ASX200 and a drop of -14.36% for the Small Ords.
In last month’s update we reported that our biggest detractor was Telix Pharmaceuticals Limited (Telix, ASX: TLX) which fell 23% on its decision to withdraw its marketing authorisation application for investigational product Illuccix in Europe. The price drop was an exaggerated response during a time of market weakness.
This month TLX rose 47%, more than making back last month’s fall, with the release of its September quarter business update. Total revenues for the period were $55.3m, up 168% on the previous quarter. The next catalyst is likely to be the headline data from the pivotal trial of TLX-250-CDx for the imaging of renal cancer, due early November. Telix has always been a stock with lots of news flow. This is not surprising as its products are currently involved in about 20 clinical trials covering both company sponsored and investigator led programs.
Performance Commentary - September 30, 2022 Despite being stock size agnostic, we tend to find the most opportunities in smaller companies. In an environment where smaller companies have performed so poorly we have not suffered to the same degree. Over the last six months the total return of Small Ords is down 20.76%, the ASX200 is down 11.56% and the portfolio is “only” down 6.55% (after fees).
In the September quarter the Fund rose 0.34% (after fees). This compares to a rise of 0.39% for the S&P/ASX200 and a fall of 0.47% for the Small Ords.
In the month of September, the Fund fell 7.02% (after fees). This compares to a decrease of 6.17% for the S&P/ ASX200 and a fall of 11.20% for the Small Ords.
Performance Commentary - August 31, 2022 In August, the Fund rose 1.84% (after fees). This compares to an increase of 1.18% for the S&P/ASX200 and a rise of 0.58% for the Small Ords
August was a reporting season month during which companies disclose their full year results. On balance there were less large surprises or extreme movements than usual, though some stood out.
Our best result was Lovisa (ASX: LOV) which rose 30% for the month due to stronger sales and earnings than expected, and guidance that its store roll out program was accelerating. Our largest detractor was City Chic (ASX: CCX) which fell -29% for the month on the back of a result that saw an unexpectedly large increase in its inventory levels, but was otherwise in line with expectations.
The portfolio benefitted from two of our smaller holdings receiving take-over approaches. In both cases the targets seem of a mind to accept the bids and the stocks rose strongly. Nearmap (ASX: NEA) rose 49% and PTB Group (ASX: PTB) rose 35%.
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