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All Star Funds// All Star KFM Income Fund Kaplan Funds Management July 2013 PowerPoint Presentation
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Presentation Transcript
slide1

All Star Funds//

All Star KFM Income Fund

Kaplan Funds Management

July 2013

disclaimer
Disclaimer

Past performance is not necessarily indicative of future performance. This document has been prepared and issued by Ventura Investment Management Limited, ABN 49 092 375 258, AFSL 253045 (Ventura). Equity Trustees Limited ABN 46 004 031 298, AFSL 240975 (EQT) is the responsible entity of the Ventura and All Star series of funds. Information contained in this document is of a general nature only. It is not intended as advice, as it does not take into account your individual objectives, financial situation or needs. Investment can only be made on an application form attached to the Product Disclosure Statement (PDS) or through an IDPS operator. Copies of the PDS are available from Ventura or your financial planner.

contents
Contents
  • Investment Overview/Environment
  • Portfolio Mix & Activity
  • Buy & Write Positioning & Returns
  • Property Trusts
  • Hybrids
  • Utilities
  • Performance
investment overview kfm
Investment overview - KFM

Investment Environment

  • QE tapering –liquidity withdrawal
  • China credit squeeze-growth withdrawal
  • Economy ill prepared for mining slowdown, policy failure.
  • Combination of above creates a challenging environmentfor an economy in a transition phase
  • Stimulus from interest rates & currency to continue
  • Weak economy will cap the US linked rise in government bond yields.

All Star KFM Income Fund - Investment changes

  • De-risked portfolio over past 6 months
  • Reduced buy & writes
  • Reduced utilities
  • More defensive mix in property trusts
  • Improved hybrid yields
  • Increased cash/taking profits
  • Currently gradually rebuilding buy & write exposure as volatility returns after equity market correction
  • Delivered strong FY13 performance of 10.6% (net) with low volatility of 3.8%.
investment sectors
Investment Sectors

Sector attributes and positioning

  • Buy & Writes: high volatility & low equity valuation
  • Positioning: underweight/low volatility but rising/equity valuations moderate
  • Interest Rate Securities: good credit & wide spreads & redeemable structures
  • Positioning: overweight/good credit/wide spreads/acceptable structures
  • Utilities: regulated businesses & asset growth
  • Positioning: underweight/growing regulatory risk/bond yield sensitive
  • Property Trusts: leasing model & quality assets & NTA discount
  • Positioning: neutral/yields normalised/price near NTA
portfolio mix
Portfolio Mix

Sector allocation (30 June 2013)

Sector ranges

portfolio activity
Portfolio Activity

Active sector management (6 months to 30 June 2013)

  • De-risked portfolio over last 6 months with reduction in buy & write equities exposure and reduction in utilities. Buy & writes reduced by 11% from Feb-Apr and then increased 5% in June.
buy write exposure
Buy & Write Exposure

Buy & Writes/highest risk sector /Active Management

  • Risk reduction into rising equities market with low volatility
  • Recently re-building buy & write positions following equities correction and lift in volatility
buy write returns d ividend focus
Buy & Write Returns – dividend focus

Buy & Write – looking attractive again

buy write returns dividend focus
Buy & Write Returns – dividend focus

Buy & Write – looking attractive again

share price volatility
Share Price & Volatility

Buy & Write

looking attractive again-CBA volatility rising & share price correction ahead of Aug 13 dividend

CBA

Vol

share price volatility1
Share Price & Volatility

Buy & Write

looking attractive again-TLS volatility rising & share price correction ahead of Aug 13 dividend

TLS

Vol

property trusts
Property Trusts

Security selection – property trusts

  • Switched into SCP - by exiting MGR, DXS, LEP and reduced CPA
  • Rationale: lower risk with higher yield and higher discount to NTA
  • Maintain property trust weighting at neutral- suitable for current environment.

Shopping Centres Australasia Property Group (SCP)- 2.5% weight

  • Spun out of WOW comprised of 69 shopping centres (subregional, neighbourhood and standalone)
  • Bought $1.40 listing price (7.4% yield), now trading at $1.61 (6.4% yield)

Inclusion assessment:

  • Primarily a yield play based on 7.4% fixed yield being attractive in a falling interest rate environment with WOW credit.
  • WOW paying 61% of gross rent, 15 yr leases plus 2 year rental guarantee on vacancies. Forecast risk low.
  • Limited rental growth but priced at 11% discount to NTA, young portfolio with little capex.
property trusts1
Property Trusts

Sector Premium to NTA- less attractive

hybrids
Hybrids

Security selection – hybrids & corporate bonds

  • Strategic preference for high margin floating rate hybrids in current environment.
  • High fixed margins help protect returns as rates fall and the floating rate structure benefits if rates rise.
  • Quality credit offering good margins. Basel III triggers acceptable/remote
  • Exited low return sub notes after good rally (WOWHC -4.6% yield to maturity)
  • Replaced with: SUNPD -285bps, NABPA -320bps, MQGPA -400bps (5.6%-6.7% yield)
  • SUNPD: 10 yr, Basel III tier 2 Sub Note, non-viability trigger/capital risk at $2.50
  • NABPA: 6 yr, Basel III tier 1 Conv. Pref, CET1 & non-viability trigger/capital risk $6.00
  • MQGPA: 6 yr, Basel III tier 1 Conv. Pref, non-viability trigger/capital risk $8.00
  • Listed Hybrid & Corporate Bond Market Capitalisation $37bn, $600m per month turnover
utilities
Utilities

Security selection – utilities

  • Reduced DUE & SKI after strong rally, total reduction 3%
  • Environment of QE tapering to pressure bond yields higher.
  • Utilities valuations more sensitive to bond yields/however utilities offer relatively high yields of around 6.5% - 7.5% justifying mild underweight position.
  • Manager favours buy & writes for investment allocation

SKI & DUE share prices

(2 year returns: 50% SKI, 39% DUE)

performance
Performance

Performance 30 June 2013 (net of fees) JP to update

Inception : July 2007

APIR Code: VEN0007AU | Fees: MER 0.75%pa | Expense Recovery 0.10%pa | Performance Fee 15.38% above 1yr Interest Rate Swap

slide18

Performance

Fund performance with 1/3rd volatility of S&P/ASX200

Fund vol 4.2%

ASX vol 13..3%

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slide19

Performance

Portfolio yield

Sector attribution 3 years June 2013

Yield by sector

Portfolio Yield Margin above bank bills

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