Yes, reply was quick, and as follows! they will do better in this falling market basically!
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Hello Ivan,
Thankyou for your inquiry,
The announcement to the ASX on November 5th reflected the change in the portfolio value, adjusted for any impact from capital management. As such, it was down to us, rather than an impact from capital management that saw the portfolio underperform in October.
As you may be aware, ALF currently retains a low net exposure to the share market due to the hedging that we have in place. We will necessarily have to work harder to keep pace with a rising market given the portfolio gets very little benefit from the uplift it the share prices more broadly. Unfortunately in October we had dual headwinds to performance being the low exposure to a rising market, a some stock specific issues which also knocked the portfolio around. In simple terms, the company’s long portfolio lagged the rising market and the short portfolio went up (detracting from performance), buoyed by the same momentum.
We maintain our cautious outlook for share markets and hold a view that many parts of the market look very expensive. We note the challenges that remain for the domestic economy with rising unemployment, low growth and waning consumer confidence as well as a range of challenges for the commodity complex. Having said that, stimulatory monetary policy looks like it is with us for the medium term, which is broadly supportive for share markets.
We can only assure you that we will continue to focus our efforts in researching and selecting the right stocks, in order to deliver portfolio returns in line with our target, while protecting our shareholders’ capital as best we can, from the risk of material capital loss in the event of a market fall.
Justin will have much more to say in this regard at our AGM and shareholder update in a few weeks’ time.
Best Regards
COO/Head of Distribution
Watermark Funds Management
Level 5, 139 Macquarie Street
NSW Sydney 2000
