HCAP Diversified Fund

Year 2010 in Review

The Fund finished 2010 with a solid performance. In reviewing the year the Fund delivered 10 out of 12 positive months, which is a pleasing result. Key points and considerations include:

The Fund predominantly invested in liquid USD denominated, Asian High Yield Corporate Eurobonds and Rates. The Fund has not invested in distressed investments.

The Fund remains long biased with an active investor profile – and is supported by solid accrual income each month. The portfolio of investments has been turned over up to three times during the year.

The Fund maintained a low duration risk profile of less than 5 years, applied zero leverage to the High Yield Portfolio and held a positive cash balance at all times. The Fund built a diversified portfolio of investments, across country and sector. The Portfolio is made up of liquid investments, all else being equal, which enables the Fund to provide monthly liquidity to investors.

The Value Proposition of investing in liquid high yield credit in Asia is that Asia is still “emerging” with a strong growth outlook, whereas the Europe and the US are considered as “mature” markets. Asia also offers a relatively lower default environment, particularly amidst the fallout of the GFC. Additionally, Asia is still emerging and generally offers a “premium” for investing in Asian Credit.

The opportunity set of Asia’s HY USD Eurobond Market is USD $60 billion in size and growing, which is likely to deliver ongoing opportunity going forward.

In looking at Fund’s first and largest loss during the year, May 2010 surprised many about the extent of Europe’s escalating debt crisis. It quickly created panic around world markets, including across Asia. Investors around the globe reacted swiftly, taking risk off the table. Liquidity all but evaporated. Essentially there was no place to hide and the Fund suffered from the markets broad price adjustments.

Looking ahead, we believe that Asia is a relative beacon of strength and opportunity. Almost two years on from one of the worst economic crises since the great depression, the Asian region is showing signs of real strength, while the West remains weighed down by the aftershocks of the crisis. Asia is in a relatively strong position to drive its own destiny as domestic growth picks up.

What is exciting about emerging markets, and more specifically Asia, is their growth story. Asia’s future appear bright, thanks to a combination of strong fundamental and credit underpinnings; strong demographic trends; a large, hardworking and educated labour force and an increasing emphasis on infrastructure. We believe Asian companies – both banks and corporates – are in an excellent position to leverage this growth. This backdrop provides much opportunity for the Fund looking ahead.

Disclaimer

The information contained in this document is for information purposes only and is not to be relied on as a recommendation or forecast by the fund, investment manager or any related party. Past performance is not necessarily indicative of future performance. Under no circumstances will the trustee, investment manager and/or its affiliates be liable for any loss including, but not limited to direct, indirect, incidental, special or consequential damages caused by using the information. Nothing in this newsletter should be construed as either an offer to buy or sell or a solicitation of an offer to buy or sell any investments in any jurisdiction. Fund risks are outlined in the current Private Placement Memorandum.

HCAP Diversified Fund – USD

Jan feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
2010 2.74% 1.26% 3.52% 0.80% -4.83% 0.14% 3.46% 0.38% 3.10% 1.64% -1.20% 2.39% 13.58%
2009 0.37% 0.37%

Asian Fixed Income and Rates

The Diversified Fund adopts a multi strategy investment philosophy, seeking to source value across asset classes and proactively reallocating capital to meet its objectives. The predominant focus is on Interest Rate markets and Asian High Yield Credit investments.

Key Fund points

Transparency – monthly liquidity – performance driven – management is a significant investor

Fund Manager

HCAP Asset Management, as Investment Manager to the Fund, was founded in November 2008. Steve Howell, company founder and CEO, has extensive experience across fixed income and relative value trading and investing. Steve, having worked in financial markets for over 25 years, has deep experience in asset selection, portfolio construction and risk management disciplines.

Performance StatisticsCapital Allocation at Year End

NAV per Unit 117.86
Return Since Inception 17.86%
3 Month Return 3.78%
6 Month Return 11.85%
12 Month Return 17.04%
%Positive Months 85%
Highest Monthly Return 3.80%
Lowest Monthly Return -4.93%

Fund InformationHY Portfolio Rating

Base Currency: AUD
Domicile: Cayman Islands
Investment Type: Mutual Fund
Fund Inception: Nov 2009
Management Fee: 1.50%
Performance Fee: 20%
Subscriptions: Monthly
Redemptions: Monthly
Minimum Investment: USD 100,000
Legal Advisor: Walkers
Auditor: Rothstein Kass
Administrator: TMF FundServices
Custodian: RBC (Swisse)
Bloomberg Ticker: HCAPGDV AU Equity
Telekurs VALOR: CH11736558

Investment Manager

Portfolio Manager: Steve Howell
Tel: +61 2 8274 4304
Email: info@hcap.com.au
Web: www.hcap.com.au

 

 

HCAP Diversified Fund – USD

Jan feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
2010 2.44% 1.26% 3.52% 0.80% -4.83% 0.14% 3.46% 0.38% 3.10% 1.64% -1.20% 2.39% 13.58%
2009 0.37% 0.37%

Asian Fixed Income and Rates

The Diversified Fund adopts a multi strategy investment philosophy, seeking to source value across asset classes and proactively reallocating capital to meet its objectives. The predominant focus is on Interest Rate markets and Asian High Yield Credit investments.

Key Fund points

Transparency – monthly liquidity – performance driven – management is a significant investor

Fund Manager

HCAP Asset Management, as Investment Manager to the Fund, was founded in November 2008. Steve Howell, company founder and CEO, has extensive experience across fixed income and relative value trading and investing. Steve, having worked in financial markets for over 25 years, has deep experience in asset selection, portfolio construction and risk management disciplines.

Performance Statistics

NAV per Unit 114.00
Return Since Inception 14.00%
3 Month Return 2.83%
6 Month Return 10.11%
12 Month Return 13.58%
%Positive Months 85%
Highest Monthly Return 3.52%
Lowest Monthly Return -4.83%

Fund Information

Base Currency: USD
Domicile: Cayman Islands
Investment Type: Mutual Fund
Fund Inception: Nov 2009
Management Fee: 1.50%
Performance Fee: 20%
Subscriptions: Monthly
Redemptions: Monthly
Minimum Investment: USD 100,000
Legal Advisor: Walkers
Auditor: Rothstein Kass
Administrator: TMF FundServices
Custodian: RBC (Swisse)
Bloomberg Ticker: HCAPGDV AU Equity
Telekurs VALOR: CH10974288

Investment Manager

HCAP Asset Management
Licence: ACN 133 454 896| AFSL 332 100

Portfolio Manager: Steve Howell
Tel: +61 2 8274 4304
Email: info@hcap.com.au
Web: www.hcap.com.au

Disclaimer
The information contained in this document is for information purposes only and is not to be relied on as a recommendation or forecast by the fund, investment manager or any related party. Past performance is not necessarily indicative of future performance. Under no circumstances will the trustee, investment manager
and/or its affiliates be liable for any loss including, but not limited to direct, indirect, incidental, special or consequential damages caused by using the information.Nothing in this newsletter should be construed as either an offer to buy or sell or a solicitation of an offer to buy or sell any investments in any jurisdiction. Fund risks are outlined in the current Private Placement Memorandum.