HCAP Global Diversified Fund

Year 2010 in Review

The Fund finished 2010 with a solid performance and whilst the Fund delivered a positive and reasonable overall result of 9.59%, the year fell short of the Fund’s target of 15% plus.

In reviewing the year the Fund delivered 10 out of 12 positive months and whilst this result in itself is good, May and June’s losses hit the Fund. Key points and considerations about the Fund include:

The Fund, a Global Macro Fund, adopts a high conviction; discretionary; multi strategy investment philosophy. The focus is to source value in the global markets, largely expressed through Futures, and to proactively allocate investment capital to target the Fund objectives (which is deliver 15% plus per annum).

Throughout the year the Fund largely traded in the global futures markets. It has a flexible alpha-seeking mandate to take risk positions across global markets in search of high returns. Importantly the Fund may also concentrate risk where value is identified.

The discretionary investment approach undertaken seeks to identify opportunistic value – and employs both directional and market neutral strategies to express views.

The focus is largely on value investing, utilizing fundamental disciplines to identify and extract value.

In reviewing the Year, investments were primarily focused on “Calendar Spreads” in Australian, New Zealand and European Interest Rate Futures markets. The typical trade throughout the year was market neutral (long / short), high conviction spreads – either expressed as flatteners or steepeners across global yield curves.

In reviewing the 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 and markets gapped. Essentially there was no place to hide and the Fund suffered from the markets broad price adjustments.

As Europe’s problems emerged, the Fund got caught as the market gapped against the Fund’s high conviction trading positions. It was a disappointing loss in what was otherwise a good first year.

Looking ahead, the global environment presents itself with ongoing uncertainty. This backdrop provides the Fund with ongoing opportunity, as volatility will likely remain high.

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 Information Memorandum.

HCAP Global Diversified Fund

Jan feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
2010 2.74% 4.22% 1.22% 2.87% -2.11% -9.91% 0.08% 0.025% 2.40% 3.21% 3.35% 1.71% 9.59%
2009 2.10% -0.38% 1.72%

Global Futures

Targeting superior risk adjusted returns, the Fund’s alpha seeking focus is to generate returns through an active and global trading approach – largely across liquid futures; securities and options strategies. The Fund’s investment style is predominantly value based and discretionary, adopting both directional and hedged (i.e. long/short) position taking. The Fund has a higher expected volatility profile, which implies higher targeted returns.

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

Cumulative Performance

NAV/Unit 111.47
Return Since Inception 11.47%
3 Month Return 8.49%
6 Month Return 11.46%
12 Month Return 9.59%
%Positive Months 79%
Highest Monthly Return 4.22%
Lowest Monthly Return -9.91%
Average Gain 2.20%

Fund Information

Fund Information

Base Currency: AUD
Domicile: Australia
Investment Type: Unit Trust
Inception: Oct 2009
Management Fee: 1.50%
Performance Fee: 20% (subject to HWM)
Subscriptions: Monthly
Redemptions: Monthly
Income Distributions: Semi-Annually
Minimum Investment: AUD 100,000
Fund Open To: Professional Investors
Legal Advisor: Mallesons Stephen Jaques
Auditor: Hall Chadwick
Administrator: TMF FundServices
Bloomberg Ticker: HCAPGDV AU Equity
Telekurs VALOR: CH11003333

Investment Manager

HCAP Asset Management
ACN 133 454 896 | AFSL 332 100

Portfolio Manager: Steve Howell
Tel: +61 2 8274 4304
Investment Type: Unit Trust
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.

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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.

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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