HCAP Diversified Fund

Year 2011, 6 months in review to 30 June.

 

AUD Share Class 3 Month 2.06% 6 Months 4.60% 12 Months 17.00%
USD Share Class 3 Month 0.97% 6 Months 2.31% 12 Months 12.65%

Amidst volatile trading conditions, the Fund finished the first 6 months of the year with a net positive performance. The Fund not only preserved capital in the context of difficult trading conditions throughout the period, it delivered a highly credible 3 month, 6 month and year-onyear return to investors.

The Fund largely focuses on USD denominated Asian High Yield Eurobonds and other Interest Rate investments.

The Fund maintained its long bias with an active investment profile, supported by solid accrual income each month. Additionally, the Fund maintained a low duration risk profile of circa 4 years – and applied zero cash leverage during the period.

The opportunity set for the Fund remains compelling. The Fund is operating in an environment that is offering historically wide credit spreads for investors in Asian bonds, which is supported by a benign default environment. In addition, Asia continues to offer global ‘relative value’ in the credit space, which is often termed the “Asian Premium”.

High Yield Cash Spreads

 

To a key point: The Portfolio is largely made up of liquid investments, which enables the Fund to provide monthly liquidity to its investors under most conditions.

The economic and value proposition of investing in Asian High Yield Bonds remains intact. Asia has a strong relative growth outlook, whereas growth considerations in Europe and the US remain mixed at best. Asia also enjoys a relatively lower credit default environment, which provides added comfort for bond investors.

Asian default rate below the US in the last cycle

 

Whilst asset markets have recovered much since the dark lows of the Global Financial Crisis, supported by governments providing monetary and fiscal stimulus, the last 6 months has been testing for investors across the globe. Europe’s debt concerns continue, the US housing and unemployment problems are ongoing and Japan’s woes also contributed to a tough investment backdrop.

Looking ahead, we continue to believe that Asia is a relative beacon of opportunity – particularly in the credit space. Some 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. Importantly, much of Asia’s debt issuance is to support growth opportunities, as distinct from issuance to service existing bond maturities.

Despite concerns of inflation and rising interest rates, particularly in China, Asia’s future continues to be relatively bright, thanks to a combination of strong fundamentals and credit underpinnings; strong demographic trends; a large, hardworking and educated labour force and an increasing emphasis on infrastructure. We continue to believe Asian companies are in an excellent position to leverage this expected growth, which helps to facilitate value for the focused credit investor.

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 – AUD

Jan feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
2011 0.66% 0.49% 1.32% 2.04% 0.20% -0.17% 4.60%
2010 2.78% 1.53% 3.80% 1.12% -4.93% 0.48% 3.59% 0.78% 3.25% 1.99% -0.87% 2.65% 17.04%
2009 0.69% 0.69%

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/Unit 123.28
Return Since Inception 23.28%
3 Month Return 2.06%
6 Month Return 4.60%
12 Month Return 17.00%
% Positive Months 84%
Highest Monthly Return 3.80%
Lowest Monthly Return -4.93%

Fund Information

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

Investment Manager

HCAP Asset Management Licence: ACN 133454896| AFSL 332100
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. The AUD Share Class of the HCAP Diversified Fund was funded on 1st August 2010. The performance before this date has been calculated based on the actual USD return of the base Fund, adjusted for the foreign exchange hedging and risk in a manner that is being employed. 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. Investment considerations and 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
2011 0.24% 0.15% 0.93% 1.77% -0.19% -0.60% 2.31%
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/Unit 116.63
Return Since Inception 16.63%
3 Month Return 0.97%
6 Month Return 2.31%
12 Month Return 12.65%
% Positive Months 79%
Highest Monthly Return 3.52%
Lowest Monthly Return -4.83%

Fund Information

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

Investment Manager

HCAP Asset Management Licence: ACN 133454896| AFSL 332100
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.