PEF Capital Long Short Equities Derivative Fund

Transcription

1 PEF Capital Long Short Equities Derivative Fund Product overview ACHIEVING LONG-TERM SECURITY VIA SHORT-TERM VOLATILITY 2018

2 Contents Introducing PEF Capital 1 Our investment process 2 Who we are 4 Our partners 4 Fund strategy 5 Disclaimer Past performance is not necessarily indicative of future results. All investments involve the possibility of profit and the risk of loss, including the loss of principal. This presentation does not constitute a recommendation, an offer to sell or a solicitation of an offer to purchase any security or investment product. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. All information is current as of the date hereof and is subject to change in the future. This presentation also contains forward-looking statements, which reflect PEF Capital s views. These forwardlooking statements are subject to various risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Should any assumptions underlying the forward-looking statements contained herein prove to be incorrect, the actual outcome or results may differ materially from outcomes or results projected in these statements. PEF Capital does not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law or regulation.

3 Introducing PEF Capital PEF Capital is a Brisbane-based investment management firm led by a team of experienced individuals seeking to disrupt the investment sector with a highly competitive Australian-focussed product. About PEF Long Short Equities Derivative Fund At PEF Capital we see things differently to the ordinary investment manager. Unlike those that aim to mitigate or avoid perceived risks in following a conventional buy low, sell high or price versus value investment strategy, PEF Capital s main objective is to profit from the risk itself. PEF Capital sees properly managed and priced risk as the greatest sort of investment asset. The Fund s focus on risk allows it to gain returns from multiple marketindependent variables, taking into account volatility, time and the probability of various high and low side events occurring. This gives PEF Capital an advantage over traditional investment methodologies, which are merely two-dimensional in terms of their potential for yielding the greatest returns. A novel investment strategy Our investment strategy is similar to the well-known business of general and personal insurance, where insurers calculate the cost of risk and then profit from taking on the risk by selling policies. Similarly, we identify opportunities in the market where taking on financial risk (usually associated with anticipated stock price movement) offers significant potential profit. This strategy focuses our attention on calculating and quantifying the potential risks that affect each stock, individually and in various baskets, and takes on these risks where the potential return outweighs the realized risk over the long term. Rigorous research and analysis matched by a prudent understanding of market dynamics Through a combination of fundamental research and technical analysis, PEF Capital develops a well-informed view of the outlook of the Australian market, each sector and each stock. Execution triggers are identified and may consist of planned events like annual reporting, profit guidance reporting and dividend payments, or unplanned events like operational accidents and profit guidance revisions. Our Fund s key value advantage The Fund s offering is significantly different to regular managed funds and funds whose targets are tied to the Australian stock market indices. Comparitively, PEF Capital invests in ETOs (Exchange Traded Options) because of the unique characteristics that comprise an ETO s value, including time decay and volatility. Compared to equities and some other derivative products whose price moves linearly with the price of the underlying stock, properly executed ETO investment strategies allow the Fund to make a profit even when the stock price does not move in line with market expectations (or even when it moves contrary to analysts forecasts). Partnered with leaders in the investment world PEF Capital is a member and active participant of the Alternative Investment Management Association, AIMA, which represents over 1,900 member firms in over 60 countries. The Fund is active in promoting investor s interests on the regulatory scheme with regular dialogue with ASIC. Additionally, PEF Capital is backed by CMC Markets, a global broker of financial instruments. CMC Markets, founded in 1989, is headquartered in London with hubs in Sydney and Singapore and more than 11 offices internationally. We are also backed by TradeOn, the makers of the ASX Options Game, which is used by the ASX as an educational tool for investors. Their platform provides us a number of highly sophisticated modelling and risk management tools. Over the following pages, we have outlined the key valueadvantages of the Fund. The Fund proposes to deploy investors capital as soon as it identifies new investment opportunities which align with its investment and risk matrix. Should you require any further information please do not hesitate to contact me directly. Stephen Arulogun Chief Investment Officer PEF Capital 1

4 Our investment process Our success lies in our commitment to thorough analysis before action. We analyse the market extensively and continuously to maintain an informed view on the different factors that affect financial market dynamics. Domestically, our investment views are informed by detailed industrial sector analysis to guide our weightings in individual companies. The Fund does not have a geographical limitation and considers investments listed on the Australian Securities Exchange, whether or not they are located or operate within Australia. The Fund holds cash reserves to enable it to capitalise on short term stock price dislocations. 1. RESEARCH PHASE >>>>>>>>>>>>> Macro Analysis Overview of global economic factors. Megatrends (political, social, and economic). Effect of economic regional trends on Australian market. GICS Sector Analysis Overview of Australian economy by industrial sectors. Industrial sector comparison of relative strengths/weaknesses. Impacts of megatrends on each industrial sector over investment horizon. Stock Level Analysis Quantify investment proposition of stock based on industry, economic region and the global environment. Set trigger parameters for investment. The value of an asset (either the underlying stock, or its derivatives) is comprised of many quantitative and qualitative factors, including asset quality, management acumen, current and potential earnings, growth potential, and competitive moats. Additionally, factors which are rarely fully appreciated, but probably as important than the foregoing factors, are cognitive biases exhibited by investors (often collectively studied as behavioural finance ). Much of PEF Capital s alpha is derived from research and analyses into the biases in tandem with the quantitative and qualitative factors. Over time, as the mix and prevalence of these biases change and interact, PEF Capital s investment strategy will adapt to capture the change, and this will be reflected by the new emphasis taken by our research. 2

5 2. EXECUTION PHA SE >>>>>>>>>>>>> Investment execution Seek out significant short term price adjustment does not reflect companies financial capacity. Scan for persistent deviation of price and value with potential of correction catalyst. Hedge and monitor Reduce market risk by combining long & short exposures. Maintain edge through positions that profit even if the unexpected eventuates. Ensure sound risk management by covering all positions. Successful Exits Achieve consistent alpha with disciplined exit executions. Rebalance positions to maintain optimum portfolio performance. Throughout the execution phase, the emphasis is not to execute a trade at a particular price; it is to execute a trade when an asset with a particular value reaches a particular price. Because options are extremely versatile (probably the most versatile derivative instrument), they can be made to be useful in all market conditions: upward and downward trending, flat and volatile. Australia s options market is relatively liquid. Most of the exchange traded equity options have four or more market markers with the significant number of option series being subject to mandatory market marker obligations. Significant moves result in a skew of the offer, and bid prices quoted by market markers intraday tend to recover within one day, even with the underlying stock remaining at the new dislocated price. Contact us directly to learn further information about our investment process. 3

6 Who we are Meet with us at your convenience to discuss how our Fund can work for you. Stephen Arulogun Our partners Chief Investment Officer PEF Capital Stephen has over 15 years of experience in the investment services sector, beginning his trading career in 2002 with Pure Knowledge Trading, where he traded futures and foreign exchange spot contracts. Stephen traded Australian equities while gaining his training in options in 2006, and has traded options nearly exclusively across a variety of markets, including Australia, Germany and the UK. Following graduation in 2015 of his Graduate Diploma in Applied Finance (Financial Markets), Stephen traded full-time for the proprietary trading firm, Managed Trade Services. Following this enriching experience, he established his own fund in order to privately manage the capital of close friends and family members. As a qualified lawyer (LL.B. with Honours, QUT), Stephen applies his prudence and keen critical attention to the navigation of market volatility. He shares weekly market insights on an industrial sector and stock level via PEF Capital s ongoing MarketWrap series. In his spare time, Stephen is a keen runner, having completed both marathon and ultramarathon events, including the Devil O the Highland 43-miler, and the UTA & PEF Capital works closely with the following trusted partners. Fund trustee and administrative services are provided through our partners at Global Merces (AFSL ). Brokerage is provided by TradeOn, who also provide us a number of highly sophisticated risk and return modelling tools (AR ). We partner with Caddie as a provider of Continuing Professional Development material for financial advisors using derivative products. Brokerage is provided by CMC Markets Stockbroking. Founded in 1989, CMC Markets is a global broker of financial instruments (AFSL ). 4

7 Fund strategy The Fund s strategy allows it to achieve the ability to profit in all market conditions: rising, falling and neutral. Because the Fund s strategy is beta-uncorrelated (its movement is not tied to the market indices, thereby reducing market risk), it allows investors to reduce their market risk. Typical portfolio LONG EXPOSURE Holdings: Commonwealth Bank of Australia Ltd, Caltex Australia Ltd, IOOF Holdings Ltd, QBE Insurance Group Ltd, Westpac Banking Corporation Ltd. Outstanding net premium value: $103,000 Position types: ratio credit spreads Average time to expiry: <63 days Hedges: XJO index Put options SHORT EXPOSURE Holdings: CSL Ltd, Flight Centre Travel Group Ltd, Macquarie Group Ltd, Woolworths Group Ltd. Outstanding net premium value: $141,000 Position types: ratio credit spreads Average time to expiry: <63 days Hedges: XJO index Call options Typical portfolio as at 25 May 2018 with the view to achieving a gross return of 3.5% to 4.5% in the May/June investment cycle. Portfolio structured with the view to limiting significant downside index risk of -7.5% or -15% to a portfolio adjustment of -3.82% or +5.02% respectively, and significant upside index risk of 5% or 10% to a portfolio adjustment of -2.56% or -0.88% respectively (calculated at end of day 25 May 2018). The Fund Manager utilises several risk mitigation strategies following adverse single-stock movements to manage portfolio weighting and rebalancing. Fund facts INCEPTION DATE 23 April MINIMUM INVESTMENT $25,000. RECOMMENDED INVESTMENT TIMEFRAME Two or more years. BENCHMARK Eurekahedge Hedge Fund Index. MANAGEMENT FEE (EXC. GST) 2.0% of the Fund s net asset value. PERFORMANCE FEE (EXC. GST) 20% of the performance, subject to a high watermark and positive performance in the period. Payable three monthly. BUY/SELL SPREAD 0.10% on both application and withdrawl. ENTRY/EXIT FEES Nil (entry/exit). 1.5% (exit within 12 months of application). FUND PRICING Monthly. TARGET ASSET ALLOCATION Cash 0-70%. Derivatives 30% - 100%. AVAILABILITY Open as at 1 July 2018 for additional investments from existing investors. New investors please contact Investor Relations at info@pefcapital.com.au for further details. Risks and considerations Before deciding whether to invest with PEF Capital, it is important to understand that our product is subject to different types of risks including investment strategy; market; key person and counterparty; derivative; liquidity; and regulatory risks. Please read the Information Memorandum for further information on each risk type. Any advice in this document is of a general nature only and does not take into account your personal circumstances. 5

8 Contact us... DIRECT CONTACT Stephen Arulogun Chief Investment Officer PEF CAPITAL - INVESTOR RELATIONS info@pefcapital.com.au Level 4, 155 Queen Street, Brisbane City QLD