PM Capital Absolute Performance Fund

I read about this fund in the Eureka Report, and I followed up a bit today.

Many of you will know that I'm not big on MFs in general, as I like the challenge of setting my own share portfolio (Aussie shares). But since my international exposure is limited to my wife's and my super (both 100% international shares through industry funds, about $150k total), I'm interested in going overseas some more.

Also, with the AU dollar above normal levels, and international shares generally underperforming in the last few years, I reckon the time is right.

Now, $1.00 in the PM Capital Absolute Performance Fund from Nov 1998 'til now is worth $1.63 plus paid $0.727 in distributions, or about 10% total return pa. The website claims 11.7% up until 30 Sept, which has whipped the MSCI (around 3% in the same period).

About $1.5b in the fund, MER 1.09% plus performance fee (I've ordered a PDS... I'll post the details of the perf fee later), $20k min investment.

It seems to be directly available to retail investors, with no entry/exit fees or trailing commissions (0.5% buy/sell spread).

So far I like what I've read.

Some stuff from the website (H-SPHERE):

Investment objectives
The objective of the Absolute Performance Fund is to provide positive investment returns over a three year plus investment horizon by investing in a concentrated portfolio of undervalued equities listed on global stock exchanges. The goal of the Fund is not to replicate the standard industry benchmarks such as the MSCI. It is likely that the Fund will have varied outcomes from that of a traditional index benchmarked fund.

The Fund is managed from an Australian investor’s perspective. Tax and currency exposures are important considerations in the daily management of the Fund.

Investment strategy
The investment process is built around the simple principle that the best way to preserve and enhance your wealth over the longer term is to “buy a good business at a good price”. The Absolute Performance Fund is a focused portfolio, with approximately 35 to 45 stock specific ideas diversified across global equity markets. All of the portfolio positions are subject to intensive research and peer group review.

Stocks are selected on a risk reward basis where the objective is to focus on the risk of losing money before focusing on the potential return. If appropriate opportunities cannot be found the Fund will hold cash until new opportunities arise. If appropriate, the Fund may be 100% invested in cash.

PM CAPITAL can use derivatives and sell stocks short as a risk management tool. The primary use of derivatives and short selling is to reduce market risk in situations where we believe certain stocks are overvalued. The level of direct shorts will not be in excess of 20% of the portfolio.

Leverage can be used up to a maximum of 20% of the net asset value of the Fund. Leverage is used on an opportunistic basis, for example, where gross dividend yields exceed borrowing costs.

The Fund has a wide investment universe in that there are no formal restrictions based on country, sector or company size. We seek to invest wherever the greatest opportunities exist.

Currency exposure within the Fund is actively managed with the objective of delivering positive $A absolute returns. Protecting stock returns or minimising the risk from currency movements is the major consideration in hedging. The level of hedging will depend on the investment manager’s expectation of future currency exchange rate movements. PM CAPITAL may elect to hedge up to 100% of the foreign currency exposure.

Margin Lending
The following institutions offer margin lending arrangements into the funds offered by PM CAPITAL:
BT Margin Lending
Merril Lynch Margin Lending
Colonial Margin Lending
National Australia Bank Margin Lending
CommSec Margin Loans
Salomon Smith Barney Margin Lending
Leveraged Equities
St George Margin Lending
Macquarie Margin Lending

Anyone else had any experience with this fund?

Hi Rod,

Where I used to work we used it.
I prefer AXA/Bernstein Global Value Equity fund personally (NML0348).

That's IMHO.

Cheers,

Dan

PS The above is a personal view and not an investment recommendation. Speak to your FPA registered Financial Planner, Accountant or Tax Adviser.

Thanks Dan. I'll check that out too.
Cheers
- Rod

Since putting $10k in a year ago (minus $400 application fee) my experience has been a fall of around 17% (now worth around $7940) and a distribution of only $88 so far. I've been spending a year wondering why my financial adviser put my into it, but if Eureka think the future is looking rosy, I'd be interested to know about why they say that. Cheers, dallee

We were in this fund through our old portfolio, and won't be going back to it as it has dropped -3% p.a for the last 3 years. Over 5 years it did slightly better at a 3.51% p.a growth:

Fund Profile

Over the same period, check out the returns from Dan's suggestion. Clearly a difference no?

Not hugely, no. Negative growth and no income in both over the past 3 months. Almost be tempted into an index fund if it wasn't for the fact that the A$ may be on its way down. Dallee