Joining Regional Business Development Manager, NSW and ACT Alex Keen, this newly created role will be primarily responsible for managing relationships with regional NSW advisers, which represent approximately 67% of the adviser population in the state.

Damian Crowley, Director of Distribution at Pengana, said: “We’re very pleased to expand our distribution team in NSW to support regional advisers. Ryan has a demonstrated track record of managing long-term relationships and supporting advisory businesses. This expansion of our team is key in driving our growth strategy forward, in particular with the launch of our private equity listed investment trust this year.”

Mr Crewe joins Pengana from BlackRock Investment Management, where his most recent role was in the business development team, responsible for business development and client relationship management across regional NSW and ACT. Prior to that he was a Junior Investment Analyst at boutique funds manager APT Wealth.

Mr Crewe holds a Graduate Diploma of Applied Finance and Bachelor of Business (Finance and Marketing) and is currently completing a Master of Business Administration.

Mr Crewe will be based in Pengana’s Sydney office.

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Damian Crowley

Australian funds management group Pengana Capital (Pengana) has reinforced the value of investors diversifying sources of return across their portfolio, highlighting the ability of its Asia Pacific event-driven fund to deliver smooth returns during volatile markets.

The Pengana Absolute Return Asia Pacific Fund (PARAPF), which has a recommended rating from both Lonsec1 and Zenith2, invests across multiple investment strategies and geographies to take advantage of structural changes and growth occurring across the Asia Pacific region.

The fund can exploit structural changes occurring in the region such as China State-Owned Enterprise privatisations, and invests in companies undergoing corporate activity including M&A deals and capital management initiatives.

Singapore-based Portfolio Manager, Vikas Kumra, said PARAPF had built up an enviable track record since its inception despite shaky market conditions, delivering returns of 10% per annum in the last 7.5 years, compared to 2% per annum returns from the Asia Pacific equity markets and the Reserve Bank of Australia’s cash rate of 3% per annum.

“The Asia Pacific region can deliver some exciting opportunities for investors, with this fund delivering absolute returns and offering investors diversification to their portfolios. One such example is that the region is pregnant with M&A activity: we are seeing circa 800 to 1,200 M&A deals coming to the market each year, which the fund can potentially capitalise on.

“With heightened market volatility recently, the investment team has been able to take advantage of indiscriminate selling to add to some of their high conviction positions in company deals coming to completion. As these are stock specific events, they are unrelated to market movements and offer attractive diversification benefits.”

Commenting on the recent global sell-off, Mr Kumra added: “When you look at the recent sell-off in the Asia Pacific markets, with 4% drops per annum in the last three years, funds such as PARAPF provide a great deal of comfort, delivering real returns despite micro uncertainties and extremely volatile conditions. In that same period we are pleased to have delivered 6% per annum returns and preserved our investors’ capital.”

Fund moves to daily pricing
Pengana today announced to clients that PARAPF has now moved to daily pricing, aligning the Fund’s pricing and processing of applications and redemptions with all Pengana Funds.

Pengana Director of Distribution, Damian Crowley, said the move was in response to strong interest from the investment community for daily pricing to be applied to a broader range of funds – and as interest in the PARAPF strategy has grown amongst Australian investors and advisers.

“Today’s investors are seeking daily liquidity and daily investment returns, and we are excited to be able to offer this service for PARAPF investors,” he said.

Pengana manages around AU$1.7 billion in assets across six established equity strategies spanning Australian shares, Australian small caps, global resources, global small caps, global equities and Asian event driven.

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Rachel Elfverson has been appointed as Regional Distribution Manager for Queensland and Alex Keen as Regional Distribution Manager for New South Wales.

In their new roles, Ms Elfverson and Mr Keen will be responsible for sales via dealer groups and financial advisers across Pengana’s suite of funds.

Ms Elfverson brings more than 25 years’ experience in the financial services industry. Prior to joining Pengana she held senior business development roles with Australian Unity’s Lifeplan Funds Management and BT Financial Group. Mr Keen brings more than seven years’ experience in the fund management industry. He most recently worked for Fidante as Senior Business Development Manager and previously for Equity Trustees as Key Account Manager.

Damian Crowley, Pengana’s Director of Distribution said: “Alex and Rachel both bring extensive experience working with dealer groups and financial advisers in areas including compliance management, practice development and business development. Their wealth of experience makes them well suited for the Regional Distribution Manager role.”

Pengana has also appointed Nicole Thompson as Marketing Manager. Ms Thompson brings more than 15 years’ marketing experience in the financial services industry and joins from NAB Asset Management where she was a marketing consultant. Prior to this role she was a marketing manager at BT Financial Group and Colonial First State.

The appointments bring the Pengana marketing and distribution team to nine people.

Mr Crowley said Pengana had grown its marketing and distribution team in response to a significant increase in the number of dealer groups and advisers using Pengana funds, as well as the ongoing growth in Pengana’s suite of funds and assets under management. During 2015 Pengana’s suite of funds increased to seven covering global and Australian long only, long short and market neutral absolute return equities strategies. Overall assets under management have increased by more than 40% in the last two years, growing from $970 million to $1.5 billion.

Mr Crowley said the manager continued to focus on offering investment solutions that generated absolute returns for investors – not returns relative to an index.

“We’ve seen growing demand for our solutions as both investors and their advisers look for ways to achieve specific portfolio outcomes despite ongoing uncertainty across global markets,” Mr Crowley said.

In August, Pengana entered into a strategic agreement with leading US quantitative manager PanAgora Asset Management to introduce a number of new quantitative strategies for Australian advisers and retail investors.

The first Pengana PanAgora fund, a Global Equities Market Neutral Fund, is expected to be launched by Christmas.

The expanded Pengana distribution team will continue to work closely with its partners NAB Asset Management in taking the group’s investment solutions to advisers and their clients.

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Rhett Kessler

Australian investors can survive local equities market turmoil – such as that experienced in August and September – if they focus more on strategies that can deliver absolute returns not just returns relative to an index, according to Pengana Capital.

Rhett Kessler, senior fund manager for the Pengana Australian Equities Fund, is currently speaking at an adviser roadshow where he is discussing how the Fund has managed the recent market volatility for the benefit of its investors.

At a briefing yesterday Damian Crowley, Pengana’s Director of Distribution, introduced the roadshow by highlighting that 90% of the risk in traditional portfolios came from equities. On top of this, the majority of directly held stocks are in the top 20 largest stocks listed on the ASX. For managed funds, most people’s money is invested in mainstream “benchmark aware” strategies – ie strategies that are also heavily weighted to the ASX top 20 or top 50 largest stocks.

The result of this concentration is that when markets take a dive, investors’ portfolios inevitably head into negative territory, destroying precious capital.

Mr Kessler said the best way for investors to maintain a path to financial independence was to preserve capital and try and minimise the impact of equity market falls, while also achieving a decent return.

“Part of doing this means when markets get crazy and expensive, and people are getting greedy, you stay focused on your investment goals and don’t simply run with the herd,” Mr Kessler said.

The Pengana Australian Equities Fund invests in a concentrated portfolio of around 20-25 stocks and has an overarching goal to preserve investors’ capital and provide downside protection in difficult markets – generating a fair return of at least 6% above the cash rate, no matter what markets are doing. The Fund is benchmark unaware – ie it invests in companies purely on their investment merit and not based on their weighting in the index.

As part of its ‘absolute return’ approach, the Fund is also able to hold unlimited amounts of cash if suitable investments can’t be found. For this exact reason its cash position had been building up over the first two quarters of the year. During August and September the Fund was able to take advantage of big falls in the share prices of great companies (as greed to turned to fear) to convert cash into investments aimed at preserving capital and generating solid returns.

“Many investors berate their managers for holding cash, saying it’s easy to sit on the sidelines and not what they’re paying management fees for. However when markets dive and everyone is heading for the exits, we are able to reach for our wallets and buy things at great prices,” Mr Kessler said.

“We gorged on cheap stocks in August and September… It’s when there’s the proverbial blood in the streets that you want to be able to buy.”

During August and September the ASX All Ords returned -7.3% and -2.5% respectively. Substantial purchases made by the Fund during the period included a material holding in Duet Group during and following its capital raising to acquire Energy Developments; a material increase in holdings in Spotless Group during the sell down by PEP; and a holding in Contact Energy, benefitting from Origin’s sell down. The Fund also added to existing positions and acquired several other new smaller holdings.

Mr Kessler said Australian investors were getting wiser about how to manage inevitable volatility – and that people “really want to be able to sleep at night”.

“We have a long track record for assessing risks and being disciplined in picking stocks that can both preserve capital and make money – and this really resonates with our very wide investor base,” he said. “It’s possible to be protected, and to gain opportunities in down markets, if investors consider strategies that are focused on delivering absolute returns not just returns relative to an index.”

Since inception in July 2008 the Fund has returned a seven year annualised return of 11.0%*- growing a $100,00 portfolio to $213,387 during that period – with no negative years – versus a $130,533 outcome for the same amount invested in the ASX All Ords Accumulation Index.

Pengana currently manages around A$1.5 billion in assets across five established equity strategies spanning Australian shares, Australian small caps, global resources, global small caps, and Asian event driven.

*Total return after fees and expenses and assuming reinvestment of dividends to 30th September 2015.

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Diversify in to alpha: Pengana

Investors should look to alpha-focused strategies because they do not depend on market direction and they are uncorrelated or lowly correlated to market indices, a leading fund manager advises.

Pengana Capital’s Damian Crowley says that ‘beta-investment strategies which generate returns mainly due to the market are unlikely to perform as well in the next three to five years’.

Crowley agrees that alpha managers may introduce new risks to portfolios, but he adds, ‘the more fundamentally different risk-and-return drivers that are in a portfolio, the more diversification it has’.

The assumption that markets are efficient and that investors should be ambivalent about the timing of their investment is not borne out in practice,’ he says.

‘Equity market beta – the return attributable to the market only – is a volatile and unpredictable source of returns. It can generate significant gains and losses, and gives limited diversification from other equity markets. Also, timing is everything in this area.’

In contrast, Crowley says, a market-neutral strategy has a low exposure to movements by hedging out the market risk through short positions in equities or equity derivatives such as futures.

‘Because most of the market risk is removed, the returns are generated by the manager’s investment skill, rather than rises or falls in equities overall,’ he says.

This alpha is far more stable, consistent and predictable, he says. The range of returns and maximum peak to trough loss (or maximum drawdown) is far narrower and the correlation with the equity market is negative in a number of periods.

As to the cost, Crowley says ‘beta is cheap, but it isn’t free’. The management of a beta only portfolio can approach 0.5 per cent a year, taking into account market impact, rebalancing, holding costs and commissions.

‘Alpha on the other hand is more expensive, but it’s scarce so arguably it should be,’ says Crowley. ‘Hedge fund managers typically charge higher fees when compared to traditional long-only managers, but expressing the fee as a percentage of the alpha generated puts hedge fund managers in a far more favourable light.’

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