Zentih rates Global Long/Short Funds.

Global Long/Short Funds rated approved or above by Zenith Investment Partners returned an average of 36.6% compared to the MSCI World index return of 32.8% for 12 months to 30 June 2013, while volatility levels were similar.

James Tsinidis, Research Manager – Alternatives at Zenith said “It is actually somewhat of a surprise that our global long/short funds have beaten the market over the past 12 months given the strong rally. While most of the funds on the approved list are typically long biased, many of them will hold higher levels of cash and have some shorts on. This will generally hold back returns in an upswing.”

Tsinidis noted that part of the reason some of the funds exceeded the index was because they were using their greater mandate flexibility to execute their investment ideas to full affect. For example, some of the Funds have moved into parts of the market that were out of favour (i.e. down the market capitalisation spectrum, unloved sectors, etc.) and were able to do this comfortably knowing that they have higher cash levels or some shorts in place to offset these positions. Other managers have utilised their ability to increase gross leverage in the portfolios so as to maximise some of their high conviction trade ideas.

Tsinidis went on to say, “over the longer term the Approved Listed funds have tended to do well in their portfolio positioning. We have gone back and looked at how the individual fund net exposures have changed over time and they generally seem to be very capable when it comes to removing or taking on more market risk.”

Of the 27 funds rated in Zenith’s Global Long/Short Sector Review released this week, only three funds achieved Zenith’s top rating; and all three were Platinum Asset Management funds (Platinum International Fund, Platinum International Brands Fund and Platinum Asia Fund). In terms of ratings moves, the PM Capital Absolute Performance Fund was upgraded to Recommended after some positive changes at the firm over the last year.

Zenith’s complete Approved Product List for the Global Long/Short Sector is shown in full below:

Global Funds

• Platinum International Brands Fund – Highly Recommended
• Platinum International Fund – Highly Recommended
• PM Capital Absolute Performance Fund – Recommended
• K2 Select International Fund – Recommended
• Five Oceans Wholesale World Fund – Approved

Regional Funds – Asia

• Platinum Asia Fund – Highly Recommended
• K2 Asian Absolute Return Fund – Recommended
• Premium Asia Fund – Recommended
• Regional Funds – Other
• Platinum European Fund – Recommended
• Platinum Japan Fund – Recommended
• Premium China Fund – Recommended

Sector Funds

• Pengana Asia Special Events Fund – Recommended
• Pengana Global Resources Fund – Recommended
• Platinum International Health Care Fund – Recommended
• Platinum International Technology Fund – Recommended
• Premium Asia Property Fund – Recommended

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From an initial universe of 34 Domestic Long/Short Funds Zenith has rated 3 funds “Highly Recommended”, 14 funds “Recommended” and 1 fund “Approved”. The 18 funds that were rated are shown below with their respective ratings and segregated into Global Funds, Regional Funds and Sector Funds.

Global Funds
Platinum International Brands Fund –  Highly Recommended
Platinum International Fund – Highly Recommended
Five Oceans Wholesale World Fund – Recommended
K2 Select International Absolute Return Fund – Recommended
PM Capital Absolute Performance Fund – Approved

Regional Funds
Platinum Asia Fund – Highly Recommended
K2 Asian Absolute Return Fund – Recommended
KIS Asia Long Short Fund – Recommended
Platinum European Fund – Recommended
Platinum Japan Fund – Recommended
Premium Asia Fund – Recommended
Premium China Fund – Recommended
8IP Asia Pacific Partners Fund – Recommended

Sector Funds
Platinum International Technology Fund – Recommended
Platinum International Health Care Fund – Recommended
Pengana Asia Special Events Fund – Recommended
Pengana Global Resources Fund – Recommended
Premium SAM Asia Property Fund – Recommended

Platinum’s Ratings – Zenith Maintains Strong View
Given the prevalent use of Platinum by our clients and the questions that have come up around the recent underperformance of some of Platinum’s funds, we thought it would be useful to provide a brief comment on why we have re-affirmed our strong ratings on Platinum’s suite of products post this year’s due diligence reviews.

While some of the Platinum funds have had softer performance numbers more recently, we are inclined to continue to back the manager. We note that Platinum takes very contrarian views on many stocks and themes in the market and that this style of management does not work consistently across the market cycle.

In more recent times the manager has been positioned in areas that have been overlooked and neglected by the market based on risk off trades. Zenith feels that investors that hold the course with Platinum are likely to be rewarded. Historically, given Platinum’s high conviction style, when performance has turned it tends to turn quite quickly.

Overall, Zenith believes that the level of quality across the Platinum team remains excellent and from the meetings with all of the portfolio managers across the firm we believe that they remain across all the issues in their portfolios.

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