NZARA now on LinkedIn...

Hi - we now have a group for NZARA on LinkedIn. Feel free to look it up. This is a useful way to stay in touch with the New Zealand alternative investment industry and NZARA members in particular. We are looking for two-way communication and discussion of those topics that members think are important. If you are a manager or an investor, please feel free to make contact through the group on LinkedIn. Go to www.linkedin.com . Search for "New Zealand Absolute Return Association Inc".

NZARA update...October 2011

Hi. Welcome back to the NZARA Blog. The core NZARA group continues to operate in what is a very challenging environment for investment managers - both from a market environmental perspective, and also from a regulatory perspective. New Zealand managers are coping well in context, albeit with year-to-date performance that is slightly negative (see chart above -3.57% YTD). With global equities down almost 14% YTD at the end of September, it appears that there remains significant diversification benefits from being exposed to New Zealand managers in a portfolio. The HFRX Global Hedge index is down over 8% YTD which shows that not only are New Zealand managers an appropriate diversifier for a standard portfolio - but also for an hedge fund portfolio. The index is still annualizing at above 12% over its 4 year history - through one of the worst episodes in financial market history. The association continues to experience steady membership growth with several innovative investment strategies making their way onto the NZARA roster over the last 12 months. As usual, the NZARA members will meet in December in Auckland for an end-of-year function - this year on Auckland's beautiful harbour. This will be a time to catch up with each other as well as to introduce the managers to a range of important local investors. Please feel free to make contact if you wish to have more information on the NZ alternatives industry and/or its constituent managers.

Ernst & Young NZ Absolute Return Index - progress...

Hi all.

Time for an NZARA Blog update. The Ernst & Young New Zealand Absolute Return Index continues to build on its successful history, finishing April 2011 at +4.372% year-to-date. The index is annualizing at over 16% per annum after a 2010 annual performance of +10.517%. The index currently has six managers representing a balance of global equity beta, commodities, trend-following and tail risk with a new manager being evaluated that will further diversify the asset class exposures. There is substantial interest coming through to develop the index into investable products. Although the index was designed to promote the competency of New Zealand investment managers, developing investable exposures to the index has always been encouraged. We will update you with further as it develops. Talk to you all soon.

June 2010 Update

Hi. Its been awhile since I posted to the NZARA blog so I thought it was time to give you a quick update.

The core NZARA group remains intact although more geographically disparate with members partially emigrating their businesses as a result of the growing due diligence pressures. The news has been good overall with those having made the commitment benefiting in increased assets under management. It is clear there are still benefits to having a presence in NZ with operational staff remaining here. We expect this trend to continue.

The Ernst & Young Absolute Return Index (see chart below) is down slightly for the year - essentially treading water in 2010 but we now have close to a 3 year track record - and what a track record it is - annualizing at over 15% through one of the more difficult trading environments of the last few decades. See the Index Performance page at http:/www.nzara.org.

We have some congratulations to offer one of our individual members, Tony Cooper, an expert quantitative analyst (and principal) with Double Digit Numerics who won first place in the US-based National Association of Active Investment Managers (NAAIM) Wagner Award for Advancements in Active Investment Management. Tony's paper focuses on alpha generation and risk smoothing using volatility of volatility. The paper produces a formula for the optimal leverage of an investment in any given market volatility environment. Tony's success led to being interviewed live on CNBC in the US. Congratulations Tony!

Opalesque New Zealand Roundtable...

Hi. Opalesque's Matthias Knab recently came down to New Zealand to do the second Opalesque New Zealand Roundtable - the first one took place in 2008. Of course the balanced performance of the Ernst & Young New Zealand Absolute Return Index over the last couple of years came up in the conversation. For some insight into the thinking of New Zealand managers and investors - please go to:

http://www.opalesque.com/RT/RoundtableNZ2010.html

Thanks to all who took part.

NZARA appoints the executive team for 2010...

Hi. At a meeting today (March 11 2010) a quorum elected the following to executive roles within the New Zealand Absolute Return Association Inc. The executive is:

Anthony Limbrick - Chairman (reappointed)
Mark Sleeman - Deputy Chairman (new)
Monique Le Roux - Secretary (new)

Contact details are available on the website at www.nzara.org

Equities boost July index performance...

Hi there

The good performance continues for the Ernst & Young New Zealand Absolute Return Index – up almost 3% in July and up over 8% YTD.

The index was +20% last year and +8% over its first 6 months in 2007.

The index continues to demonstrate how a well-balanced portfolio may avoid the problems of beta or other macro problems.

The directional/volatility strategies which did so well last year are not doing quite as well this year – but the equity and commodity components are going great guns – and thus we have a very smooth return series through one of the worst environments in memory.

In July the biggest contributor was Australasian small cap manager, Pie Funds (+8.6% MoM), which is up over 50% year to date. Another strong performer was Commodity Strategies. Their NZARA Average was + 7.95% in July putting them +14% YTD. Well done guys.

More than a one trick pony...NZ funds up in May 09

Hi there. The Ernst & Young New Zealand Absolute Return Index had a strong year in 2008. The index was +20.4% with most of the gains attributable to directional, trend-following, volatility and commodity strategies. This led some to comment that the index was really only a CTA index as its correlation with CTA's was high. 2009 is proving that our index is indeed more than a "one trick pony". May 2009 saw a strong move higher for the index, correlating highly with the global HF industry and equities - at a time that we would think it would be appropriate. The index was +6% for the month, putting it +7.5% for the 2009 year so far. The index is now annualizing on a compound basis at 19.95% with the largest peak to valley draw-down so far being -6.5%. New Zealand managers continue to demonstrate competence in investment management.

New Zealand index holding its own...

Hi. Well...after running high correlation co-efficients with managed futures strategies last year, the Ernst & Young New Zealand Absolute Return Index has proved its mettle to the end of April, +1.877%YTD to the end of April, a year on year return of 12.7%. The index is annualizing at just under 17%. Managed futures strategies are currently down on a YTD basis so it is good to demonstrate that New Zealand managers as a group are not a "one-trick pony". It is also great to see the equities strategies kicking in, with one of the managers, Pie Funds, posting a 14% return in April. Diversification sometimes works!

Momentum...and movement....

Another couple of months and the New Zealand absolute return industry moves on...in a couple of ways. Year to date performance for the Ernst & Young New Zealand Absolute Return Index retains positive momentum (+2.495% YTD to the end of Feb) and annualized returns are running circa 19.50%. This is mildly spectacular in the current environment. We are getting some local media coverage this week and a new global PR campaign is due to start soon. Some local managers are seeing substantial asset inflows against a global redemption trend. But this doesn't take away the fact that some of us are being driven to giving up on making New Zealand a global base for operations. In New Zealand, and nearby, there are some great strategies run by some innovative teams. But put the current global economic environment against the distance from customer-base with which most of us deal with, and there needs to be compromise. And so it is that we "fare thee well" to most of the 36 South Investment Managers team as it moves its centre of operations to London. Some members of the investment team and administrative staff will continue to reside in New Zealand, but the key principals are off to London to leverage a strong performance record from the last few years. So is there a lesson here? I believe so. We have to start thinking globally - which means accepting international geographical representation for our businesses is a "must". My business Pure Capital is doing just that, establishing a full European presence to harness both business development and timezone efficiencies. We are partnering with a European business to break down some of the initial barriers. I believe this is a logical development for the New Zealand Absolute Return Industry and will eventually lead to a situation where we retain the lifestyle and other benefits - whilst continuing to grow our businesses - and their potential for even greater growth.

A strong year for New Zealand managers

Well - the final numbers for 2008 are in for the Ernst & Young New Zealand Absolute Return Index - and it was a good year. The index finished the year +20.398% YTD after a +2.372% monthly performance in December. Since inception in June 2007 the index has posted a cumulative gain of 30.508% and is currently annualizing at 19.97%. Performance for the year was driven by strong gains in volatility, trend-following strategies and to a lesser extent, commodities. Equity market strategies suffered in line with broader market weakness but saw some late strength in December. We are now getting some interest in putting together a fund based on the index...so watch this space.

Another good month for New Zealand managers...

Hi - another good month for New Zealand managers with the Ernst and Young New Zealand Absolute Return Index returning +1.502% in November making it +17.597% year-to-date. Since inception the index has returned +27.471% and is currently annualizing at +19.24%. In terms of sectoral performance - weakness in global equities again in line with global equity indices, and strength in volatility and tail risk strategies.

Anthony Limbrick

Chairman

NZARA

Amber Partners on Madoff

Hi

Amber Partners, a London-based hedge fund certification business recently put out an interesting Amber Alert (comment) on Madoff.

Key points made were:

1. Investors who invested directly with Madoff did not buy shares in an offshore company or partnership interests in an onshore limited partnership.
2. It was extremely unusual for a firm of Madoff's size and supposed reputation to utilize an audit firm which was quite clearly not one of the "top 4" firms nor a specialist in auditing broker-dealers.
3. Amber Partners has never known a broker that refuses to send trade tickets to clients, other than in hard copy form via the postal system.
4. Madoff was infamous for not letting investors visit their offices to performan any on-site due diligence.
5. Many who invested with Madoff recognized the risks involved. A logical counter argument to all of the above "red flags" was that there would have to be substantial collusion within Madoff for such a fraud to go undetected for such a long period, and there was also the fact of his continued regulation by SEC and FINRA.

If you want a copy of the release, please register at the NZARA website (www.nzara.org). Once website access has been granted you may find the document in the Library on the site. You could also register on the Amber Partners website at www.amberpartners.com for future alerts and announcements.

Regards

Anthony Limbrick

From the FT - "Ten reasons to..."

Hi

The Financial Times (http://www.ft.com/) has some excellent columnists and their Alphaville blog (http://ftalphaville.ft.com) is a great way to get a real time view on market developments.

With the Madoff disaster putting the global alternative investment industry under even more pressure, I thought it was time for some educated light relief.

Please see the link below for "Ten reasons why you should hug a hedgie" from the Lombard column. Amusing - but also some good points made - points that should be considered before the proverbial "baby" is thrown out with "bath water".

http://www.ft.com/cms/s/0/0f5e33aa-cbdc-11dd-ba02-000077b07658.html

NZARA Endorses CAIA

Hi there,

As of this week the New Zealand Absolute Return Association (NZARA) is happy to endorse the Chartered Alternative Investment Analyst Association (CAIA), the global organization responsible for education of investment professionals active in the alternative investment industry.

CAIA's Chartered Alternative Investment Analyst qualification is a best-practice educational standard, now attempted by thousands of applicants from across the globe every year.
Please note the links below for more information on the CAIA program.

Preliminary Diagnostic Review - a test of the traditional finance material that candidates are expected to know).

Study Guide.

Mini Quiz (a sampling of CAIA test questions).

Candidate stats.

Representative firms.

Global chapters.

Meet a CAIA Member.

CAIA website.

Please note a representative of CAIA is likely to be visiting Australia and New Zealand in early 2009.

Response to the NBR article...

National Business Review today published an article with the headline "John Key annoys local hedge fund managers".

The New Zealand Absolute Return Association (NZARA) would like to clarify that the New Zealand investment managers represented by the association are not "annoyed" with the Prime Minister but have noted his comment regarding hedge funds, and take that as a continuity from recent statements implying improved disclosure may be one of the areas to get a regulatory boost. If this were to be so, NZARA would welcome this initiative. We believe transparency is healthy for all involved in the investment management industry, be they investment managers, investors or regulators.

Anthony Limbrick
Chairman
New Zealand Absolute Return Association

Link to the National Business Review article is below:

http://www.nbr.co.nz/article/private-bin-john-key-annoys-local-hedge-fund-managers-38262

A new member of the New Zealand index...

Pie Funds, an Auckland-based absolute return equity manager is to join the Ernst & Young New Zealand Absolute Return Index.

Pie Funds was founded by Mike Taylor and Richard Avery-Wright in 2007. Their flagship fund is the Pie Australasian Growth Fund which focuses on small to mid cap stocks and short term opportunistic trading.

The fund is unleveraged but has the ability to short futures and trade options for downside protection. Since inception, the fund has outperformed the ASX small cap index by around 20% p.a.

Link here: http://www.piefunds.co.nz/

New Zealand Prime Minister John Key on hedge funds...

From Reuters

"We can no longer afford to ignore the effect that the amount of risk that hedge funds are able to take through leverage that is arguably completely disproportionate to the real economy," said Key.

Link here:

http://www.reuters.com/article/bondsNews/idUSN2148103820081121

Some good media coverage of our performance...

Hi

There has been some good media coverage of the Ernst & Young New Zealand Absolute Return Index over the last few months.

See below for links:

http://www.opalesque.com/AMB2008/47677Australasia_Ernst_and_Young_New_Zealand.html

http://www.hedgemedia.com/articles/detail.jsp?content_id=277018

http://www.hedgeco.net/news/11/2008/new-zealands-absolute-return-managers-index-surge-in-october.html

http://www.scoop.co.nz/stories/BU0811/S00397.htm

http://www.nzherald.co.nz/best-of-business-analysis/news/article.cfm?c_id=1501241&objectid=10539214

Another good month for New Zealand managers...

Hi there

October 2008 was a good month for most of the New Zealand investment managers represented in the Ernst & Young New Zealand Absolute Return index. The index was +15% YTD, and +2.8% for the month.

Before I tell you who the managers are, firstly understand that they are wholesale-only - and are not available for retail investment. They may also expose one's investment to substantial risk - so make sure any offering documentation is read thoroughly so that all risks are fully understood. Past performance is not necessarily an indication of future performance. And when I talk about performance I am talking about that firms "NZARA Average".

There is a strong representation by trend followers and volatility/tail risk in the group. Trend-follower, MS Capital Management was +25% for October, targeted non-correlation manager Pure Capital (my team) was +6% and volatility and tail risk manager, 36 South was +4% for the month. One of the more interesting performances was Commodity Strategies, a commodity trader that was +4%. A great performance considering how weak commodity markets have been. This was the result of a long-short commodity product they run.

These are difficult times. It is satisfying to see New Zealand managers proving they can hold their own in challenging markets - and performing well against global peers.

For more information on the index, please go to http://www.nzara.org/

Regards

Ant Limbrick
Chairman - NZARA