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.