How this fundie made 17pc in March

Nicolas Bryon Fun ManagerOriginally published in the AFR Apr 27, 2020 by Robert Guy

Nicolas Bryon has an unorthodox belief: he actually believes in market timing.

A willingness to rebuff the accepted market wisdom warning about the perils of doing so allowed the fund manager to outshine the “time in the market” crowd with a 17.2 per cent return in March.

Having navigated the volatility that torpedoed the track records of many of the market’s most feted hedge funds, the portfolio manager of the Atlantic Pacific Australian Equity Fund warns there may be more downside as investors confront the “sticker shock” of high unemployment and the fallout on consumer spending.

Bryon’s wariness is founded on his experiences travelling through Asia after the region’s financial crisis of the late 1990s, a massive shock that not only felled a number of economies but triggered a reshaping of societal views on spending and the use of debt.

“Once the Asian economies went through the Asian crisis their whole perspective changed. They weren’t willing to take on leverage, they weren’t willing to spend willy-nilly. A level of frugalness came back into the populace.”

He sees the prospect of a similar dynamic playing out in the wake of the COVID-19 crisis, which has produced massive job losses as social distancing restrictions have come into force and economies have been placed into hibernation mode.

“When you have people blindsided by COVID-19, not necessarily getting another job for another year, the psyche of those individuals will change,” he says.

“It’s going to be 10 to 15 per cent of the population who thinks that way. There will be the haves and have-nots, not that it’s any different to what we had before, but I think the have-nots are going to have major issues with propensity to spend.”

Bryon, whose fund has around $30 million in funds under management, says he had been expecting a sell-off for about a year given the more than decade-long bull run and the extended valuations of many popular, and richly valued, stocks.

He adds the reporting season in February didn’t provide the positive earnings trajectory needed to justify valuations.

The fund typically has a long bias – but is very rarely at 100 per cent net exposure – but is focused on downside risk management and capital preservation.

The fund, established in 2013, has a track record of outperforming when the market declines more than 2 per cent.

Bryon’s belief in market timing is based on the exposure of stocks to large declines and his desire to avoid “sequencing risk”, or the need for investors to access their funds as they retire.

“If you look at the peak of the GFC and the recent peak, the annualised return was about 5 per cent,” he says. “But in the meantime you’ve drawn down half your capital and it’s taken you 12 years to get 5 per cent annualised returns.

“To me, given that equities are a high-risk investment vehicle, if I can take those drawdowns out then I will.

“That’s why I have a bias to saying if you can time the market then fantastic.”

Predicting risk not events

He also disagrees with the idea that big sell-offs like that seen in March are Black Swan events, or events that cannot be forecast.

“I just don’t agree with that concept because these things happen quite regularly. You can’t predict it, it’s nothing you can predict, but they happen all the time.”

“If your mentality is that you know these things are going to happen and you have the tools to protect capital when these things do happen, then why wouldn’t you use those tools? That’s what we do.”

That tool is an analytical system he calls HALO, which feeds into what he calls the quadruple alpha process. That’s a combination of fundamental stock analysis, event analysis, an understanding of macroeconomic issues, and quantitative analysis.

“It’s also experience of looking at markets, how to interpret economics, knowing when markets are risky,” Bryon says.

The combination of analysis and experience paid off in March.

Read the original article here: https://www.afr.com/markets/equity-markets/how-this-fundie-made-17pc-in-march-2020

Sydney-Based Fund Delivers Exceptional Performance in Unprecedented Market Volatility

Originally published 30 March 2020 in the Australian Stock Report by Tim Montague-Jones.

Fears surrounding the global economic impact of a widespread COVID-19 “Coronavirus” outbreak have shaken investor confidence and sent markets around the world into meltdown. It was as recently as February that the market was sitting at all-time highs off the back of a decade long bull run. Since then we have seen the market crash significantly coupled with wild swings in both directions.

This type of unprecedented market volatility would make most people want to run and hide, however, there has been one Sydney-based fund manager who has continued to deliver returns for investors where others have failed.

The Atlantic Pacific Australian Equity Fund (APAEF) from APSEC Funds Management has been operating since 2013 with a risk management mantra and a natural instinct to protect investor capital. Given the current market climate this strategy has been particularly effective and throughout this difficult period, the Managed Fund has performed exceptionally well versus the market.

Since 20th February to 27th March the S&P/ASX 200 has fallen dramatically by over 30.1%. The Fund, however, has performed exceptionally well by comparison and as at 27th March the Fund is currently up over 11%.

apaef-performance-29.03.20

Note: The estimate for the Fund’s performance up to the end of 27 March 2020, is a preliminary internal estimate only. This has not been validated by the Fund’s administrator. Things can change rapidly in current market conditions. Chart is accurate as of 27 March 2020. Returns have been calculated to include management and performance fees.

 

Proven Performance in Down Markets

While the Fund’s performance has been nothing short of exceptional in an extremely volatile market, it is the result of careful, meticulous investment strategy coupled with the use of cutting edge investment research technology from fund managers Nicolas Bryon and George Paxton.

Nic and George started Atlantic Pacific Australian Equity Fund (APAEF) back in June of 2013 with the goal of outperforming the market by capturing upside returns while minimising downside risk. The team bring a wealth of experience to the table with a combined experience of over 30 years of successfully navigating financial markets and have demonstrated how this experience can reap rewards. After all, they have been here before. Co-fund manager George Paxton has over 15 years experience in financial markets and has a history of outperforming when the market is down:

Historically we have tended to outperform in falling markets, in fact, since the inception of the fund we have outperformed in every period where the market has fallen except one. Looking forward, once we get past this current volatility we look forward to buying good businesses at bargain basement prices.

Since inception to 27th March 2020, the Fund has returned over 8.1%pa vs the S&P/ASX200 Accumulation Index returning 4.2%pa. The Fund has also exhibited two-thirds of the volatility of the market an important metric to understand the risk profile of the Fund.

apaef-relative-returns

Co-fund manager Nicolas Bryon has been managing mutli-billion dollar portfolios for global financial institutions for over 20 years and has seen many crashes, corrections and recessions:

Due to our experience in these market environments, in that we have seen most of it before, we will use all the techniques we know of to protect capital first and foremost.

 

A Winning Investment Strategy

The Fund itself is a long-bias equity market product, also known as a hedge fund, which typically buys or short sells Australian listed securities and derivatives. The team employs a Quadruple Alpha Investment Strategy which provides investors with strong capital growth and lower than market volatility. This allows the fund to generate solid returns with downside protection in place.

The fund solves a common problem faced by many investors and retirees right now, that is, the dilemma of moving into Cash and getting almost zero real returns or moving into Shares and face the risk of significant capital loss in the event of a market correction or crash.

Fortunately, for those investors who are risk-averse and need decent returns to fund their lifestyle into retirement, the APAEF offers an attractive solution especially in current market conditions.

 

Competitive Technical Edge

Since the middle of 2017, the team has had the added competitive advantage of a cutting-edge piece of software that has been instrumental in optimising their investment performance. The HALO Investment Research Platform is a proprietary technology created and developed by Fund Manager Nicolas Bryon to help make smarter, more accurate investment decisions.

The platform uses a variety of scans, monitors and indicators combined with predictive consensus data to give users unparalleled insight into the market, companies and their own portfolios.

 Without HALO and its multi-strategy focus, we would not have been able to navigate markets as well as we have.

 

Investing with APSEC Funds Management

As the market continues to fall investors and financial advisers need to be looking at their downside protection. The APAEF’s recent performance and proven track record has seen an influx of new and additional fund applications. The APAEF accepts applications monthly with the next cut off date being 31st of March 2020. You can invest in the fund directly or find it on the Netwealth platform.

The Fund will remain open until the $200m cap is reached and will not extend this limit so don’t delay and get in contact with us now.

If you would like to learn more about the fund for yourself and your clients please give us a call on 1300 379 307 or email us at enquiries@apsec.com.au.