Watermark Market Neutral Fund Ltd (LIC)
28 February 2019
Key Facts
| Index Used: | Bloomberg AusBond Composite 0+ Yr Index | Discretionary/Quantitative: | Discretionary |
| Peer Group: | Equity Alternative - Australia | FUM (millions): | AU$ 70.1m |
| Investment Style: | N/A | Fund Inception Date: | July 2013 |
| Geographic Mandate: | Australia/Global | Latest Return Date: | February 2019 |
| Investor Type: | Status: | Closed | |
| Minimum Investment: | AU$ 1,000 | Investment Frequency: | Daily |
Manager Details
The Fund's Portfolio will be managed by Watermark Funds Management Pty Limited (Manager), a licensed financial services provider owned by an entity associated with Justin Braitling. The Fund provides investors with the opportunity to invest in an actively managed portfolio and gain access to the investment experience and expertise of the Manager.
Watermark is an active, high conviction fund manager investing in Australian public companies. Established in 2003 by Justin Braitling, who has over 30 years experience managing portfolios of Australian and International shares, Watermark comprises a team of experienced investment professionals based in Sydney.
Strategy Description
The Company's investment strategy has a primary goal of identifying and buying listed securities that in its view are undervalued by the market, and identifying and short selling listed securities that in its view are overvalued by the market.
In a market neutral structure, the Company's capital is retained in cash and cash equivalents and the investment portfolio is funded from the short selling of borrowed securities. The Company will primarily acquire interests in ASX listed securities, with up to 10% of each of the long and short portfolios held in international listed securities. An important distinction for the Company is its ability to short sell listed securities. This is considered by the Company to be an attractive means of funding its long portfolio, as short selling generates cash proceeds for investment and also provides a hedge against market volatility for the Portfolio. The Company will typically hold between 40 - 80 positions in each of the long and short portfolios at any one time. The Company will remain market neutral with the long and short portfolios being of equal size,resulting in net market exposure of under 10% of capital. The long and short portfolios will be monitored daily and re-balanced as required, at least monthly.
The Company's investment strategy has a primary goal of identifying and buying listed securities that in its view are undervalued by the market, and identifying and short selling listed securities that in its view are overvalued by the market.
In a market neutral
Fund Fees
| Management Fee: | 1% | Performance Fee: | 20% |
| Buy Spread: | 0% | Sell spread: | 0% |
| High Water Mark: | Yes | Hurdle: | RBA cash rate |
Fund Structure
| Offshore/Onshore: | Onshore | Fund Structure: | LIC |
| Share Classes: | AU$ | Trustee/RE: | N/A |
| Administrator: | White Outsourcing Pty Limited | Prime Broker: | UBS AG, Australia Branch |
| Custodian: | UBS Nominees Pty Limited | Legal: | Watson Mangioni |
Ratings & Availability
Research Ratings
Platform Availability
Performance Review
The Watermark Market Neutral Fund Ltd (LIC) has a track record of 5 years and 8 months and has underperformed the Bloomberg AusBond Composite 0+ Yr benchmark since inception in July 2013, providing investors with an annualised return of 3.05% compared with the benchmark's return of 4.66% over the same period.
The Manager has delivered these returns with 3.51% more volatility than the benchmark, contributing to a Sharpe ratio which has fallen below 1 five times over the past five years and which currently sits at 0.22 since inception. The fund has provided positive monthly returns 55% of the time in rising markets and 58% of the time during periods of market decline, contributing to an up-capture ratio since inception of 11% and a down-capture ratio of -139%.
The Watermark Market Neutral Fund Ltd (LIC) rose by +0.7% in February, a difference of -0.24% compared with the Bloomberg AusBond Composite 0+ Yr benchmark which rose by +0.94%. Over the past 12 months, the fund's best monthly return was +2.79% compared with the benchmark's best return of +1.5%, and its worst monthly return was -2.9% vs the benchmark's worst return over the same period of -0.42%.
| Year | Jan % | Feb % | Mar % | Apr % | May % | Jun % | Jul % | Aug % | Sep % | Oct % | Nov % | Dec % | YTD % |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 0.14 | 0.70 | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | 0.84 |
| 2018 | -0.66 | 0.46 | 1.03 | 0.49 | -0.44 | -0.76 | 2.79 | -2.03 | 0.14 | -1.86 | -2.90 | -1.30 | -5.03 |
| 2017 | -0.55 | -0.15 | 0.01 | 0.88 | 0.48 | -0.40 | 0.29 | -1.67 | -0.25 | -3.04 | 1.16 | -0.14 | -3.41 |
| 2016 | -0.07 | -2.21 | 1.19 | 0.18 | 1.70 | 1.44 | 0.19 | -0.86 | 3.28 | -0.57 | -0.90 | -0.14 | 3.15 |
| 2015 | -1.18 | 0.66 | 3.21 | 0.73 | -0.63 | 3.30 | 4.07 | 3.90 | 2.63 | -1.92 | 1.52 | 2.90 | 20.69 |
| 2014 | 1.64 | 1.14 | -1.42 | 2.70 | 1.11 | 0.73 | -4.34 | -2.10 | 2.81 | -1.87 | -1.44 | -1.12 | -2.40 |
| 2013 | NA | NA | NA | NA | NA | NA | 1.32 | 1.59 | 0.38 | 1.58 | 0.63 | -0.14 | 5.47 |
Annual Returns
Over the past 12 months, the fund has returned -4.04% compared with the benchmark which has returned +6.16%, for a difference of -10.2%. Since inception in July 2013, the fund has returned +3.05% per annum, a difference of -1.61% relative to the benchmark which has returned +4.66% on an annualised basis over the same period.
Cumulative Returns
On a cumulative basis (assuming reinvestment of distributions), $100 invested since inception would have become $118. The same amount invested in the benchmark over the same period would have become $129.
Annual Returns %
Volatility and Risk
Annual Standard Deviation
The fund's returns over the past 12 months have been achieved with a volatility of 5.17% vs the index's 1.79%. The annualised volatility of the fund's returns since inception in July 2013 is 5.95% vs the index's 2.44%. Over all other periods, the fund's returns have been more volatile than the benchmark.
Sharpe Ratio
The fund's Sharpe ratio has ranged from a high of 0.37 for performance over the most recent 48 months to a low of -1.08 over the latest 24 months, and is 0.22 for performance since inception. By contrast, the Bloomberg AusBond Composite 0+ Yr Index's Sharpe for performance since July 2013 is 1.11.
Annual Standard Deviation
Sharpe Ratio
Performance in Positive Markets
Since inception in July 2013 in the months where the market was positive, the fund has provided positive returns 55% of the time, contributing to an up-capture ratio for returns since inception of 11.25%. Over all other periods, the fund's up-capture ratio has ranged from a high of 37.34% over the most recent 48 months to a low of -66.56% over the latest 12 months.
Performance in Negative Markets
Since inception in July 2013 in the months where the market was negative, the fund has provided positive returns 58% of the time, contributing to a down-capture ratio for returns since inception of -139.34%. Over all other periods, the fund's down-capture ratio has ranged from a high of 90.36% over the most recent 24 months to a low of -99.41% over the latest 60 months. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months, and a negative down-capture ratio indicates that, on average, the fund delivered positive returns in the months the market fell.
Average Return in +ve Market %
Average Return in -ve Market %
Sortino Ratio
The fund's Sortino ratio (which excludes volatility in positive months) has ranged from a high of 0.57 for performance over the most recent 48 months to a low of -1.23 over the latest 12 months, and is 0.28 for performance since inception. By contrast, the Bloomberg AusBond Composite 0+ Yr Index's Sortino for performance since July 2013 is 1.84.
Drawdown
Over the past 12 months, the fund's largest drawdown was -7.72% vs the index's -0.42%, and since inception in July 2013 the fund's largest drawdown was -9.74% vs the index's maximum drawdown over the same period of -3.08%.
Sortino Ratio
Drawdown%
Quintile Ranking vs. Average Equity Alternative - Australia as of
The Watermark Market Neutral Fund Ltd (LIC) is not ranked in the first or second quintile for any KPI.
Over the past 12 months, the fund has returned -4.04% compared with the peer group which has returned an average of +10.33%, for a difference of -14.37%.
The fund's returns over the past 12 months have been achieved with a volatility of 5.17% vs the peer group's average volatility of 7.05%. The annualised volatility of the fund's returns since inception in July 2013 is 5.95% vs the peer group's 8.99%. Over all other periods, the fund's returns have been consistently less volatile than the peer group.
Quintile data is pending for Watermark Market Neutral Fund Ltd (LIC).