Acorns Newsletter - March 2014

BINJAI HILL ASIAN ACORNS FUND
MONTHLY LETTER > MARCH 2014
FUND DETAILS1
INCEPTION DATE:
AUG
2004
SUBSCRIPTIONS:
MONTHLY
REDEMPTIONS:
MONTHLY
NOTICE PERIOD:
22 B.DAYS
SOFT LOCK UP:
2% 1-6
MONTHS
BINJAI HILL ASIAN ACORNS FUND is a Fundamental Equity Long Short Hedge
Fund that invests in small-to-mid cap companies in Asia-ex Japan and seeks to
provide a targeted return in excess of 15% p.a. through the cycle with moderate
volatility. The strategy exploits the sizeable inefficiencies, higher growth rates and
strong structural investment themes prevalent in the space whilst limiting downside
volatility through active risk control and aggressive cash management.
NET PERFORMANCE (CLASS A)
%
JAN
FEB
MAR
MONTHS
2014 -1.14
1.76
0.47
MANAGEMENT FEE:
1.5%
2013
2.91
3.40
PERFORMANCE FEE:
20%
2012
0.34
HIGH WATER MARK
YES
DOMICILE:
CAYMAN
PRIME BROKER:
UBS AG
ADMINISTRATOR:
SMT FUND
SERVICES
(IRELAND)
1% 6-12
MINIMUM INVESTMENT:
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
1.73
0.94
0.78
-3.20
0.25
-2.85
0.88
1.71
-0.17
-0.86
5.4
1.16
-0.09
1.71
-0.96
-0.64
-0.04
0.54
1.04
-0.13
1.15
0.82
5.0
2011 -1.28
-0.14
0.86
1.77
-1.22
-0.62
0.47
-2.47
-3.07
0.44
-1.36
0.14
-6.4
2010 -2.49
-0.18
7.30
4.63
-6.45
0.87
4.5
2.57
6.32
2.50
-0.36
0.32
20.4
2009 -3.00
-3.27
0.31
5.63
11.2
2.25
5.14
2.73
7.08
1.58
1.32
4.12
40.1
2008 -8.32
-2.70
-3.45
-0.47
0.59
-4.59
-0.98
-3.60
-4.55
-15.05
-3.86
3.84
-36.4
2007
3.33
-0.30
1.47
5.78
3.83
6.07
1.39
-8.22
2.30
2.15
-3.87
1.38
15.4
2006
9.00
4.21
8.41
6.11
-2.29
-4.08
0.03
0.52
0.29
4.95
6.04
2.04
40.2
2005
2.32
-0.72
-3.37
1.09
0.68
1.26
4.56
-1.74
1.85
-1.10
4.14
3.60
13.0
2004
-
-
-
-
-
-
-
0.26
2.96
-0.36
2.92
1.88
7.9
AUG
SEP
OCT
NOV
DEC
1.1
(please refer to Fund Prospectus for full details)
FEB
MAR
1.90
0.59
-
-
2013
-
JUN
JUL
YR
0.77
-3.52
0.31
-3.52
1.09
2.12
-0.25
-1.05
-3.3
STATISTICAL OVERVIEW (GROSS PERFORMANCE)
MAR’
14
Year
To
Date
Total Return
since Aug 04
Annualized
Return
0.9
2.3
121.3 (net)
237.7 (gross)
8.6 (net)
13.4 (gross)
13.7
-28.3
MSCI AC Daily TR Net Asia
Ex Japan USD
1.0
-0.7
184.4
11.4
22.9
-53.2
MSCI Daily TR Net World
USD
0.1
1.3
103.6
7.6
16.3
-40.9
FUND
Binjai Hill Asian Acorns Fund
Binjai Hill Asset Management
#02-01, 78 Amoy Street,
Singapore 069896
SELECTED BENCHMARKS
℡
+65 6557 7185
Max Consecutive
Loss
Volatility
GROWTH SINCE INCEPTION (GROSS PERF)
Binjai Hill Asian Acorns Fund (Gross)
MSCI Daily TR Net World USD
MSCI AC Daily TR Net Asia Ex Japan USD
Binjai Hill Asian Acorns Fund (Net)
250%
200%
150%
100%
50%
0%
Feb-14
Aug-13
Feb-13
Aug-12
Feb-12
Aug-11
Feb-11
Aug-10
Feb-10
Feb-07
Aug-06
Feb-06
Aug-05
Feb-05
-50%
Aug-04
DISCLAIMER: This publication and its contents are intended for informational purposes only and may be
subject to change without further notice. Neither Binjai
Hill Capital nor Binjai Hill Asset Management represent
nor warrant the accuracy or completeness of the information contained herein or as to the existence of other
facts which might be significant, and will not accept any
responsibility or liability whatsoever for any use of or
reliance upon this publication or any of the contents
hereof. This publication is not an offer of securities and
must not be construed as an offer to sell or an invitation
to subscribe to any securities or other financial products
in any jurisdiction or country. An investment in the Binjai
Hill Asian Acorns Fund can only be made by completing
an application form attached to the appropriate offer
document. Information contained in this publication is not
intended to provide securities or financial product advice
and should not be relied upon as such. The repayment
of an investment in and the performance of funds managed by Binjai Hill Capital is not guaranteed by Binjai Hill
Capital, any organisation or any person. The potential
investment is subject to investment risk, including possible delays in repayment and loss of principal invested.
Past performance is not indicative of or a guarantee of
future results. This publication is intended as a general
outline only and is not a definitive statement on the
subject matter. It is not intended for public use or distribution.
MAY
1.3
0.93
CONTACT INFORMATION
[email protected]
APR
Aug-09
Gross Performance returns are presented
before management fees, performance fees
and non-trading expenses but after all trading
expenses.
JAN
Feb-09
Volatility: The annualised Standard Deviation
of Monthly returns. Maximum Consecutive
Loss: The Maximum consecutive and cumulative loss based on monthly returns.
%
2014 -1.14
Aug-08
These are measures of the degree of risk
taken in generating returns.
NET PERFORMANCE (CLASS C)
Feb-08
*STATISTICAL NOTES
Aug-07
1
$100,000
YR
APR
1
BINJAI HILL ASIAN ACORNS FUND
MONTHLY LETTER > MARCH 2014
SECTOR EXPOSURE (CURRENT MONTH END)
SECTOR
EXPOSURE
Industrials
13.9%
Real Estate
11.4%
Energy
9.2%
Consumer Staples
7.8%
Financials
7.4%
Consumer Discretionary
5.3%
Materials
2.7%
Information Technology
2.3%
Health Care
2.1%
Cash
37.8%
Financials Csr. Disc.
Materials
I.T.
Csr. Staples
Health Care
Energy
Real Estate
Cash
Industrials
COUNTRY EXPOSURE (CURRENT MONTH END)
LONG
SHORT
NET
GROSS
POSITIONS
Singapore
10.6%
0.0%
10.6%
10.6%
6
Vietnam
10.2%
0.0%
10.2%
10.2%
4
Philippines
8.9%
0.0%
8.9%
8.9%
7
China
6.6%
0.0%
6.6%
6.6%
5
Malaysia
5.7%
0.0%
5.7%
5.7%
3
Sri Lanka
4.7%
0.0%
4.7%
4.7%
3
India
4.3%
0.0%
4.3%
4.3%
3
Indonesia
3.9%
0.0%
3.9%
3.9%
1
Korea
3.2%
0.0%
3.2%
3.2%
2
Thailand
1.9%
0.0%
1.9%
1.9%
2
Taiwan
1.5%
0.0%
1.5%
1.5%
2
Hong Kong
0.8%
0.0%
0.8%
0.8%
1
Totals
62.2%
0.0%
62.2%
62.2%
39
COUNTRY
ASSET ALLOCATION (DAILY SINCE INCEPTION)
175%
Gross Exposure
150%
Net Exposure
125%
100%
75%
50%
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
0%
Jan-05
25%
Average Long^
Average Short ^
Average Net^
Average Gross^
57.3%
-6.9%
50.4%
64.2%
^Since Inception
2
BINJAI HILL ASIAN ACORNS FUND
MONTHLY LETTER > MARCH 2014
PORTFOLIO ACTIVITY
Asian stock markets continued to rise in March. The MSCI Asia
ex-Japan index and our benchmark index, the FT Small Cap
Index (“FTSCA”) both rose 1.0%. The Acorns Fund rose 0.9%
gross.
We bought one new position in March. Dat Xanh Real Estate
Services & Construction JSC is a leading real-estate
developer and investor in Vietnam, where we believe the
property market is poised to emerge from a severe downturn.
During the month we also bought back into Rizal Commercial
Banking Corp (Philippines) and Shriram Transport Finance
Co Ltd (India).
COMPANY RESULTS
Eleven portfolio stocks reported 2013 results in March with a
median year-on-year (YoY) net income increase of 15%.
Amidst a generally strong reporting season in the Philippines,
Robinson Retail, the country’s second largest mall and retail
operator, reported net profits up 127% YoY, boosted by a
change to depreciation policy and rapid expansion as the
country embraces modern retail formats. Vista Land saw net
profit for FY13 up 15% YoY on strong demand for its affordable
homes from both domestic and expatriate customers.
Our largest holding, Indonesian real estate company Jaya
Real Property, recorded a 28% rise in net profits from its
residential developments and commercial investments despite
headwinds from mortgage curbs and project licensing delays.
In Hong Kong, CIMC Enric saw a 28% YoY rise in its 2013
bottom line amidst strong demand for its gas and liquid food
transportation and storage equipment. Enric is a major
beneficiary of China’s push to promote liquid gas-fuelled
vehicles. CSR Corp, one of the two major players in the
Chinese railway equipment industry, reported a 3% YoY rise in
net profit but a big rise in orders, reflecting a revival in rail
spending and growing export success. Its listed subsidiary
Zhuzhou CSR posted a 20% FY14 profits gain followed by a
four-fold increase in first quarter profits.
OUTLOOK
Global Emerging Market (GEM) equities saw the first
meaningful inflows in almost a year in the last few weeks after
the mini-capitulation in March, and have now outperformed
developed markets so far this year. There was no doubt there
was undue pessimism towards GEMs - not least the more lurid
risks ascribed towards China. However for Asian ex Japan
(AXJ) equities to sustain their YTD gains we need to see an
improvement in corporate earnings and Return on Equity
(ROE), together with a recovery in exports. Our sense is all of
these will occur, but more likely in the second half of 2014.
Central to a more optimistic view on AXJ are hopes that
China’s GDP growth will stabilise and that political change will
help reform the under-performing State Owned Enterprises
that have been the main reason for the region’s ROE collapse
since 2004/5. There are grounds for hoping this might already
be underway in China.
The next few months will see important political developments
in Indonesia, India and Thailand. The highly regarded Jokowi
should win the Indonesian Presidential Election but it remains
to be seen to what degree he can escape the realities of
coalition politics and opposition to reform by traditional vested
interest within his own party. Indonesia equities have
recovered well this year on but are no longer cheap. Having
said that Indonesia's low-beta GDP growth, highest ROE in the
region and likely cyclical EPS bottom in FY13 will underpin
equities whilst tough reforms in fuel subsidies and imports
should bolster the currency. We may see a modest sell-off as
investors become more realistic about the political risks and
will look to buy into any weakness.
A similar hope-trade has been evident ahead of India’s
mammoth election as the business-friendly BJP-led coalition
has gained momentum. Should the coalition win something
close to a workable number of seats, we may see further
upside. However the market now trades on over 15x forward
PER, a substantial premium to its 5 year average, despite still
very weak GDP growth and falling fixed asset investment, and
there is only so much a new Federal Government can do to
offset the multiple headwinds facing the economy. On top a
return of El Nino threatens the essential monsoon rains, whilst
the Reserve Bank of India is likely to retain a tightening bias
given stubborn inflation stemming from food production issues
that will take years to correct. Admittedly India offers some
positives relative to the other large emerging market
economies, notably as a huge beneficiary of a weaker oil price
going forward.
We remain cautious in the short term towards Thailand,
despite a solid stock market recovery this year. We continue to
believe the risks are far higher this time than in previous bouts
of political tensions. Following the expected dismissal of the
Thaksin Party Government at the behest of the old elite, we
think there is a very real risk, that their 'red-shirt' supporters will
protest in Bangkok and that real violence could then break-out.
Unlike in previous episodic bouts of political violence it is hard
to find a basis for compromise. The damage, as this drags on
for the 7th month, is being seen in the economy with consumer
confidence at a 12 year low, domestic demand in a serious
recession and foreign investors turning away. Should real
violence break-out our sense is that the SET will see a very
sharp correction.
We continue to think the principal risk in China is not economic
but political. Our sense is that China’s economy has probably
bottomed out and should recover moderately over the next few
months, helped by recent mild stimulus measures. We believe
that the residential real estate 'bubble' and the challenges of
financial system liberalisation can be dealt with by the
Government without derailing the economy. A greater, but less
recognized risk is President Xi’s unprecedented corruption
3
BINJAI HILL ASIAN ACORNS FUND
MONTHLY LETTER > MARCH 2014
purge of influential Generals together with senior politicians
associated with the very powerful oil industry. Political
instability would undermine Xi’s ambitious economic reform
programme and the recent recovery in regional equity markets.
A more recent sector feature has been the savage rotation out
of Growth-related stocks to value or 'cheap' stocks. This has
been especially the case in China where last year's 'new'
economy darlings - the internet and Macau gaming stocks –
have seen very sharp sell-offs of late whilst 'old' economy
SOEs have perked-up on hopes of reforms and of better
access to capital markets. We had limited exposure to the
more highly priced 'new' economy sectors but have seen some
of our HK/China positions, seen as growth stocks, punished
hard. Our exposure to China remains centred on rail and
environmental plays which enjoy strong government support.
Lastly we have a holding in Labixiaoxin Snacks, a leading
China producer of confectionery, snacks and jellies.
Unfortunately just a day after short selling was permitted in the
shares, they were hit by a newspaper report alleging that the
company had inflated its results, claims strongly rejected by
management. Subsequently the stock was suspended at the
company’s request whilst the auditors extend their audit checks.
The share price has fallen 55% from its peak. We think it likely
that the share price will recover in time, as have other stocks
where short sellers' allegations proved groundless. If not, our
exposure is manageable at less than 1% of the fund’s NAV.
IMPORTANT NOTICE TO SHAREHOLDERS
BINJAI HILL ASSET MGT PTE LTD ( 'BHAM' ) - merged with JAVELIN WEALTH MGT PTE LTD ( 'JWM' )
with effect 13 March 2014
We are pleased to say the Monetary Authority of Singapore has approved the merger of Binjai Hill Asset Management Pte Ltd
with Javelin Wealth Management Pte Ltd with effect 13 March 2014.
If you have any questions about this announcement, please contact Justin Kendrick (+65 6325-3982,
[email protected], [email protected]) or Steve Davies (+65 6325-3986,
[email protected])
Justin Kendrick
David Gibbons
4

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