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06 January 2009
Australian Quant Strategies

Australian Quant Strategies Fund Update

September Quarter 2008


Download the Australian Quant Strategies Fund Update

Download the Funds Performance report


This update is for the BlackRock Australian Quant Strategies Fund (formerly known as the Merrill Lynch Australian Quant Strategies Fund).

The performance shown in the Fund Update is the gross performance of the fund. To view the net performance of the fund or of the different unit classes of the fund download the Fund Performance Report or visit Fund Performance.

Gross performance returns and benchmark performance shown do not include expenses, fees or tax. Net performance returns are prepared on an exit-to-exit fee basis which includes all ongoing fees and expenses.


Performance review

The Australian Quant Strategies Fund returned -12.81% (before fees) over the September quarter, versus the S&P/ASX 300 Accumulation Index (Gross of Franking Credits) return of -10.24%. Please note that all performance has been adjusted for the effect of franking on dividends.


Please note that all performance has been adjusted for the effect of franking on dividends. The Fund benchmark was changed during the quarter (01/02/05) to the S&P/ASX 300 Accumulation Index (Gross of Imputation Credits) to reflect the impact of franking on dividends.


 
Gross returns
Benchmark returns^
Out-performance*
3 Month
-12.81%
-10.24%
-2.57%
6 Month
-12.20%
-11.62%
-0.58%
1 Year
-25.34%
-26.08%
0.74%
2 Year (pa)
2.70%
-0.37%
3.07%
3 Year (pa)
8.07%
5.28%
2.79%
5 Year (pa)
15.16%
13.40%
1.76%
Past performance is not necessarily a guide to future performance.
^S&P/ASX 300 Accumulation Index
*Shows the difference between Gross return and Benchmark return. Long term performance returns show the potential volatility of returns over time. Gross performance figures shown are composite numbers for the Australian Quant Strategies Fund and make no allowance for expenses, fees or taxes. Composite returns are used for indicative purposes and minor variations may occur.
Please note that all performance has been adjusted for the effect of franking on dividends. The Fund benchmark was changed during the quarter (01/02/05) to the S&P/ASX 300 Accumulation Index (Gross of Imputation Credits) to reflect the impact of franking on dividends.


Performance contributors

Statistical Arbitrage (-2.58%)

The Fund’s suite of statistical arbitrage strategies detracted from performance over the quarter. The main stock specific influences from a statistical arbitrage perspective were:

Key positive influences:

  • JBH outperformed in July and August after releasing a strong result, ahead of guidance, and maintaining its favourable growth forecast, contributing 0.18% to the strategy.
  • RHC outperformed after reporting strong full year results in August, contributing 0.17%.
Key negative influences:

  • IPL underperformed on the back of a pull back in fertiliser prices and investor sentiment towards soft commodities detracting by -0.18% to the strategy.
  • PNA underperformed impacting the strategy by -0.19%.
  • JHX outperformed despite a continuation of unfavourable economic conditions in the US and impacted the strategy by -0.20%.
  • FCL outperformed in July after reaffirming earnings guidance and an improved forecast net debt position and impacted the strategy by -0.26%.

Option Substitution (0.05%)
  • The Option Substitution strategy contributed positively to performance over the quarter. A variety of positions were held within the portfolio, with value added by Oil Search (OSH), and Santos Limited (STO) substitutions.

Liquidity Trading (0.08%)
  • A number of positions were held over the period, with the overall Liquidity Trading strategy adding value. Value was primarily added by positions in the Alumina Limited (AWC), Bradken Limited (BKN) and Leighton Holdings (LEI) placements, while the Babcock & Brown Residential Land Partners Group (BLP) initial public offering (IPO) detracted.

Merger Arbitrage (0%)
  • There was no activity in the strategy over the quarter.

Convertible Bonds (-0.43%)
  • Challenging market conditions and stock specific issues impacted the hybrid market with the overall Convertible Bond strategy detracting from performance over the quarter. Octaviar Limited Unsecured Note (OCVG) detracted most among a range of small losses across the hybrid book. OCVG was written down in July following the company’s proposal to redeem the notes at $22.50.

Index Adds & Deletes (0%)
  • There was no activity in the strategy over the quarter.

Yield Preference (0.01%)
  • The Yield Preference strategy contributed positively to pre-tax performance as exposure to a diversified basket of high franked yield stocks was established leading into the August dividend season.

Share Buy-Backs (0.20%)
  • The Share Buy-Back strategy contributed positively to pre-tax performance over the quarter. The Fund increased its position in Santos (STO) following the announcement of their $300 million off-market buy-back.

Franking Impact (0.10%)
  • The Fund received 10 additional basis point of franking credits, relative to the benchmark over the quarter.

Australian Quant Strategies Fund Portfolio as at 30/9/08

Strategy attribution
Strategy
Contribution to active return
Statistical Arbitrage
-2.58%
Option Substitution
0.05%
Liquidity Trading
0.08%
Merger Arbitrage
0.00%
Convertible Bonds
-0.43%
Index Adds/Deletes
0.00%
Yield Preference
0.01%
Share Buy-Back
0.20%
Franking Impact
0.10%
Total Active Return
-2.57%

  • In late September ASIC introduced a ban on short-selling in response to global economic conditions.

Investment objective

The BlackRock Australian Quant Strategies Fund seeks to outperform the S&P/ASX 300 Accumulation Index adjusted for franking credits by 2–3% per annum over rolling 3 year periods (before fees), while maintaining an annual ex-ante tracking error of below 3% per annum.


Fund strategy

The BlackRock Australian Quant Strategies Fund provides investors with a core style neutral offering, which adds value through the use of a broad suite of investment techniques. We describe our investment style as quantitative or structured arbitrage in nature. We develop portfolios whose essential characteristics closely mimic those of the underlying benchmark. This investment approach is complementary to fundamentally based approaches and can provide additional balance to most investment arrangements.

The Fund is an equitised long/short fund, with the flexibility to short sell up to 15% of the net asset value of the Fund.
BlackRock Investment Management (Australia) Limited ABN 13 006 165 975 AFS Licence Number 230523 RSE License No L0000116
The Merrill Lynch name and logo are trade marks of, and used under license from, Merrill Lynch & Co., Inc.