Outflows mount for K2 Australia Absolute Return fund

Assets on the K2 Australian Absolute Return fund have continued to decline as it reports continued underperformance.

Earlier this year, the fund reported a $41m outflow in one month after it saw redemptions from a large single investor. This saw it fall to $143 million and assets have since fallen further to $137 million.

Total funds under management (FUM) at the firm were $239 million, across six funds, and the firm said this was the first year it had reported a net pre-tax loss.

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In its full-year results for the year to 30 June, 2019, the firm said the Australian Absolute Return fund lost 7.6 per cent over the period.

Only two of the firm’s six funds reported positive returns; Select International Absolute Return and Asian Absolute Return fund which saw returns of 0.7 per cent and 0.5 per cent respectively.

K2 said the fund outflows were ‘disappointing’ but was hopeful of inflows coming from a partnership with Principals Fund Management.

“While attracting additional FUM is still a key focus, outflows disappointingly continued. K2 sees the outflows as a symptom of the late stage of the current growth/momentum market cycle.

“In FY19, significant progress was made by partnering with Principals Fund Management to access quality participants in the wholesale market. We believe this is where FUM growth will ultimately come from, with the wholesale market understanding equity cycles and the value of a long-term track record.”

Despite the underperformance, the firm reiterated it would be sticking to its investment strategy.

“K2 does not necessarily believe there needs to be a catalyst that will force market participants to return to valuation and profit models. We believe investors will soon reach a point where they see the gap in pricing between value and growth as being far too wide and unsustainable.

“In the wake of FY19, K2 will stay true to our strategy with conviction through the late stage of this economic cycle.”

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