Investing Recommendation: Do not invest. Manager claims outperformance for the longer period of the unlisted fund but AEG has had very poor performance and no alpha since Dec 2015. The fees are very high and volatility and drawdowns are elevated.
Trading Recommendation: Short term if discount is at least 3% greater than recent (1 to 6 months) average. Minimum discount advised is 5%. There is major performance-chasing recency bias in AEG.
Actual Performance:
In its Feb 2019 monthly report AEG reports an Inception To Date return of 1.27%:
Actual Compound Annual Growth Rate for Pre-tax NTA: 2.26%
- Amazingly this is slightly higher than AEG's reported figure. This is because they report "before the investor's tax" and so don't include franking credits and likely also exclude the small option value at expiry. It is refreshing to see an honest reporting of performance.
Actual TSR Comparison with relevant benchmark ETF:
Using Sharesight and a performance report period of 16 Dec 2015 to 28 Feb 2019 you can determine comparative Total Shareholder Return annualised performance between investing in the AEG IPO and investing in the most relevant passive index fund:
- AEG has an annualised TSR of -0.28%
- VAS has an annualised TSR of 12.4%
- Obviously, AEG being market neutral cannot be compared directly like a long-only fund. However, the opportunity cost of investing in AEG as opposed to simply buying a low-cost, passive long-only ETF is worth considering.
Performance Impact on NTA Discount/Premium:
The difference between the VAS TSR of 12.4% and AEG's 2.26% NTA CAGR has driven AEG to discounts of up to 10% and has meant the AEG TSR is -0.28%.
