The Rate Debate - Ep51 The rest of the world is changing,

so why aren't we?

Yarra Capital Management

September 2024

Funds operated by this manager:

Emerging Markets are offering one of the biggest

opportunities in a lifetime

Ox Capital (Fidante Partners)

September 2024

The term "BRICS" was coined in 2001, and it refers to a collection of developing countries - Brazil, Russia, India, China and South Africa. Since then, the BRICS nations' share of global GDP (based on purchasing power parity) has surpassed that of developed economies, contributing to over ~60% of global GDP. China for example, grew its share of world GDP (PPP) to ~19% from ~8% in 2001. While China's growth is more mature, many other emerging economies are poised to continue the economic catch-up, as these economies still have relatively low-income per capita levels, and growth is driven by sound economic policies.

Notably, emerging markets equities are at a multi-decade low in price to earnings and price to book valuations compared to that of developed markets. It is an important fact given EM equities have historically outperformed developed market over the long-term.  A general lack of interest has led to extraordinarily appealing valuations. We are looking at an attractive entry point with forward price to earnings multiples at depressed levels for quality companies with sustainable long-term growth and a backdrop supportive of outperformance.

Moreover, many EM economies are undergoing continued economic development and political reforms. The economic fundamentals are much better than in prior years. Inflation is trending lower in many EMs allowing central banks to cut rates. A slowing developed markets economy is set to benefit emerging economies as we believe a slowdown in growth for the US will lead to interest rate cuts.  Additionally, a declining US dollar and official interest rates are set to benefit emerging market equities.

The recent period of underperformance for emerging markets, is an outlier in our view. EM economies were much more indebted and starting valuations were high over a decade ago. The present outlook is vastly different. Fiscal balances are healthy while debt to GDP ratios are at stable levels. Corporates are in a healthy position. Moreover, many EM regions are rich in key commodities for the upcoming Net Zero energy transition.  We remain optimistic on emerging markets and believe the fundamentals are in place for EMs to outperform developed economies.  

Our proprietary quant model (the MOAT) is pointing to a very difficult environment for many developed markets into 2H2024 into 2025 including the US, versus an improving outlook for many EM countries, including China. Ox Capital is positioned now to benefit by investing in quality companies with sustained growth at attractive valuations across EM countries. In a volatile environment such as the one we are in; it is important to try to hedge the volatility. Ox has the capability to manage the portfolio dynamically that has reduced volatility in the past.

Theme 1: A weaker USD

The US interest rate hikes by the central bank (Federal Reserve) has driven a stronger US Dollar. The recent strength of the "greenback" has been a headwind for emerging economies. This is logical as a stronger dollar can impact capital flows, trade, direct investment, and can impact credit growth. We believe the eventual decline in the USD will provide a tailwind for emerging market equities as returns are typically higher when the USD is declining in value.  Historically, EMs outperformed the market by ~20% on average over the period since 2003.

Theme 2: Rate Cuts

The US federal funds rate has peaked and the FOMC is likely to cut rates as inflation moderates within its targets range. EM markets have historically performed well when the US cuts interest rate. Moreover, local central banks have been fiscally responsible. Many central banks have already started to cut official interest rates as inflation has trended back towards many central bank targets. Rate policy looks too restrictive, and cuts are likely to continue.      

Theme 3: Supply chain reconfiguration and nearshoring.

A reconfiguration of global supply chains will boost economic growth for a number of economies, especially nearshoring in ASEAN and LATAM, boosting GDP growth through foreign direct investments. Vietnam is a notable beneficiary of this trend. Greater foreign direct investment into an ever more open and market driven economy, with some of the most comprehensive free trade agreements in place globally, is providing strong employment opportunities for this young and vibrant country. As such, we believe this backdrop provides a foundation for alpha generating opportunities.  

Moreover, nearshoring is a significant opportunity for the LATAM region in the coming years based on their geographical proximity to North America, and relatively cheap skilled labour.  Nearshoring could add US$78 billion per annum in additional export revenue in LATAM in the coming years with Mexico being the primary beneficiary. Trade is especially important for Mexico. Mexico relies heavily on its industrial sectors for exports, with the manufacturing sector representing >80% total exports.

Mexico's manufacturing sector has grown and matured over the years. Most recently, the top three export categories include auto-components, electronics, and machineries. Mexico is well placed with its long-established export capabilities to fulfil manufacturing orders for an increasing number of international companies.  Mexico's relationship with the US is already well-established, as it is the largest exporter to the US. The country's ~15% share of US imports has now surpassed China's ~14%.

Growth in developed economies is expected to slow as rates have likely peaked. In contrast, despite recent economic challenges, the Chinese economy is expected to grow faster than the US, Japan, and Euro Area. Although China's growth is lower than in recent years, its economy is showing signs of bottoming, on the back of the Chinese authorities showing a willingness to stimulate and support the economy. Keep in mind that interest rates in China are low with minimal inflation relative to the rest of the developed world. A positive set up for equities in the year ahead. Moreover, Emerging countries make up the bulk of global growth, contributing to over ~60% of global GDP, but is under appreciated by global investors.

Funds operated by this manager:

Ox Capital Dynamic Emerging Markets Fund

Important Information: This material has been prepared by Ox Capital Management Pty Ltd (Ox Cap) (ABN 60 648 887 914) Ox Cap is the holder of an Australian financial services license AFSL 533828 and is regulated under the laws of Australia. This document does not relate to any financial or investment product or service and does not constitute or form part of any offer to sell, or any solicitation of any offer to subscribe or interests and the information provided is intended to be general in nature only. This should not form the basis of, or be relied upon for the purpose of, any investment decision. This document is not available to retail investors as defined under local laws. This document has been prepared without taking into account any person's objectives, financial situation or needs. Any person receiving the information in this document should consider the appropriaten

Why the coming downturn is good for credit investors

Janus Henderson Investors

September 2024

Funds operated by this manager:

Janus Henderson Australian Fixed Interest Fund, Janus Henderson Australian Fixed Interest Fund - Institutional, Janus Henderson Cash Fund - Institutional, Janus Henderson Conservative Fixed Interest Fund, Janus Henderson Conservative Fixed Interest Fund - Institutional, Janus Henderson Diversified Credit Fund, Janus Henderson Global Equity Income Fund, Janus Henderson Global Multi-Strategy Fund, Janus Henderson Global Natural Resources Fund, Janus Henderson Tactical Income Fund

This information is issued by Janus Henderson Investors (Australia) Institutional Funds Management Limited (AFSL 444266, ABN 16 165 119 531). The information herein shall not in any way constitute advice or an invitation to invest. It is solely for information purposes and subject to change without notice. This information does not purport to be a comprehensive statement or description of any markets or securities referred to within. Any references to individual securities do not constitute a securities recommendation. Past performance is not indicative of future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

Whilst Janus Henderson Investors (Australia) Institutional Funds Management Limited believe that the information is correct at the date of this document, no warranty or representation is given to this effect and no responsibility can be accepted by Janus Henderson Investors (Australia) Institutional Funds Management Limited to any end users for any action taken on the basis of this information. All opinions and estimates in this information are subject to change without notice and are the views of the author at the time of publication. Janus Henderson Investors (Australia) Institutional Funds Management Limited is not under any obligation to update this information to the extent that it is or becomes out of date or incorrect.

10k Words

Equitable Investors

September 2024

Funds operated by this manager:

Equitable Investors Dragonfly Fund

Disclaimer

Past performance is not a reliable indicator of future performance. Fund returns are quoted net of all fees, expenses and accrued performance fees. Delivery of this report to a recipient should not be relied on as a representation that there has been no change since the preparation date in the affairs or financial condition of the Fund or the Trustee; or that the information contained in this report remains accurate or complete at any time after the preparation date. Equitable Investors Pty Ltd (EI) does not guarantee or make any representation or warranty as to the accuracy or completeness of the information in this report. To the extent permitted by law, EI disclaims all liability that may otherwise arise due to any information in this report being inaccurate or information being omitted. This report does not take into account the particular investment objectives, financial situation and needs of potential investors. Before making a decision to invest in the Fund the recipient should obtain professional advice. This report does not purport to contain all the information that the recipient may require to evaluate a possible investment in the Fund. The recipient should conduct their own independent analysis of the Fund and refer to the current Information Memorandum, which is available from EI.

Global Webcast: Reflecting on a volatile month

& 2Q24 results season

Alphinity Investment Management 

August 2024

Elfreda Jonker and Jonas Palmqvist reflect on what has been happening in markets over the previous month and review key themes from the second quarter of 2024.

Funds operated by this manager:

Alphinity Australian Share Fund, Alphinity Concentrated Australian Share Fund, Alphinity Global Equity Fund, Alphinity Global Sustainable Equity Fund, Alphinity Sustainable Share Fund

Paul Sanger, Head of Sequoia Direct, speaks to Nicholas Chaplin, Director and Portfolio Manager at Seed Funds Management. 

Nicholas Chaplin, Director & Portfolio Manager of Seed Funds Management, critiqued APRA's proposal to phase out Additional Tier 1 (AT1) bonds, highlighting concerns about the potential risks to banking stability and retail investors. He discussed the current challenges with AT1 instruments in the Australian market, the transition timeline, and the differing impacts on large and small banks. Nicholas also explored alternative solutions and gauged the market's reaction to the proposed changes.

The Seed Funds Management Hybrid Income Fund  has a track record of 8 years and 11 months and has outperformed the Solactive Australian Hybrid Securities (Net) benchmark since inception in October 2015, providing investors with an annualised return of 6.37% compared with the benchmark's return of 4.79% over the same period.

Funds operated by this manager: Seed Funds Management Hybrid Income Fund

Chris Gosselin, CEO of Australian Fund Monitors, speaks to Nicholas Chaplin, Director and Portfolio Manager at Seed Funds Management. 

The Seed Funds Management Hybrid Income Fund   has a track record of 8 years and 10 months and has outperformed the Solactive Australian Hybrid Securities (Net) benchmark since inception in October 2015, providing investors with a return of 8.41% over the past 12 months and an annualised return of 6.4% since inception compared with the benchmark's return of 4.84% over the same period.

Funds operated by this manager: Seed Funds Management Hybrid Income Fund

Chris Gosselin, CEO of Australian Fund Monitors, speaks to Nichols Chaplin, Director and Portfolio Manager at Seed Funds Management. Topics covered include: interest rates and inflation; US markets; volatility in equity markets; and bonds and hybrids.

Funds operated by this manager: Seed Funds Management Hybrid Income Fund

Chris Gosselin, CEO of FundMonitors.com, speaks with David Franklyn, Executive Director & Head of Funds Management at Argonaut.

The Argonaut Natural Resources Fund has a track record of 4 years and 6 months. The fund has outperformed the S&P/ASX 300 Resources TR benchmark since inception in January 2020, providing investors with an annualised return of 27.27% compared with the benchmark's return of 8.73% over the same period.

Funds operated by this manager: Argonaut Natural Resources Fund, Argonaut Global Gold Fund

Chris Gosselin, CEO of FundMonitors.com, speaks with Richard Brennan, Strategy Ambassador at East Coast Capital Management.

The ECCM Systematic Trend Fund has a track record of 4 years and 4 months. The fund has outperformed the Barclay Hedge Global Macro benchmark since inception in January 2020, providing investors with an annualised return of 17.34% compared with the benchmark's return of 7.75% over the same period.

Funds operated by this manager: ECCM Systematic Trend Fund

Chris Gosselin, CEO of FundMonitors.com, interviews Dan Nicolaides on how Digital Asset Funds Management uses crypto market volatility for stable returns and risk management.

Innovations shaping the global healthcare universe

Magellan Asset Management

May 2024

The healthcare sector is in a state of constant evolution, and with the COVID-19 pandemic behind us and an upcoming US election, what impacts could we see in the sector? Investment Analyst, Wilson Nghe sheds light on the dynamics that could play out from the US elections, how the healthcare system has transformed since the pandemic and highlights the opportunities and challenges that investors need to watch out for.

Funds operated by this manager:

Magellan Global Fund (Hedged), Magellan Global Fund (Open Class Units) ASX:MGOC, Magellan High Conviction Fund, Magellan Infrastructure Fund, Magellan Infrastructure Fund (Unhedged), MFG Core Infrastructure Fund, Magellan Core ESG Fund

Important Information: 

This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 ('Magellan') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation.  This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision about whether to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to a Magellan financial product may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au.

Past performance is not necessarily indicative of future results and no person guarantees the future performance of any financial product or service, the amount or timing of any return from it, that asset allocations will be met, that it will be able to implement its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of a Magellan financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.

This material may include data, research and other information from third party sources. Magellan makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material.  Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Magellan. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. No representation or warranty is made with respect to the accuracy or completeness of any of the information contained in this material. Magellan will not be responsible or liable for any losses arising from your use or reliance upon any part of the information contained in this material.

Any third party trademarks contained herein are the property of their respective owners and Magellan claims no ownership in, nor any affiliation with, such trademarks.   Any third party trademarks that appear in this material are used for information purposes and only to identify the company names or brands of their respective owners. No affiliation, sponsorship or endorsement should be inferred from the use of these trademarks. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Magellan.

Chris Gosselin, CEO of FundMonitors.com, speaks with Glen Finegan, Lead Portfolio Manager at Skerryvore Asset Management. In this wide ranging interview Glen explains the fund's Emerging Market strategy, and what drives a company's selection in the portfolio.

Magellan Global Quarterly Update - April 2024

Magellan Asset Management

April 2024

Nikki Thomas and Arvid Streimann discuss key themes impacting the markets and providing opportunities for investors. Arvid discusses his recent trip to Washington which provided valuable insights into the future growth of AI innovation and adoption. Nikki touches on her future trip to China and how understanding the interplay between China and other economies is essential for businesses operating within China or competing against it in various sectors.

Funds operated by this manager:

Magellan Global Fund (Hedged), Magellan Global Fund (Open Class Units) ASX:MGOC, Magellan High Conviction Fund, Magellan Infrastructure Fund, Magellan Infrastructure Fund (Unhedged), MFG Core Infrastructure Fund, Magellan Core ESG Fund

Important Information: 

This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 ('Magellan') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation.  This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision about whether to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to a Magellan financial product may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au.

Past performance is not necessarily indicative of future results and no person guarantees the future performance of any financial product or service, the amount or timing of any return from it, that asset allocations will be met, that it will be able to implement its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of a Magellan financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.

This material may include data, research and other information from third party sources. Magellan makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material.  Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Magellan. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. No representation or warranty is made with respect to the accuracy or completeness of any of the information contained in this material. Magellan will not be responsible or liable for any losses arising from your use or reliance upon any part of the information contained in this material.

Any third party trademarks contained herein are the property of their respective owners and Magellan claims no ownership in, nor any affiliation with, such trademarks.   Any third party trademarks that appear in this material are used for information purposes and only to identify the company names or brands of their respective owners. No affiliation, sponsorship or endorsement should be inferred from the use of these trademarks. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Magellan.