NEWS
10 Oct 2022 - Inflation will test Fed's patience, but RBA has cards up its sleeve
|
Inflation will test Fed's patience, but RBA has cards up its sleeve Pendal September 2022 |
|
ALONG with many other observers, we expected US inflation to moderate more than it did in August. Headline CPI came in overnight at 0.1% (8.3% annual) and underlying at 0.6% (6.3% annual). A new group of unrelated components (including vehicle repair, dental charges and tobacco) showed fresh signs of inflation, pushing the rate positive for the month. We still expect goods deflation in the months ahead. Oil prices and most other commodities are weak. But US wage growth is spreading inflation wider into services. Services inflation is now the battleground and labour supply lines are normalising far slower than goods. What little patience the US Federal Reserve may have had is running out. Fed funds now seem destined for 4% or higher. As little as six weeks ago the market was expecting terminal rates closer to 3%. RBA may be more patientAs always, Australian bonds will follow the US. But the RBA seems prepared to show a bit more patience. This is due to a number of factors — but the two main ones are wages and our floating rate mortgage market. The NAB business survey showed that rate hikes are yet to have any impact. This is not surprising as the economy is now almost fully open, many have pent-up savings to spend and fixed rates are protecting 40 per cent of mortgage holders. The RBA remain on course for 3% cash rates by year end (either 2.85% or 3.1%). It will likely rely on the fixed rate mortgage cliff and immigration to do the heavy lifting to combat inflation in 2023. Bond markets are caught in the loop of pushing rates up with the Fed but also with one eye on increasing recession risks. Flatter curves seems to be the favoured way of reconciling these two outcomes. Credit and equity markets were hit by the high inflation numbers, but for now look to be range-trading rather than breaking down. The only certainty for now is volatility is here for a while yet. Author: Tim Hext, Portfolio Manager and Head of Government Bond Strategies |
|
Funds operated by this manager: Pendal Focus Australian Share Fund, Pendal Global Select Fund - Class R, Pendal Horizon Sustainable Australian Share Fund, Pendal MicroCap Opportunities Fund, Pendal Sustainable Australian Fixed Interest Fund - Class R, Regnan Global Equity Impact Solutions Fund - Class R, Regnan Credit Impact Trust Fund |
|
This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at December 8, 2021. PFSL is the responsible entity and issuer of units in the Pendal Multi-Asset Target Return Fund (Fund) ARSN: 623 987 968. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient's personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com |
7 Oct 2022 - Hedge Clippings |07 October 2022
|
|
|
|
Hedge Clippings | Friday, 07 October 2022 For the past 60 years Bob Dylan, arguably the greatest musical influence of our time, has delivered classical and songs, and with memorable lines. None more so than one from one of his earlier works, Subterranean Homesick Blues, which included the line "You don't need a weather man to know which way the wind blows." Admittedly, much, if not all, of the rest of the song's meaning, remains a mystery to most, us included, but (with apologies for the YouTube ad) the video clip was also an early classic. The RBA's media release following their monthly meeting is a master of understatement, but often it is the last sentence which tells which way the wind is really blowing. In March 2020 the RBA dropped its cash rate target to an unprecedented 0.25% with the following comment: "The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 per cent target band." It's worth noting that back then the objective was to create some inflation... In November of the same year, the RBA eased further to an even more unprecedented rate of 0.10% with the comment: "Given the outlook, the Board is not expecting to increase the cash rate for at least three years... and is prepared to do more if necessary." Oops! Where was the weatherman that time? To be fair to the accelerator/brake analogy, history shows that the cash rate stuck at 1.5% from August 2016 to May 2019, before it declined again through to November 2020 to bottom, and stay at 0.10%. That was until May this year, when it rose by 0.25%, followed by four consecutive increases of 0.5%, and then this week's increase of 0.25%, taking the cash rate to 2.6%. Tuesday's RBA media release finished with this: "The Board remains resolute in its determination to return inflation to target, and will do what is necessary to achieve that." It goes without saying that the board's intention is to now reduce inflation to 2-3%, which they expect to achieve (just) in 2024. Part of where we're going with this is not to say the RBA's job is easy, but that the resultant effect of easing or tightening are pretty inevitable (if not immediate) on the economy, and particularly housing prices. To repeat or borrow Dylan's words, when it comes to property prices, "you don't need a weatherman to know which way the wind blows". It stands to reason - actually supply and demand - that a prolonged period of easy money, especially with little or low unemployment - will result in an increase in property prices. Equally, the lower the interest rate, and the longer it lasts for - or in the RBA's case their November 2020 expectation for "at least three years" - the stronger will be the increase. While money was easy and housing prices were rocketing, the RBA and media were concerned about housing affordability. Now, with interest rates and repayments rising, and property prices falling, there are dire warnings of mortgage stress and the potential for foreclosure. So which way is the wind blowing at the moment? This week's rise of only 0.25% against the expectations of 0.50%, although unlikely to be the last in this cycle, did signal a significant shift in the RBA's thinking that this time the peak cash rate should be no more than 3.25%. That of course assumes that inflation declines. And sometimes that weatherman is not so predictable. Europe Trip Insights | 4D Infrastructure Why on earth would Experiences thrive with all the gloom around today? | Insync Fund Managers McDonalds Story | Magellan Asset Management |
|
|
September 2022 Performance News |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday
|
7 Oct 2022 - Performance Report: Argonaut Natural Resources Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months (pa) | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | At times, ANRF may consider holding higher levels of cash (max 30%) if valuations are full and it is difficult to find attractive investment opportunities. The Fund does not borrow for investment or any other purposes, but it may short sell securities as part of its portfolio protection strategies. |
| Manager Comments | The Argonaut Natural Resources Fund has a track record of 2 years and 9 months and therefore comparison over all market conditions and against its peers is limited. However, the fund has outperformed the ASX 200 Total Return Index since inception in January 2020, providing investors with an annualised return of 42.98% compared with the index's return of 2.66% over the same period. On a calendar year basis, the fund hasn't experienced any negative annual returns in the 2 years and 9 months since its inception. Over the past 12 months, the fund's largest drawdown was -19.06% vs the index's -11.9%, and since inception in January 2020 the fund's largest drawdown was -19.06% vs the index's maximum drawdown over the same period of -26.75%. The fund's maximum drawdown began in April 2022 and has lasted 5 months, reaching its lowest point during June 2022. During this period, the index's maximum drawdown was -11.9%. The Manager has delivered these returns with 4.03% more volatility than the index, contributing to a Sharpe ratio for performance over the past 12 months of 1.38 and for performance since inception of 1.65. The fund has provided positive monthly returns 82% of the time in rising markets and 36% of the time during periods of market decline, contributing to an up-capture ratio since inception of 220% and a down-capture ratio of 37%. |
| More Information |
7 Oct 2022 - Halgos and three steps for navigating the road ahead
|
Halgos and three steps for navigating the road ahead Nikko Asset Management August 2022 The experience of investing in risk assets over the last six months has been a miserable affair for most involved-particularly in some corners of the market where we have seen a collapse in share prices. We question, however, why this might be a surprise for so many investors. The evidence would suggest that many investors have become conditioned by the environment that had prevailed for over a decade, with a smooth and clear road to higher prices for equities and most financial assets. The world's key central banks have had a specific goal of lower yields on financial assets since the great experiment of quantitative easing commenced. We have been in an era that has been less about investing capital and more about deploying capital to the beneficiaries of the great inflation in financial assets. This era even had its own language: SPAC, FAANG, meme, NFT, crypto, FOMO[1], etc. We live in a world where artificial intelligence is developing rapidly and can join the dots within larger data sets much better than humans can, and we will no doubt underestimate the degree of future advances in this area. However, we have just had a good reminder of the power of human thinking, as joining the dots on the wide array of evidence from different sources has been giving us valuable insights for some time. As a team, we are always discussing and debating these observations and the insights they provide as they are instrumental in both directing our research towards the best new ideas and a correct appraisal of our current investments. The valuation of companies has been a key area of focus, particularly when the last COVID-related round on monetary creation pushed valuation disparities within the market to exceptional levels. Exactly a year ago we wrote, "These balloons…will not stay high in the sky…and the only debate will be the speed of descent". In January we wrote, "Make no mistake, there are many aspects of this that have the trappings of a bubble". This is the human algo (or "Halgo[2]" for short) in action and a good reminder to ourselves of the value of staying disciplined and bringing experience to the table. Whether the current outcome is surprising or not, all investors are now faced with a new and ongoing challenge. In our view, policymakers no longer have our back and inflation - rather than the price of risk assets - appears to be their number one priority. The road ahead is not going to be so easy. Three steps for the new road ahead It may be easy to become gloomy after the drawdown of the last few months. But we believe that there are plenty of reasons to be optimistic about the prospects for compounding your future capital from today's levels if you consider the following three steps. 1. Recognise that we have shifted to a different road type, and it is rougher and more variable As investors in individual companies, we are constantly being asked to differentiate between volatility that is just short-term angst and a signal of change. This is our suggested approach: always be open-minded to new information that could undermine a thesis. The thesis, however, is that we are seeing a regime change. More specifically, inflationary trends are now greater than they were in the past given the scale of monetary creation over the last decade. In the shorter term, there will likely be a period of easing pressures as the pending rate-induced recession commences and supply chain pressures ease somewhat. On balance, however, structural energy undersupply, labour market constraints and military expenditures will all contribute to sticky inflation at rates likely to be above the 2-3% ideal for central banks. Risk-free rates will therefore remain at higher levels. Secondly, geopolitics will likely remain problematic as the battles for technology dominance between China and the US, and the struggle for military supremacy in Ukraine are likely to be prolonged. The free flow of capital across borders should no longer be assumed, the cost of borrowing in the world's reserve currency will likely stay high and we need to be prepared for an increasing shift from certain actors, such as China, moving away from the US dollar as the currency of external trade in the years ahead. In short, we believe that growth in the broader economy will be less certain and more cyclical, and as a result, the cost of capital will not return to the low levels we saw in 2020-2021. 2. Realise that this new road may be best travelled with different vehicles Those of a certain vintage (myself included) might remember the cartoon series "Wacky Races", courtesy of Hanna-Barbera. With the adoption of a multitude of new and sometimes esoteric ETFs and other thematic vehicles in recent years, it has often felt as though we have been competing in Wacky Races! The good, albeit challenging, news for investors is that when there is a regime change, as the significant market correction seems to flag, there is a high probability that there will be new leaders in the race ahead. We have done some work on prior periods of significant market corrections and what the probabilities are, with a clear caveat that the number of reference data points is modest in total. As a reminder, the leaders over the last cycle were information technology, consumer discretionary and energy; assuming they will automatically return as market leaders is a brave call based on this work. Our personal intuition is also that new leadership is likely to emerge this time given the scale of surplus of capital that has just been allocated to the winners. 3. Improve your probabilities by sticking to a few enduring principles Gross margins are similarly being challenged by rising labour inflation (and availability), a shift to more local and higher cost supply chains, rising raw material input prices and (particularly for those sectors previously benefitting from COVID-related revenue boosts) negative operating leverage as sales decline. On average, times are getting tougher for businesses, and franchise strength is being tested more fully. Where products and business models are unique, dominant or gaining share, the scope for passing on costs to customers and sustaining volume growth is greater. Ensure capital funding is sustainable It is now patently clear to all that the cost of debt is going up notably, and as is always the case, the availability of debt could become more irregular. The degree of change in debt costs in US dollars is much greater than in other currencies, and given its reserve currency status, it raises the global cost of capital for many businesses. Self-funding growth (high free cash flow) and balance sheets with appropriate and long-duration debt, in our view, will be better placed to keep investing through the pending down cycle. Cash-burning, profitless business models likely won't pass the test. Focus on justifiable valuations We have learned, sometimes through bitter experience, that the penalty for investing at inflated prices and a lack of future cashflows can be quite onerous. Compounding capital from levels that can be politely described as "frothy" is difficult. When the music stops, falls of 80-90% are common for the frothy crowd, and more often than not they stay down as profitability remains a dream rather than reality. Where we find Future Quality winners If you are a more seasoned investor none of the above should be particularly surprising. The next key question will likely be: where are you investing your capital within global equities? Companies on a unique journey of improvement that can attain and sustain high returns on invested capital over the next five years or more have always been the best starting point, in our view. These Future Quality ideas are what excite us and have been the foundation of our alpha delivery for over a decade. For simplicity, though, there are often some common traits for these stock picks and we highlight the following: Energy transition Last quarter we highlighted in greater detail the energy transition theme. We very much retain our optimism that an enduring cycle of rising investment is now upon us as societies need to address the challenge of sustaining the still-necessary fossil fuel production, increasing supply from more trusted regimes, improving energy efficiencies, reducing emissions, and further developing alternative energy sources. The latter is key from a climate perspective, but also energy intensive in its own right, creating a circular requirement for the other drivers. In short, the addressable market will grow and surprise investors, and profitability for many suppliers of the "picks and shovels" of the energy transition is on an improving trend. This is an increasing rarity in the current environment. This quarter we have added Worley, an Australian-based provider of engineering consultancy and design services, and Linde, a leading global industrial gas provider, over the last quarter. Both are expected to be price makers in their respective markets. Enduring growth Given the backdrop of rising rates and pressures on household consumption, we are increasingly cautious about the growth outlook for many consumer-facing companies. We believe that falling propensity to consume (due to greater spending on mortgage and utility costs) and prior COVID-led pulling forward of demand will be difficult and enduring problems to overcome. Sustainable growth that is less impacted by consumer cyclicality is therefore preferred. Our long-standing overweight in the healthcare sector highlights the fact that we see the demand backdrop for better and more cost-effective solutions across ageing societies as being very much enduring in nature. In other sectors, we have also added new holdings with similar attributes, such as O'Reilly Automotive and beverage maker Diageo. The need to repair autos given the significant ageing of the fleet in the US will remain strong, and premium spirits will remain an affordable luxury with long-life inventory less impacted by the current rise in input costs. Other recent additions include leading franchises in areas such as travel, where prior consumption has been constrained significantly by COVID and as a result, we added Amadeus IT, the world's largest provider of travel booking systems, to our portfolios. The final key comment on the area of enduring growth is that we are increasingly concerned about the prospects for digital advertising. Business start-ups and the funding for newer business models have ballooned over 2020-2021, as conducive capital markets have enabled IPOs, SPACs, and a flurry of activity in private equity funding. Many of these have been technology-related firms with limited customers and cashflow, and they have been focused on finding new customers. This startup funding in 2021 is estimated at USD 650 billion in the US (Source: Crunchbase), roughly double the level of prior years. We assume that about 40% of this will end up in customer acquisition/digital marketing with the majority going to key players such as Meta and Google. This level of spending may now normalise to more sustainable levels as we see new funding dry up and many existing customers burn through cash reserves. This source of advertising spend will likely see a large drawdown, in turn prompting investors to reappraise their growth assumptions for the leading digital media players. Notable downgrades are not a key attribute for enduring growth and we have no exposure in this area. Author: Will Low, Head of Global Equities Funds operated by this manager: Nikko AM ARK Global Disruptive Innovation Fund, Nikko AM Global Share Fund, Nikko AM New Asia Fund, 1 SPAC (special purpose acquisition company), FAANG (Facebook, Amazon, Apple, Netflix and Google), 2 Halgo (Human Algorithm) Disclaimer This material has been prepared by Nikko Asset Management Europe Ltd (NAM Europe) which is authorised and regulated in the United Kingdom by the FCA. This material is issued in Australia by Yara Capital Management Limited (formerly Nikko AM Limited) ABN 99 003 376 252, AFSL 237563. To the extent that any statement in this material constitutes general advice under Australian law, the advice is provided by Yarra Capital Management Limited. NAM Europe does not hold an AFS Licence. Effective 12 April 2021, Yarra Capital Management Limited became part of the Yarra Capital Management Group. The information contained in this material is of a general nature only and does not constitute personal advice, nor does it constitute an offer of any financial product. It is for the use of researchers, licensed financial advisers and their authorised representatives, and does not take into account the objectives, financial situation or needs of any individual. For this reason, you should, before acting on this material, consider the appropriateness of the material, having regard to your objectives, financial situation and needs. The information in this material has been prepared from what is considered to be reliable information, but the accuracy and integrity of the information is not guaranteed. Figures, charts, opinions and other data, including statistics, in this material are current as at the date of publication, unless stated otherwise. The graphs and figures contained in this material include either past or backdated data and make no promise of future investment returns. Past performance is not an indicator of future performance. Any economic or market forecasts are not guaranteed. Any references to particular securities or sectors are for illustrative purposes only and are as at the date of publication of this material. This is not a recommendation in relation to any named securities or sectors and no warranty or guarantee is provided. Portfolio holdings may not be representative of current or future investments. The securities discussed may not represent all of the portfolio's holdings and may represent only a small percentage of the strategy's portfolio holdings. Future portfolio holdings may not be profitable. Any mention of an investment decision is intended only to illustrate our investment approach or strategy and is not indicative of the performance of our strategy as a whole. Any such illustration is not necessarily representative of other investment decisions. Portfolio holdings may change by the time you receive this. Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold, or directly invest in the company or its securities. The information set out has been prepared in good faith and while Yarra Capital Management Limited and its related bodies corporate (together, the "Yarra Capital Management Group") reasonably believe the information and opinions to be current, accurate, or reasonably held at the time of publication, to the maximum extent permitted by law, the Yarra Capital Management Group: (a) makes no warranty as to the content's accuracy or reliability; and (b) accepts no liability for any direct or indirect loss or damage arising from any errors, omissions, or information that is not up to date. Yarra Capital Management. Copyright 2022. |
6 Oct 2022 - Why on earth would Experiences thrive with all the gloom around today?
|
Why on earth would Experiences thrive with all the gloom around today? Insync Fund Managers September 2022 Put simply-Pent-up demand. Pre-Covid expenditure on experiences had been consistently growing ahead of GDP and its sub-segment, travel, was one of the fastest growing. Most megatrends within Insync's portfolio tend to have low sensitivity to economic cycles but the one sub-segment that suffered temporarily was travel. The extent of the fall in travel was unprecedented. Worldwide a staggering 1 billion fewer international arrivals in 2020 than in 2019. This compares with the 4% decline recorded during the 2009 global economic crisis (GFC).
There has been a lack of visibility on how leisure travel was going to emerge after governments implemented onerous travel restrictions. This was compounded by the shift to working from home with online meetings reducing the need for face-to-face meetings. What we do know is that humans desire to travel is hardwired into all of our DNAs. As travel restrictions have started to ease consumers appear to be making up for lost time. Airlines in the US last month reported domestic flight bookings surpassing pre-pandemic levels! US travellers spent $6.6 billion on flights in February, 6% higher than February 2019. Airlines for America, a leading US industry advocacy group noted that travellers have been eager to book tickets as COVID restrictions lifted. This provides a good indicator for the rest of the world. Our families and friends are all planning new adventures and reunions too. Interestingly, rising jet fuel prices, which have put upward pressure on ticket prices, has so far not deterred travellers who are willing to spend more. Emirates recently added a fuel surcharge and saw booking rise! A number of surveys are painting similar stories. TripAdvisor, found that 45% of Americans are planning to travel this March and April, including 68% of Gen Z travellers. This number will climb higher as the summer season rapidly approaches, as 68% of all American adults will vacation this summer (The Vacationer). No wonder hotels around the United States are nearing or have already surpassed pre-pandemic occupancy. Just try finding a decent, moderately priced hotel room in Sydney, as two of our team have recently experienced. The megatrend of Experiences is accelerating. Finding the right businesses benefitting from the trend is equally important for the consistent earnings growth we seek. It's why Cruise lines, airlines and hotels, whilst obvious picks, don't meet the quality criteria we insist upon.
Recently we reinvested into Booking Holdings after the over-blown pull back in its share price and the Covid event subsiding. It generates prodigious amounts of cash because of their scale and superior margins versus its competitors. As well as delivering a commanding competitive position they also help it in protecting against inflation. Bookings recently overtook Marriott, the largest hotel group, in gross volume booked in 2012, and today stands 70% bigger. Companies with superior business models and balance sheets tend to come through a crisis strengthening their competitive position. Booking Holdings is a prime example. The structural reduction in business travel has made hotels reliant upon OTAs once again to fill-up their rooms. This has been evidenced by recent data showing strong market share gains, in excess of pre-COVID levels. Second is the shutdown of Google's "Book on Google" product, removing the biggest perennial risk to the OTA investment case. The fact that the most powerful online search engine is shutting down this service is testament to the powerful position that Booking Holdings occupy.
Long term, travel looks set to continue to grow ahead of GDP as populations age, emerging market middle classes expand, and discretionary spend shifts more from "things" to "experiences.". Booking Holdings will be a major beneficiary compounding earnings for many years with its share price likely to follow the consistent growth in earnings. Funds operated by this manager: Insync Global Capital Aware Fund, Insync Global Quality Equity Fund Disclaimer |
5 Oct 2022 - Around the world in 200 Meetings, Jonas Palmqvist: Medical Technology
|
Around the world in 200 Meetings, Jonas Palmqvist: Medical Technology Alphinity Investment Management October 2022 Jonas Palmqvist shares his highlights from his recent trips to the US, the key trends and themes within the healthcare sector and the future trends to look out for in medical technology. Speakers: Jonas Palmqvist, Portfolio Manager & Elfreda Jonker, Client Portfolio Manager This information is for adviser & wholesale investors only. |
|
Funds operated by this manager: Alphinity Australian Share Fund, Alphinity Concentrated Australian Share Fund, Alphinity Global Equity Fund, Alphinity Sustainable Share Fund Disclaimer |
4 Oct 2022 - Performance Report: Equitable Investors Dragonfly Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months (pa) | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | The Fund is an open ended, unlisted unit trust investing predominantly in ASX listed companies. Hybrid, debt & unlisted investments are also considered. The Fund is focused on investing in growing or strategic businesses and generating returns that, to the extent possible, are less dependent on the direction of the broader sharemarket. The Fund may at times change its cash weighting or utilise exchange traded products to manage market risk. Investments will primarily be made in micro-to-mid cap companies listed on the ASX. Larger listed businesses will also be considered for investment but are not expected to meet the manager's investment criteria as regularly as smaller peers. |
| Manager Comments | Top contribtors in August included DXN, MedAdvisor and Leaf Resources, each of which were highlighted as recapitalisation opportunities the Fund had taken advantage of. They noted the clear trend with the few stocks that had a noticeable negative impact on the Fund in August was that they were highly illiquid. They are not stocks with demanding market caps (being <$10m) that require a lot to go right. Equitable Investors say the market has humbled their investment team so far in 2022 but they remain committed to their strategy. They currently see material upside potential across their portfolio. They believe investor short-termism and a steady flow of recapitalisations will create opportunities for those able to maintain a long-term perspective. |
| More Information |
4 Oct 2022 - Which Emerging Markets look good? Hint: look for tourists
|
Which Emerging Markets look good? Hint: look for tourists Pendal September 2022 |
|
WHEN investing in Emerging Markets, consider going where the tourists go. That's the message from Paul Wimborne, who co-manages Pendal's Global Emerging Markets Opportunities Fund. For Paul and his EM team, investing starts at country-level - which means a lot of time spent sifting through national data before deciding where to invest. One of the best indicators of the health of a country is its tourism levels, he says. A strong tourism sector creates jobs, boosts local economies, adds to government revenue and foreign exchange earnings, as well as improving the cultural exchange between countries. It signals opportunities for investors in emerging markets. This is borne out by comparing the tourism sectors in Mexico, one of the better performing emerging economies, and Thailand, says Wimborne. Both countries rely on tourism and facing similar challenges - reduced capacity among airlines, airport chaos as operations ramp up again, and rising oil prices. But there is pent-up demand internally and externally, post-Covid lockdowns. The outlook for the two countries is very different. "The best tourism news is coming out of Latin America, and particularly Mexico," Wimborne says. "Passenger traffic is already back to pre-COVID levels in Mexico. That not really a surprise when you consider that tourism in Mexico depends on the United States consumer. "In the US, consumer confidence is pretty good along with employment conditions. Extrapolating the tourism sector, Mexico is the bright light within emerging markets." In contrast, many Asian economies, reliant on China, are struggling to re-emerge from the COVID pandemic. "If you take Thailand, there were just over 3 million visitors in June 2019, before the pandemic. Pre-COVD tourism contributed about ten per cent of GDP. In June this year, there were just 800,000 overseas tourists," Wimborne says. "The missing tourists are mostly from China and other Asian countries. That's because many Asian countries, including China, are trying to minimise the effects of COVID, and are following zero-COVID strategies. Outbound tourism from China is essentially zero." There are emerging economies between Mexico and Thailand whose tourism markets fall in the middle. "In Turkey, visitor numbers are just below the record level set in 2019. In Dubai, numbers are at 85 per cent of pre-COVID levels," Wimborne says. There is a geographic trend in the health of emerging economies' tourism markets. "As you move east from Latin America through the middle east, and then into Asia, tourism markets worsen. In essence, Chinese tourists are the key lagging factor in international tourism recovery. "Countries like the Philippines, Malaysia and particularly Thailand because of its reliance on tourism, are going to lag emerging markets in other regions. It's going to take longer for some countries in Asia to recover, than in other parts of the world." Author: Paul Wimborne, Senior Portfolio Manager and Co-Manager |
|
Funds operated by this manager: Pendal Focus Australian Share Fund, Pendal Global Select Fund - Class R, Pendal Horizon Sustainable Australian Share Fund, Pendal MicroCap Opportunities Fund, Pendal Sustainable Australian Fixed Interest Fund - Class R, Regnan Global Equity Impact Solutions Fund - Class R, Regnan Credit Impact Trust Fund |
|
This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at December 8, 2021. PFSL is the responsible entity and issuer of units in the Pendal Multi-Asset Target Return Fund (Fund) ARSN: 623 987 968. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient's personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com |
30 Sep 2022 - Hedge Clippings |30 September 2022
|
|
|
|
Hedge Clippings | Friday, 30 September 2022 Amid all the chaos facing the world at present, ranging from nearly three years of COVID, to the invasion of Ukraine and the subsequent threat of nuclear war, surely the most bizarre is the economic and political chaos now facing the United Kingdom. At first glance, it might seem this has been an instant reaction to a knee-jerk budget from a newly appointed PM, Liz Truss, and her equally new and inexperienced treasurer, Kwasi Kwarteng. Together, and after months of a drawn-out and damaging internal selection process, they announced a mini-budget and tax cuts which prompted an intervention from the Bank of England to prevent a run on pension funds, and a slump in the value of sterling which makes the under pressure Aussie dollar look strong. Truss didn't improve things in a series of disastrous radio interviews on the BBC by trying to blame Putin for her and Kwarteng's own goal, which also drew a warning from the IMF which issued a statement saying "we do not recommend large and untargeted fiscal packages" at a time of high inflation, and suggesting the UK government re-evaluate its plans. Ratings agency Moody's also got in on the act, saying that the unfunded tax cuts were credit negative, and likely to weigh on growth. Truss is between a rock and a hard place: Should she back down and admit she's made a serious boo-boo within weeks of being appointed, or continue to brazen it out, and no doubt in due course lose the next election? In reality, this shambles can all be traced back to the chaos created by her predecessor, Boris Johnson. However, somehow he seemed to have the brass, or b---s to be able to bluff his way through countless crises, until finally "Pinchergate" and "Partygate" finally ended his act. In the case of Truss, there's probably never been a better example of the "Peter Principal" (so named after the 1969 book of the same name written by Laurence J. Peter) which observes that people in a hierarchy tend to rise to a level of respective incompetence. Depending on one's point of view that might also have applied to Boris. Thankfully, although possibly also depending on one's political point of view, it seems that Albo, our new Prime Minister, has hit the ground running, and in spite of troubling global and economic times has yet to put a foot wrong. Of course, it is early days, and long may it last, but it seems a long apprenticeship, both in government and opposition, and a lifelong career in politics, has benefitted Australia and its 31st Prime Minister. Changing tack, and back where we belong to financial services: The latest figures from ASIC covering financial advisor numbers in Australia, compiled by Wealth Data and reported in the AFR, show that AMP's adviser workforce has dropped below 1,000 - a 60% decline since January 2019, and a far cry from the 3,329 advisers it had on its books in 2014. AMP hasn't been the only institution at the "big end" of town to lose advisors, or in the case of the big four banks, leave the business. Over 10,000 advisors have left the sector since the Hayne Royal Commission shone an unwelcome spotlight into some dark corners of certain practices. Many advisers have left the larger dealer groups to set up on their own or in smaller "boutiques" finding that they had greater flexibility to provide high levels of client advice - particularly at the higher end - in spite of the compliance support (or constraints) previously provided by head office. The risk of course is that with lower adviser numbers, but still with a large number of people requiring financial advice, some of the latter are going to miss out. Compliance and regulation in the industry are necessary, albeit often tedious. However, the Treasury's Quality of Advice Review is reported to be considering watering down the requirements for financial advice - and general advice in particular - enabling so-called "finfluencers" to flourish. This would appear to us to be throwing the baby out with the bathwater, but maybe that's the wrong metaphor to use. Let's just say that social media is responsible for enough damage as it is. News & Insights Investment Perspectives: Why rising interest rates aren't working (yet) | Quay Global Investors 10k Words | Equitable Investors Times like these - investing in sustainable growth companies makes sense | Insync Fund Managers |
|
|
August 2022 Performance News Equitable Investors Dragonfly Fund |
|
|
If you'd like to receive Hedge Clippings direct to your inbox each Friday
|
30 Sep 2022 - Performance Report: DS Capital Growth Fund
| Report Date | |
| Manager | |
| Fund Name | |
| Strategy | |
| Latest Return Date | |
| Latest Return | |
| Latest 6 Months | |
| Latest 12 Months | |
| Latest 24 Months (pa) | |
| Annualised Since Inception | |
| Inception Date | |
| FUM (millions) | |
| Fund Overview | The investment team looks for industrial businesses that are simple to understand, generally avoiding large caps, pure mining, biotech and start-ups. They also look for: - Access to management; - Businesses with a competitive edge; - Profitable companies with good margins, organic growth prospects, strong market position and a track record of healthy dividend growth; - Sectors with structural advantage and barriers to entry; - 15% p.a. pre-tax compound return on each holding; and - A history of stable and predictable cash flows that DS Capital can understand and value. |
| Manager Comments | The DS Capital Growth Fund has a track record of 9 years and 8 months and has outperformed the ASX 200 Total Return Index since inception in January 2013, providing investors with an annualised return of 13.24% compared with the index's return of 8.67% over the same period. On a calendar year basis, the fund has only experienced a negative annual return once in the 9 years and 8 months since its inception. Over the past 12 months, the fund's largest drawdown was -21.05% vs the index's -11.9%, and since inception in January 2013 the fund's largest drawdown was -22.53% vs the index's maximum drawdown over the same period of -26.75%. The fund's maximum drawdown began in February 2020 and lasted 6 months, reaching its lowest point during March 2020. The fund had completely recovered its losses by August 2020. The Manager has delivered these returns with 1.73% less volatility than the index, contributing to a Sharpe ratio which has fallen below 1 five times over the past five years and which currently sits at 0.98 since inception. The fund has provided positive monthly returns 88% of the time in rising markets and 33% of the time during periods of market decline, contributing to an up-capture ratio since inception of 67% and a down-capture ratio of 62%. |
| More Information |
