NEWS
16 Sep 2022 - McDonalds Story
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McDonalds Story Magellan Asset Management August 2022 |
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June 2022 McDonald's opened its first restaurant in 1948 and has since become one of the most recognisable brands in the world. The iconic golden arches were designed to draw attention to the company's pioneering 'Speedee Service System' that allowed McDonald's to serve its customers at speed, at lower cost and with consistent quality. It is this 'Quick Service Restaurant' design that enabled McDonald's to franchise. The company's reach has expanded to 36,000 restaurants in more than 100 countries that serve 63 million customers every day. Given its size, McDonald's is exposed to numerous environmental, social and governance risks and opportunities, particularly in relation to the supply chain and labour management. It is important that these ESG risks are managed, to limit any threat to the company's cash flows and valuation. Communication of risks and how the company is mitigating them is crucial because transparency enables investors to better understand these risks. Key risks and opportunities for McDonald's include:
As the world's largest restaurant chain, McDonald's attracts much attention from the media and investors. The McDonald's annual general meeting this year was no exception. Prominent activist investor Carl Icahn contested some of the proposals subject to shareholder voting at the meeting held in May. A contested ballot is uncommon. Less than 1% of Magellan's investments were subject to a contested ballot in fiscal 2022.[1] Contested ballots can be a distraction to management, but they can be a reminder that communication is critical to risk management. At this year's annual meeting, Icahn called for McDonald's management to focus more on sustainability. He requested two seats on the board to drive this change and submitted a shareholder proposal on sow gestation stalls - animal-rights activists say they are too small for pregnant pigs. Icahn had a tiny holding (just 200 shares) yet wanted director representation vastly greater than this ownership stake and out of proportion relative to McDonald's risks. McDonald's management improved disclosure ahead of the meeting. Specifically, McDonald's provided much greater disclosure related to the activist investor's shareholder proposal on sow stalls. McDonald's outlined its collaboration with industry, its targets related to sow stalls, supply challenges due to covid 19 and progress to date. Although Icahn's proposal was voted down, it resulted in improved transparency, which is a good outcome for the industry. The episode highlights that ESG risk management is important to asset owners. It is a reminder to asset owners that their vote matters and that asset owners can influence management. At Magellan, we value our right to vote. In this example, we reviewed the proposals, discussed the evidence, engaged with management and encouraged better communication. We concluded that McDonald's is managing the risk and this issue is of limited consequence to the investment case. Sources: Company filings |
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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 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 read and consider any relevant offer documentation applicable to any investment product or service and consider obtaining professional investment advice tailored to your specific circumstances before making any investment decision. A copy of the relevant PDS relating to a Magellan financial product or service 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 strategy, the amount or timing of any return from it, that asset allocations will be met, that it will be able to be implemented and 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. Any trademarks, logos, and service marks contained herein may be the registered and unregistered trademarks of their respective owners. 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. |
15 Sep 2022 - Performance Report: Altor AltFi Income Fund
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| Fund Overview | The Fund invests in a diversified portfolio of private credit instruments across a number of small to medium enterprises. Investors will receive cash distributions on a quarterly basis and will gain further capital upside through free attaching equity exposure on some of the debt investments the Fund makes. The Fund does not provide credit facilities to property or property linked investments. The fund is managed by Altor Credit Partners. The investment committee comprises Harley Dalton and Ben Harrison. |
| Manager Comments | The Altor AltFi Income Fund has a track record of 4 years and 5 months and therefore comparison over all market conditions and against its peers is limited. However, the fund has outperformed the Bloomberg AusBond Composite 0+ Yr Index since inception in April 2018, providing investors with an annualised return of 11.57% compared with the index's return of 0.64% over the same period. On a calendar year basis, the fund hasn't experienced any negative annual returns in the 4 years and 5 months since its inception. Over the past 12 months, the fund hasn't had any negative monthly returns and therefore hasn't experienced a drawdown. Over the same period, the index's largest drawdown was -10.78%. Since inception in April 2018, the fund's largest drawdown was -0.03% vs the index's maximum drawdown over the same period of -12.4%. The fund's maximum drawdown began in March 2020 and lasted 1 month, reaching its lowest point during March 2020. The fund had completely recovered its losses by April 2020. During this period, the index's maximum drawdown was -0.28%. The Manager has delivered these returns with 2.27% less volatility than the index, contributing to a Sharpe ratio which has consistently remained above 1 over the past four years and which currently sits at 3.96 since inception. The fund has provided positive monthly returns 100% of the time in rising markets and 95% of the time during periods of market decline, contributing to an up-capture ratio since inception of 114% and a down-capture ratio of -74%. |
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15 Sep 2022 - Performance Report: Glenmore Australian Equities Fund
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| Fund Overview | The main driver of identifying potential investments will be bottom up company analysis, however macro-economic conditions will be considered as part of the investment thesis for each stock. |
| Manager Comments | The Glenmore Australian Equities Fund has a track record of 5 years and 3 months and has outperformed the ASX 200 Total Return Index since inception in June 2017, providing investors with an annualised return of 22.84% compared with the index's return of 7.91% over the same period. On a calendar year basis, the fund hasn't experienced any negative annual returns in the 5 years and 3 months since its inception. Over the past 12 months, the fund's largest drawdown was -16.18% vs the index's -11.9%, and since inception in June 2017 the fund's largest drawdown was -36.91% vs the index's maximum drawdown over the same period of -26.75%. The fund's maximum drawdown began in October 2019 and lasted 1 year and 1 month, reaching its lowest point during March 2020. The fund had completely recovered its losses by November 2020. The Manager has delivered these returns with 7.52% more volatility than the index, contributing to a Sharpe ratio which has fallen below 1 four times over the past five years and which currently sits at 1 since inception. The fund has provided positive monthly returns 90% of the time in rising markets and 38% of the time during periods of market decline, contributing to an up-capture ratio since inception of 249% and a down-capture ratio of 102%. |
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15 Sep 2022 - Performance Report: Collins St Value Fund
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| Fund Overview | The managers of the fund intend to maintain a concentrated portfolio of investments in ASX listed companies that they have investigated and consider to be undervalued. They will assess the attractiveness of potential investments using a number of common industry based measures, a proprietary in-house model and by speaking with management, industry experts and competitors. Once the managers form a view that an investment offers sufficient upside potential relative to the downside risk, the fund will seek to make an investment. If no appropriate investment can be identified the managers are prepared to hold cash and wait for the right opportunities to present themselves. |
| Manager Comments | The Collins St Value Fund has a track record of 6 years and 7 months and has outperformed the ASX 200 Total Return Index since inception in February 2016, providing investors with an annualised return of 16.17% compared with the index's return of 9.49% over the same period. On a calendar year basis, the fund hasn't experienced any negative annual returns in the 6 years and 7 months since its inception. Over the past 12 months, the fund's largest drawdown was -11.41% vs the index's -11.9%, and since inception in February 2016 the fund's largest drawdown was -27.46% vs the index's maximum drawdown over the same period of -26.75%. The fund's maximum drawdown began in February 2020 and lasted 7 months, reaching its lowest point during March 2020. The fund had completely recovered its losses by September 2020. The Manager has delivered these returns with 3.38% more volatility than the index, contributing to a Sharpe ratio which has fallen below 1 three times over the past five years and which currently sits at 0.89 since inception. The fund has provided positive monthly returns 83% of the time in rising markets and 63% of the time during periods of market decline, contributing to an up-capture ratio since inception of 76% and a down-capture ratio of 42%. |
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15 Sep 2022 - Growing financial risks favour small and mid-sized global companies
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Growing financial risks favour small and mid-sized global companies Bell Asset Management August 2022 |
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Global equities boutique manager Bell Asset Management sees rising geopolitical and macroeconomic risks ahead and expects small and mid-sized quality companies with an international focus to offer the best value in the current market. According to Ned Bell, Chief Investment Officer, Bell Asset Management (BAM), China's sharp growth slowdown will impact the global economy, especially emerging markets, while there are growing risks the world's central banks could hike interest rates too sharply in the battle against rising inflation. "The global macroeconomic environment is changing dramatically, with economic growth slowing pretty quickly. And for the first time ever that slowdown is being led by China," said Mr Bell. "What also worries us is to what extent central banks will be able to get on the right side of managing the inflation surge. The big risk is they do too much as the economy slows," he added. Taking a more positive perspective, Mr Bell said the uncertain outlook was likely to bring plenty of buying opportunities for actively managed fund managers like BAM. "As much as there are a lot of things to be worried about in the current market, these risks bring opportunities to the table," Mr Bell said. BAM's investment approach focuses on companies that meet a high quality threshold, which includes financial strength, consistent profitability as well as a strong focus on Environmental, Social and Governance (ESG) factors. The asset manager then looks to identify mispriced companies within this sector or those stocks that display a disconnect between quality and current value. SWITCH TO GLOBAL SMALL AND MID-CAP COMPANIESAs a result of the changing macroeconomic environment, Mr Bell said the Bell Global Equities Fund had cut its weighting in large global companies and increased its allocation to smaller and mid-sized (SMID) firms as they offer more attractive valuations. "We've got 42% (of the fund's assets) in the SMID area. At the same time, we're probably the most underweight in mega caps that we have ever been," Mr Bell said. The benchmark MSCI World SMID Cap Index currently has a forward price/earnings (p/e) ratio of 15 times, compared to 24 times for the MSCI World Large Cap Growth Index. Mr Bell noted that the Global SMID cap p/e ratio currently stood at a significant discount to the MSCI World Large Cap Growth Index and traded at a discount to the main MSCI World Index compared to an average premium of 12% over the past 10 years. The COVID pandemic has given many global SMID companies a further boost with many forced to cut costs sharply. Mr Bell explained, "They had no choice. They cut so much cost out of their businesses that the actual earnings for the SMID asset class is 70% higher this calendar year than the pre-COVID level in 2019. As a result, they are able to absorb what is happening now more than they otherwise would have been able to." ESG INTEGRATED INTO INVESTMENT PROCESSAdrian Martuccio, Co-portfolio manager at BAM, said the fund manager's focus on its global SMID strategy had also led to a lower carbon footprint for the Bell Global Equities Fund. "Fundamentally we believe that if you have a portfolio with great ESG characteristics as well as meeting other quality metrics, then it's going to help you outperform. There is a very tight correlation between quality companies and good ESG outcomes," Mr Martuccio said. "We believe having a quality bias does help because it means you generally steer clear of many of utility stocks and other stocks that aren't environmentally friendly, but you really have to have some positive selection and active portfolio construction to get a carbon intensity level as low as BAM's," he added. The Bell Global Equities Fund and the Bell Global Emerging Companies Fund have ESG scores consistently above the MSCI World Index and the MSCI World SMID Cap Index, and a significantly lower carbon intensity.
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14 Sep 2022 - Performance Report: Bennelong Concentrated Australian Equities Fund
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| Manager Comments | The Bennelong Concentrated Australian Equities Fund has a track record of 13 years and 7 months and has outperformed the ASX 200 Total Return Index since inception in February 2009, providing investors with an annualised return of 14.15% compared with the index's return of 9.7% over the same period. On a calendar year basis, the fund has experienced a negative annual return on 2 occasions in the 13 years and 7 months since its inception. Over the past 12 months, the fund's largest drawdown was -31.8% vs the index's -11.9%, and since inception in February 2009 the fund's largest drawdown was -31.8% vs the index's maximum drawdown over the same period of -26.75%. The fund's maximum drawdown began in December 2021 and has lasted 8 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 1.98% more 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 0.79 since inception. The fund has provided positive monthly returns 89% of the time in rising markets and 19% of the time during periods of market decline, contributing to an up-capture ratio since inception of 140% and a down-capture ratio of 96%. |
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14 Sep 2022 - Sector Spotlight: Mineral Resources
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Sector Spotlight: Mineral Resources Airlie Funds Management July 2022 |
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Join Vinay as he discusses what makes Mineral Resources a unique business and how it's positioned for future growth. Speaker: Vinay Ranjan, Equities Analyst Funds operated by this manager: Important Information: Units in the fund(s) referred to herein are issued by Magellan Asset Management Limited (ABN 31 120 593 946, AFS Licence No. 304 301) trading as Airlie Funds Management ('Airlie') 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 to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to an Airlie financial product or service may be obtained by calling +61 2 9235 4760 or by visiting www.airliefundsmanagement.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 an Airlie 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. Airlie 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 Airlie. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Any third party trademarks contained herein are the property of their respective owners and Airlie 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 Airlie. |
14 Sep 2022 - Cracking the code on digital advice
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Cracking the code on digital advice abrdn August 2022 The financial advice industry has long touted the inevitability of digital solutions to close the financial advice gap in Australia, but there has been little progress to date. Industry players are reluctant to dive in thanks to red tape and complex rules, while a lack of regulatory support is stifling overseas investment and the local fintech community. But with the recent change in Australia's federal government and with the Treasury's Quality of Advice review into the affordability and accessibility of quality advice underway, the industry has a unique opportunity to call for the changes needed to bring digital solutions to the fore. In our view, now is the time to bring fresh thinking and establish an environment to promote robust digital advice solutions that enhance the lives of Australians and reduce anxiety around retirement planning. Glitches in the current modelAdvisers have been leaving the industry en masse due to the increased burden of ongoing accreditation and regulatory compliance costs in the wake of the Hayne Royal Commission. More than 3,000 advisers (16% of the market) left the industry in 2021, with a further 2,387 advisers predicted to leave in 2022. 1 This has also put upward pressure on the cost of advice. The median ongoing fee for advice rose to $3,256 a year in 2021 - an increase of 41% since 2018 - pricing out most Australians who say they want advice.2 Industry players widely accept that digital solutions can solve this problem by achieving a wider reach at a lower price point. But no company has successfully solved the challenge of providing digital financial advice in Australia, even though proven technology exists overseas. "No company has solved the challenge of providing digital financial advice in Australia, even though proven technology exists." Advice groups and investors are reluctant to launch digital financial advice in Australia because the rules are not clear. The risk either of losing their licence or of facing financial recourse from the regulator is seen as too great. Under the current model, the Australian Securities and Investment Commission (ASIC) is set up to be a code and conduct enforcer as opposed to helping firms to get their solutions over the line in a compliant manner. Unless this changes, overseas companies with existing solutions looking to expand their footprint to other markets, as well as local fintechs and established financial institutions, will be hesitant to do so here in Australia. Sparking innovation through collaborationOther government jurisdictions have taken a proactive approach to support financial services companies in developing innovative digital advice solutions and bringing them to market in a compliant way. The Monetary Authority of Singapore, for example, works directly with the financial sector to accelerate technology adoption. It launched the Fintech Regulatory Sandbox in 2016 to empower companies to experiment with digital solutions by relaxing legal and regulatory requirements for a limited period. Similarly, the UK's Financial Conduct Authority created Innovation Pathways to help financial services firms launch innovative products. It provides clear guidance on rules and offers one-to-one discussions with a dedicated case manager. We believe Australia's advice industry would see more early innovation if ASIC had a similar mandate. In our view, increasing ASIC's responsibility to help launch new digital initiatives by taking a more hands-on approach would not only accelerate innovation, but also attract more investment from companies in markets with well-established digital advice solutions. In developing the digital advice journeys, there should be an opportunity for regulators to help shape the solution, agree on the objectives and test the solution with clients in the marketplace to ensure intended outcomes can be met. Proven technologies can fast-track digital adviceThe good news is that proven digital solutions could be fast-tracked for the Australian market if the regulatory environment were to change. For example, digital advice journeys have been tried and tested by tens of thousands of abrdn's UK clients and have helped to close the financial advice gap in the UK. These could be adapted quickly for Australia's market. Dubbed bionic advice, abrdn's UK offering provides a hybrid between digital automation and the services of a human adviser. Clients digitise key information about their goals, lifestyle and other data inputs - freeing up paraplanning time and driving down the cost of advice. One of abrdn's UK digital journeys, for example, provides guidance to clients approaching retirement. Clients enter their data into digital tools to estimate their retirement income and model various scenarios. At this point, clients can choose to engage an adviser to finish off their retirement advice plan based on the digital inputs they've already provided. The innovation breakthroughs in bionic advice are where we see a much lower price point to access advice and reduce the advice gap. Advisers can then focus entirely on the value-add part of the journey, providing genuinely helpful advice. Author: Jason Nyilas, Head Of Retirement and Digital Innovation, Australia |
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Funds operated by this manager: Aberdeen Standard Actively Hedged International Equities Fund, Aberdeen Standard Asian Opportunities Fund, Aberdeen Standard Australian Small Companies Fund, Aberdeen Standard Emerging Opportunities Fund, Aberdeen Standard Ex-20 Australian Equities Fund (Class A), Aberdeen Standard Focused Sustainable Australian Equity Fund, Aberdeen Standard Fully Hedged International Equities Fund, Aberdeen Standard Global Absolute Return Strategies Fund, Aberdeen Standard Global Corporate Bond Fund, Aberdeen Standard International Equity Fund , Aberdeen Standard Life Absolute Return Global Bond Strategies Fund, Aberdeen Standard Multi Asset Real Return Fund, Aberdeen Standard Multi-Asset Income Fund 1 https://www.ardata.com.au/wp-content/uploads/2022/05/AFALandscape2022-AB_R2.pdf 2 https://www.ardata.com.au/wp-content/uploads/2022/05/AFALandscape2022-AB_R2.pdf |
13 Sep 2022 - Performance Report: Bennelong Australian Equities Fund
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| Manager Comments | The Bennelong Australian Equities Fund has a track record of 13 years and 7 months and has outperformed the ASX 200 Total Return Index since inception in February 2009, providing investors with an annualised return of 12.44% compared with the index's return of 9.7% over the same period. On a calendar year basis, the fund has only experienced a negative annual return once in the 13 years and 7 months since its inception. Over the past 12 months, the fund's largest drawdown was -29.91% vs the index's -11.9%, and since inception in February 2009 the fund's largest drawdown was -29.91% vs the index's maximum drawdown over the same period of -26.75%. The fund's maximum drawdown began in December 2021 and has lasted 8 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 1.53% more 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 0.71 since inception. The fund has provided positive monthly returns 90% of the time in rising markets and 17% of the time during periods of market decline, contributing to an up-capture ratio since inception of 130% and a down-capture ratio of 99%. |
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13 Sep 2022 - Australian Secure Capital Fund - Market Update
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Australian Secure Capital Fund - Market Update August Australian Secure Capital Fund August 2022
Funds operated by this manager: ASCF High Yield Fund, ASCF Premium Capital Fund, ASCF Select Income Fund |
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