NEWS
16 Aug 2022 - Is the sky really falling in?
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Is the sky really falling in? Insync Fund Managers July 2022 A different message for the year's mid-point... Each month we show how we invest practically by focusing on a Megatrend, then one or two stock examples in support. Given we are halfway through the year and with so much negativity about after the last 5 months of stock price volatility, we thought a closer look at these negatives is warranted. Negativity Bias: We notice the bad far more than the good. It's why commentators lead with bad news. It gets our attention.
Inflation, recession, high interest rates....... Commentators have espoused many things in the last 5 months, the general message swinging between ongoing crippling inflation, high interest rates, and recession. We have noticed 5 common assertions they often use, and for our investors benefit we felt it worthwhile examining each one carefully. What we discovered may surprise you, and so, remember those 5 genetic biases. The inference is that investing in growth assets will be a risky decision and thus growth managers will face hard times. As a Quality Style manager, we are not convinced of these inferences, as what we found suggests otherwise. The details behind our reasoning can be found in our recent White Paper on this subject (on our website). Common Assertion 1: Carbon prices will continue to rise.
The red line in the graph shows the general basket of major commodities. They too are falling and earlier than carbon energy has. Indeed, this might not only point to a fall in inflation but to the prospects of a recession. We will address that further on. Common Assertion 2: Global shipping supply chains are crippled and expensive. The problem with this is that shipping capacity and efficiency is rapidly improving and prices are falling. These facts and more below.
Covid is an event based disruption- not permanent. Life resumes, blockages unblock. This is already occurring. Common assertion 3: Reshoring back to the West means higher prices A UBS survey of American CEOs had 90%+ intending to move production away from China. Already 6 massive multibillion dollar chip manufacturing plants are already underway in Texas and Arizona. It comes down to what's being re-shored. Goods being re-shored are mainly higher value/complex goods (e.g. technology intensive). Let's look at some further current facts:
There are several arguments entwined in this, and so we shall try to be brief, knowing we have a fuller answer contained in our White Paper. That red circle in the graph shows a critical historical disparity. The market has overshot the negative and is out of kilter with the 300 odd critical US businesses purchasing managers that this reliable benchmark survey covers. Investors are already expecting the US economy to contract, yet importantly not to the extent that it did during the pandemic, the GFC or the 2000 recession. Despite all the news headlines, US hourly wage growth is exceeding the inflation of goods and services (ex food and energy). Real wages are growing at (a moderate) 1.7% pace, maintaining a healthy demand for labour and not too much of a concern for the Federal Reserve. Given the low labour participation rate, there is little chance that we see wages driving inflation. This is what would concern the Federal Reserve, as unit labour cost growth is the real source of endemic inflation. Until the Russian war ends the EU is in for a bumpy ride- short term no doubt, but there will be positive surprises as is already evident. Common assertion 5: Ever increasing interest rates. Bond markets basically set the future of interest rates and particularly in the US. So, let's take a closer look at what they are telling us. Their expectations after allowing for inflation, energy and commodities prices, geopolitics etc. says the next 5 years will top at 2.55% and the 5yr-10yr expectation at 2.14%. Let's say that again... 2.55% and 2.14%. From this we can gauge the expectations for 10 years which currently stands at 2.35%. Clearly interest rate rise expectations, are actually rapidly declining. This has implications for how much more the Federal Reserve is likely to tighten. Whilst there is sound basis to argue that the Fed Fund Rate is too low, it is unlikely to be lifted more than 3.5% due to the combined effect of slowing GDP growth and peaking shorter term inflationary expectations. Long term inflation averages a little over 3%, yet in the last 10 or so years, we got used to a once in a lifetime decade of ultra- low rates. Life, markets, consumers and companies adjust. This level of inflation is not bad for growth assets. Funds operated by this manager: Insync Global Capital Aware Fund, Insync Global Quality Equity Fund Disclaimer |
15 Aug 2022 - Performance Report: L1 Capital Long Short Fund (Monthly Class)
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| Manager Comments | The L1 Capital Long Short Fund (Monthly Class) has a track record of 7 years and 11 months and has outperformed the ASX 200 Total Return Index since inception in September 2014, providing investors with an annualised return of 20.05% compared with the index's return of 6.91% over the same period. On a calendar year basis, the fund has only experienced a negative annual return once in the 7 years and 11 months since its inception. Over the past 12 months, the fund's largest drawdown was -17.4% vs the index's -11.9%, and since inception in September 2014 the fund's largest drawdown was -39.11% vs the index's maximum drawdown over the same period of -26.75%. The fund's maximum drawdown began in February 2018 and lasted 2 years and 9 months, reaching its lowest point during March 2020. The fund had completely recovered its losses by November 2020. The Manager has delivered these returns with 6.62% 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 0.92 since inception. The fund has provided positive monthly returns 78% of the time in rising markets and 64% of the time during periods of market decline, contributing to an up-capture ratio since inception of 82% and a down-capture ratio of 18%. |
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15 Aug 2022 - Performance Report: Bennelong Emerging Companies Fund
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| Manager Comments | The Bennelong Emerging Companies Fund has a track record of 4 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 November 2017, providing investors with an annualised return of 18.53% compared with the index's return of 7.42% over the same period. On a calendar year basis, the fund has only experienced a negative annual return once in the 4 years and 9 months since its inception. Over the past 12 months, the fund's largest drawdown was -31.43% vs the index's -11.9%, and since inception in November 2017 the fund's largest drawdown was -41.74% vs the index's maximum drawdown over the same period of -26.75%. The fund's maximum drawdown began in December 2019 and lasted 10 months, reaching its lowest point during March 2020. The fund had completely recovered its losses by October 2020. The Manager has delivered these returns with 15.08% more volatility than the index, contributing to a Sharpe ratio which has fallen below 1 four times over the past four years and which currently sits at 0.69 since inception. The fund has provided positive monthly returns 82% of the time in rising markets and 32% of the time during periods of market decline, contributing to an up-capture ratio since inception of 285% and a down-capture ratio of 125%. |
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15 Aug 2022 - New Funds on Fundmonitors.com
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New Funds on FundMonitors.com |
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Below are some of the funds we've recently added to our database. Follow the links to view each fund's profile, where you'll have access to their offer documents, monthly reports, historical returns, performance analytics, rankings, research, platform availability, and news & insights. |
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| Hyperion Global Growth Companies PIE Fund | ||||||||||||||||||
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Man AHL Alpha (AUD) - Class B |
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| Terra Capital Green Metals Fund | ||||||||||||||||||
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| The Elvest Fund | ||||||||||||||||||
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Want to see more funds? |
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15 Aug 2022 - Four in five advisers have consulted clients about inflation in the last six months
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Four in five advisers have consulted clients about inflation in the last six months abrdn July 2022
The vast majority (85%) of advisers have spoken with their clients in the last six months about how to adapt their finances or portfolios in the wake of soaring inflation, according to new research from abrdn. A fifth (22%) of advisers have spoken to all of their clients about the impact of inflation on their finances, while just one in ten (12%) have yet to discuss changes with any. To help clients manage the effects of inflation, advisers are most frequently altering pension drawdown strategies to reduce tax liability (23%) and adapting their investment portfolio to decrease risk (21%). More than one in six (17%) have also discussed a wider range of annuity options, while 14% have adjusted retirement income plans. abrdn's research also looked at advisers' client conversations about higher taxes, market volatility and the ESG implications of holding or making investments in Russian-linked assets following its invasion of Ukraine. A majority (85%) of advisers have discussed the impact of market volatility, 84% have discussed Russian-related ESG considerations and 83% have spoken to their clients about managing the impact of higher taxes. Jonny Black, strategic director abrdn, Adviser, said: "Advisers are yet again supporting clients in another challenging environment. Many will not have experienced the record levels of inflation we're currently living through, and I'd expect to see more people seek professional advice for the first time this year. "People want to know how to mitigate the impact of inflation on their finances, but also to better understand why the economy is in this position in the first place. This underlines the value of advice. Advisers help clients answer the hard, technical questions, but also help put their minds at ease in difficult times." When it came to the impact of Russian-linked ESG considerations, advisers have most frequently been working with clients to adjust retirement income plans (21%) and divest money away from Russian-linked assets, as required by sanctions (20%). Meanwhile, a further one in six (16%) advisers said they had divested client funds from Russian-linked assets out of clients' personal choice. Elsewhere, to help clients manage the impact of higher taxes, one fifth (20%) of advisers say they've increased the proportion of investments in a tax wrapper. A further 20% have altered their investment portfolio asset allocation to increase risk and potential return to mitigate the impact of market volatility. Jonny Black added: "It's clear both advisers and clients are taking a range of actions. With further challenges ahead - including warnings of worsening inflation - firms will need to be prepared to continue engaging with clients to ensure they're able to adapt to pressures and remain on the strongest possible financial footing." |
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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
Methodology Survey of 424 UK-based adult financial advisers, conducted by Censuswide on behalf of abrdn in May 2022. Notes to Editors At abrdn, our purpose is to enable our clients to be better investors. abrdn plc manages and administers £542 billion of assets for clients, and has over 1 million shareholders. (Figures as at 31 December 2021) Our business is structured around three vectors - Investments, Adviser and Personal - focused on the changing needs of our clients. For UK wealth managers and financial advisers, we provide technology, expertise and support to make it easy for them to run their businesses - and to deliver the outcomes their clients want. We offer content and experiences that can be personalised to suit every type of business and client, giving advisers powerful data and insight to make better decisions. We're the number one adviser platform business in the UK for assets under administration and gross flows (Adviser AUA: £76 billion as at 31 December 2021). We're also the first UK adviser platform provider to receive and retain an 'A' rating from AKG for the financial strength of our platforms (AKG financial strength reports 2021).
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12 Aug 2022 - Hedge Clippings |12 August 2022
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Hedge Clippings | Friday, 12 August 2022
Following last week's rate increase of 0.5% by the RBA, and the inevitable flow-on from the big banks, various sections of the media made a song and dance about how much higher mortgage rates are likely to go, and how much stress that's going to put on homeowners, and thus push the economy into a recession. This week therefore, it is worth taking notice of comments by the CEO's of the CBA and ANZ, both of whom are more optimistic than the economic doomsayers. Given that between the two of them they have their fingers on the pulse, or at least the numbers of the bank statements of half the population, they should know. ANZ's Shane Elliott thinks an Australian recession is "extraordinarily unlikely", while Matt Comyn doesn't believe there will be widespread mortgage defaults within CBA's home loan book. Given the sensitivity to any interest rate increases from the record lows of the past few years, the facts would appear to support Comyn's view that the RBA will only need to raise official rates twice more, once by 0.50%, and a final 0.25% before Christmas. 40% of CBA's mortgage customers have fixed loans, and most won't be affected for another 18 months. Added to this almost 80% of CBA's borrowers are ahead with their payments, and around one third are two years ahead. Finally, the CBA, along with other banks, have been tightening mortgage eligibility for a while in anticipation of higher rates. As we see it, the biggest risk for homeowners is that property prices fall significantly (say more than 20%), whereupon banks, who have a habit of wanting an equity top up from their stretched borrowers, demand just that. Hopefully this time around prices won't fall that far, or if they do, banks will hold their nerve. Meanwhile, the above scenario (official rates to be limited to 2.75% or say 3% as a maximum) relies on inflation peaking and therefore falling into the RBA's "transient" category. It's well accepted that to date, rather than being wages driven, much of the inflationary pressure is either climate based (fresh fruit and veg for example), caused by supply chain disruption, and/or energy prices, thanks to the war in Ukraine. As noted last week, there's probably a number of opportunistic price rises by some businesses being slipped in there as well. As a result, Australian equity markets have continued to rally after their EOFY sell off, which particularly hit last year's winning peer group of small and mid cap managers, and their funds, which judging by the results below rebounded strongly. Even cryptocurrencies have stabilised, which has seen Bitcoin back above $24,000 from below $19,000 in early June. Equity markets seem to have ignored the war in Ukraine, as they did with this week's ramping up of action, and rhetoric, by the Chinese leadership over Pelosi's visit to Taiwan. Coupled with the effects of climate change in Europe, which is threatening further supply chain disruption as the Rhine and Danube rivers become un-navigable in places, macro issues such as the threat of an all out war between China and the US (and allies) would put everything more in perspective. Except that the markets, by and large, seem to be ignoring the storm clouds. At their peril. News & Insights New Funds on FundMonitors.com Activism by prominent Australians | L1 Capital Australian Secure Capital Fund - Market Update July | Australian Secure Capital Fund |
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July 2022 Performance News Bennelong Long Short Equity Fund Quay Global Real Estate Fund (Unhedged) Insync Global Capital Aware Fund Bennelong Emerging Companies Fund |
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12 Aug 2022 - Performance Report: DS Capital Growth Fund
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| 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 7 months and has outperformed the ASX 200 Total Return Index since inception in January 2013, providing investors with an annualised return of 13.42% compared with the index's return of 8.61% over the same period. On a calendar year basis, the fund has only experienced a negative annual return once in the 9 years and 7 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 1.74% 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 0.99 since inception. The fund has provided positive monthly returns 89% 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 68% and a down-capture ratio of 62%. |
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12 Aug 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 6 months and has outperformed the ASX 200 Total Return Index since inception in February 2009, providing investors with an annualised return of 14.35% compared with the index's return of 9.66% 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 6 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 7 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 0.8 since inception. The fund has provided positive monthly returns 90% 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 143% and a down-capture ratio of 96%. |
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12 Aug 2022 - Why are we so afraid of normal?
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Why are we so afraid of normal? Yarra Capital Management 25 July 2022
Dion Hershan, Head of Australian Equities, details why he believes the panic in markets today appears excessive. There has been an extreme bout of panic this year (ASX -11%, S&P 500 -19%) regarding the return of what appears to be a traditional business cycle (yes it still exists!) and key settings normalising. With the glory years of low and falling interest rates (supplemented by a bit of QE) now over, financial markets are in a state of flux. This is notwithstanding the obvious inevitability that at some point interest rates would have to move upwards from zero! Commentators, many of whom just finished becoming experts on epidemiology, are now opining on the chance of a recession and discussing it as if it's a fatalistic event. It is worth noting the US had 12 recessions in the 20th century and still fared OK. Unfortunately there appears to be no sensible discussion about the duration or severity of a recession, instead just alarmist rhetoric. While we won't attempt to call the business cycle, we do believe it's worth sharing a few simple facts with reference to the Australian market where we focus:
Financial markets always look forward and often overreact. This sell off has put forward earnings multiples at 12.5-times, the lowest level since the GFC (one standard deviation below the long-term average). Clearly, broad based earnings downgrades are expected in August; a 20% downgrade would put the market at 'fair value', which may very well happen. For what it's worth, we believe this feels like a forced slowdown in the economy and the panic that has ensued seems excessive. We are capitalising on the opportunity and stepping up at the epicentre of the panic to buy a number of quality cyclical and high growth business. We have established a position in Xero (XRO) which has halved and has enormous runway for growth (new markets, lifting average spend) and also increased positions in Carsales.com (CAR), Reliance Worldwide (RWC), and Nine Entertainment (NEC). |
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Funds operated by this manager: Yarra Australian Equities Fund, Yarra Emerging Leaders Fund, Yarra Enhanced Income Fund, Yarra Income Plus Fund |
11 Aug 2022 - Performance Report: Airlie Australian Share Fund
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| Fund Overview | The Fund is long-only with a bottom-up focus. It has a concentrated portfolio of 15-35 stocks (target 25). The fund has a maximum cash holding of 10% with an aim to be fully invested. Airlie employs a prudent investment approach that identifies companies based on their financial strength, attractive durable business characteristics and the quality of their management teams. Airlie invests in these companies when their view of their fair value exceeds the prevailing market price. It is jointly managed by Matt Williams and Emma Fisher. Matt has over 25 years' investment experience and formerly held the role of Head of Equities and Portfolio Manager at Perpetual Investments. Emma has over 8 years' investment experience and has previously worked as an investment analyst within the Australian equities team at Fidelity International and, prior to that, at Nomura Securities. |
| Manager Comments | The Airlie Australian Share Fund has a track record of 4 years and 2 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 June 2018, providing investors with an annualised return of 9.55% compared with the index's return of 7.36% over the same period. On a calendar year basis, the fund hasn't experienced any negative annual returns in the 4 years and 2 months since its inception. Over the past 12 months, the fund's largest drawdown was -16.29% vs the index's -11.9%, and since inception in June 2018 the fund's largest drawdown was -23.8% vs the index's maximum drawdown over the same period of -26.75%. The fund's maximum drawdown began in February 2020 and lasted 9 months, reaching its lowest point during March 2020. The fund had completely recovered its losses by November 2020. The Manager has delivered these returns with 0.02% less volatility than the index, contributing to a Sharpe ratio which has fallen below 1 three times over the past four years and which currently sits at 0.6 since inception. The fund has provided positive monthly returns 97% of the time in rising markets and 12% of the time during periods of market decline, contributing to an up-capture ratio since inception of 108% and a down-capture ratio of 97%. |
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