NEWS
9 Mar 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 1 month and has outperformed the ASX 200 Total Return Index since inception in February 2009, providing investors with an annualised return of 13.85% compared with the index's return of 10.02% over the same period. Over the past 12 months, the fund's largest drawdown was -15.96% vs the index's -6.35%, and since inception in February 2009 the fund's largest drawdown was -24.32% 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 1.34% 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 0.81 since inception. The fund has provided positive monthly returns 91% of the time in rising markets and 18% of the time during periods of market decline, contributing to an up-capture ratio since inception of 135% and a down-capture ratio of 97%. |
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9 Mar 2022 - The question is, when should you invest?
The question is, when should you invest? Insync Fund Managers February 2022 Why we don't try to predict macro-market changes. We don't need to, no investor does. It is well established that the total returns of a stock follow the earnings growth of a business in the long term. Companies that can sustainably grow their earnings at a high rate over the long term are called compounders. Investing in a portfolio of compounders is one of the best ways to generate wealth for longer-term oriented investors that beat market averages. A major benefit of compounders is that market timing is rarely an issue, hence risk is also reduced. Our industry spends an inordinate amount of time trying to predict or forecast the future of markets. Sophisticated soothsaying by in-large. The probability of getting this right on a consistent basis is very low. Many espouse otherwise but a check of their historical records on predictions are quite revealing. Consider this:
What about the worst 20? It is also valid that avoiding the worst 20 days would have boosted your return beyond the fully invested 7.5% annualised return. The best and worst return periods show that extreme events have a large bearing on investor returns. Based on volatility around extreme events (and their mostly unpredictable appearances), it is impossible to predict the worst and best days. Indexing cannot filter in/out the extremes. If only those sophisticated 'crystal balls' in the hands of commentators and fund managers actually worked! Insync's "active" basket of 28 compounder stocks, carefully constructed to control the risk, delivers outperformance over passive benchmarks, over both full and multiple investment cycles, and does so without having to predict extreme events. Fastest decline in history. The Covid-19 pandemic clearly demonstrates the folly of an approach based on prediction. It created the fastest stock market decline in history catching out investors who believed prediction works. Let's say however, you were right and got out in time. Next and without warning, the fastest recovery in history then occurred. Unless you were in the market you missed out in a big way.
Predictions require constant and correct timing decisions. Stay in or out? If out, when? Then to where? And for how long? Thus, multiple questions need to be answered just for each event. Now, repeat over the life of your investment hundreds of times. No person or organisation has successfully got these answers sustainably right to produce great enduring outcomes. Market timing strategies also cannot benefit from the compounders. This is because timing tends to interrupt the powerful process of the conversion of earnings into price appreciation. Insync's focus on investing in compounders means we don't need to concern ourselves with the low hit-rate strategy of market timing stocks we hold. This is just one way we lower risk to our investors yet retain above average returns over time that endure. Examples of compounders
Funds operated by this manager: Insync Global Capital Aware Fund, Insync Global Quality Equity Fund |
8 Mar 2022 - Performance Report: Quay Global Real Estate Fund (Unhedged)
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Fund Overview | The Fund will invest in a number of global listed real estate companies, groups or funds. The investment strategy is to make investments in real estate securities at a price that will deliver a real, after inflation, total return of 5% per annum (before costs and fees), inclusive of distributions over a longer-term period. The Investment Strategy is indifferent to the constraints of any index benchmarks and is relatively concentrated in its number of investments. The Fund is expected to own between 20 and 40 securities, and from time to time up to 20% of the portfolio maybe invested in cash. The Fund is $A un-hedged. |
Manager Comments | The Manager has delivered these returns with 8.35% less 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 0.69 since inception. The fund has provided positive monthly returns 76% of the time in rising markets and 25% of the time during periods of market decline, contributing to an up-capture ratio since inception of 41% and a down-capture ratio of 56%. The Quay Global Real Estate Fund (Unhedged) returned -4.89% in February, a difference of -6.31% compared with the S&P/ASX 200 A-REIT Index which rose by +1.42%. Over the past 12 months, the fund has risen by +20.78% compared with the index which has returned +23.93%, for a difference of -3.15%. |
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8 Mar 2022 - Performance Report: Bennelong Kardinia Absolute Return Fund
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Fund Overview | There is a slight bias to large cap stocks on the long side of the portfolio, although in a rising market the portfolio will tend to hold smaller caps, including resource stocks, more frequently. On the short side, the portfolio is particularly concentrated, with stock selection limited by both liquidity and the difficulty of borrowing stock in smaller cap companies. Short positions are only taken when there is a high conviction view on the specific stock. The Fund uses derivatives in a limited way, mainly selling short dated covered call options to generate additional income. These typically have less than 30 days to expiry, and are usually 5% to 10% out of the money. ASX SPI futures and index put options can be used to hedge the portfolio's overall net position. The Fund's discretionary investment strategy commences with a macro view of the economy and direction to establish the portfolio's desired market exposure. Following this detailed sector and company research is gathered from knowledge of the individual stocks in the Fund's universe, with widespread use of broker research. Company visits, presentations and discussions with management at CEO and CFO level are used wherever possible to assess management quality across a range of criteria. |
Manager Comments | The Manager has delivered these returns with 6.42% less 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 0.67 since inception. The fund has provided positive monthly returns 86% 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 17% and a down-capture ratio of 52%. The Bennelong Kardinia Absolute Return Fund returned -1.72% in February, a difference of -3.86% compared with the ASX 200 Total Return Index which rose by +2.14%. Over the past 12 months, the fund has returned -3.08% compared with the index which has returned +10.19%, for a difference of -13.27%. |
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8 Mar 2022 - Manager Insights | Cyan Investment Management
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Chris Gosselin, CEO of FundMonitors.com, speaks with Dean Fergie, Director & Portfolio Manager at Cyan Investment Management. The Cyan C3G Fund has a track record of 7 years and 6 months and has outperformed the ASX Small Ordinaries Total Return Index since inception in August 2014, providing investors with an annualised return of 13.69% compared with the index's return of 8.08% over the same period. The fund has achieved a down-capture ratio since inception of 57.19%, indicating that, on average, the fund has outperformed in the market's negative months.
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8 Mar 2022 - Aligning Interests: (no freeloading on my tab!)
Aligning Interests: (no freeloading on my tab!) Colins St Asset Management February 2022 |
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Fat salaries. Big bonuses. Plummeting share price. Sound familiar?That an article discussing the benefits of aligned interests should even need to be written deeply concerns and somewhat surprises me. Nevertheless, it's clear from our experiences that there are plenty of companies where the interests of the executives and the interests of the shareholders are in direct and lopsided conflict. It boggles my mind that investors would put up with such situations, but it seems that many people out there are either unconcerned that the managers and directors looking after their money don't care about their goals or are simply too busy speculating to notice. So, though it pains me to my value investing roots to prepare this article, here are our thoughts on where investor interests and attention should be (in our humble opinion). "Show me the incentive, and I will show you the outcome." - Charlie Munger, Berkshire Hathaway There are many factors we consider when looking to invest in a company. No doubt, the basic matters such as balance sheet strength, return on equity, and competent management rank highly, but even when all of those factors are in place, a conflict of interest between the incentives for the management team and the interests of shareholders can see an otherwise attractive investment opportunity devolve into an expensive 'learning experience'. It should go without saying that a management team and investors should make all possible effort to ensure that their interests are aligned, but shockingly it is far less common than one would expect. Where investors are concerned with positive long-term outcomes, strong balance sheets, return on assets, return on invested capital, and primarily an increasing share price, many managements incentive schemes (both short term and long term) stunningly disregard some (or all of those factors) in lieu of more 'inventive' measures of success. We've seen management teams align their incentive schemes to revenue, or market cap growth, we've even seen some propose that the management team be rewarded for product growth. In each of those circumstances, we've seen time and again, management teams sacrifice balance sheet strength (via leverage), long term share prices (with dilutionary capital raisings), and margins (in search of wider and less profitable products). None of that behaviour suits shareholders, but all too often, the powers that be, who create long and short-term incentives get lost in the excitement of a good story or an exciting 'opportunity' and forget that the only role a management team should be playing is that of enriching the company's shareholders. Now it's important to note that even a perfect alignment of interests is not a guarantee of success. There have been plenty of companies with the best of intentions that have failed. However, we would suggest that over the long term, misaligned interests are a guarantee of failure. HOW TO ALIGN INTERESTS:
There is no one-size-fits-all approach, but broadly speaking there are a few basic things a board should look to do.
2. An improvement on our first point is to align management interests with shareholders by insisting that they become shareholders.
3. Once we've seen management align their interests to both the upside and the downside of the company, we also like to see the directors consistently increase their stake in the business.
If we can find a competent team that is prepared to support the company and align their interests with shareholders, it is one of the best indicators we can find for positive outcomes. A great example of this in practice is National Tyre and Wheel (NTD.ASX).
National Tyre and Wheel is a Queensland based business that, through its 28 different distribution centres spread over 3 countries, distributes tyres across a range of industries and sectors as diverse as emergency services, agriculture, off-road adventure driving and industrial vehicles (such as forklifts). The Board and Senior Management have been working together for over 30 years, well before the company was listed on the ASX. Key things that I like about the structure and alignment of interests within National Tyre and Wheel include:
Some other questions investors should be asking: There are no perfect solutions, but there are some simple steps we can take, and some indications we can look out for.
If the company is consolidating, incentives should reflect that. If the company is growing, then the incentives would be reflective of that.
It's worth offering highly attractive incentives to entice and retain quality staff. At the same time, it's important that those benefits are earned.
If the company's employees and Board are confident in the outlook of the business, receiving part of their salary in equity is enticing.
A toxic culture may achieve seemingly good outcomes in the short term but could have catastrophic consequences in the long term. Again, there is no guaranteed method for ensuring success, but knowing that the management team are working towards the same goals that we investors seek, and that a loss to investors will be equally felt by the management team is as good an indicator of the quality and prospects of a business as any we've been able to identify. How we align our interests. At Collins St Value Fund we take these lessons to heart. We expect the directors of the companies we invest in to align their interests with ours, and we expect nothing less from the investors who have entrusted us to look after their capital. As such the team have meaningfully invested in the fund and have done so on the same terms as all our investors. Additionally, the fund only receives a fee when our investors profit (focussing our attention on both genuinely protecting the downside and maximising the upside) - there are no fixed management fees skimmed off the top of investors capital as we believe, that in the Australian equities context, they incentivise little more than asset gathering, rent-seeking, index hugging and, ultimately, mediocrity. Author: Michael Goldberg, Managing Director and Portfolio Manager
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8 Mar 2022 - Webinar | Premium China Funds Management - Asian Fixed Income Webinar
Webinar | Premium China Funds Management - Asian Fixed Income The travails of certain Chinese property developers continue to impact Asian corporate bonds. Jonathan Wu has an update on how we are traversing this landscape. Speaker: Jonathan Wu, Premium's Head of Distribution and Operations & Chief Investment Specialist
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7 Mar 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 2 months and has outperformed the ASX 200 Total Return Index since inception in January 2013, providing investors with an annualised return of 14.56% compared with the index's return of 9.07% over the same period. The Manager has delivered these returns with 2.01% less volatility than the index, contributing to a Sharpe ratio which currently sits at 1.13 since inception. The fund has provided positive monthly returns 89% 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 68% and a down-capture ratio of 51%. |
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7 Mar 2022 - Manager Insights | Laureola Advisors
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Damen Purcell, COO of Australian Fund Monitors, speaks with John Swallow, Director at Laureola Advisors. The Laureola Australian Feeder Fund has a track record of 8 years and 10 months and has consistently outperformed the Bloomberg AusBond Composite 0+ Yr Index since inception in May 2013, providing investors with a return of 14.96%, compared with the index's return of 3.55% over the same time period.The fund has provided positive monthly returns 97% of the time in rising markets, and 97% of the time when the market was negative, contributing to an up capture ratio since inception of 160% and a down capture ratio of -249%.
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7 Mar 2022 - Norsk Hydro: In discussion with Pål Kildemo
Norsk Hydro: In discussion with Pål Kildemo Antipodes Partners Limited February 2022 In this episode on the Good Value podcast (recorded Monday 21 February 2022), Alison Savas is joined by the Executive Vice President and CFO of Norsk Hydro, Pål Kildemo. Norsk Hydro is a long-term holding in Antipodes' global portfolios, including the ASX-listed Antipodes Global Shares (Quoted Managed Fund) active-ETF (ASX: AGX1). Not only is the Oslo-listed company one of the largest aluminium producers in the world, it also has one of the lowest carbon footprints. Alison and Pål discuss Norsk's low-carbon, low-cost production, the opportunity for a green aluminium premium, and the structural trends impacting the aluminium market. |
Funds operated by this manager: Antipodes Asia Fund, Antipodes Global Fund, Antipodes Global Fund - Long Only (Class I) |