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28 Feb 2022 - Performance Report: Delft Partners Global High Conviction Strategy
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Fund Overview | The quantitative model is proprietary and designed in-house. The critical elements are Valuation, Momentum, and Quality (VMQ) and every stock in the global universe is scored and ranked. Verification of the quant model scores is then cross checked by fundamental analysis in which a company's Accounting policies, Governance, and Strategic positioning is evaluated. The manager believes strategy is suited to investors seeking returns from investing in global companies, diversification away from Australia and a risk aware approach to global investing. It should be noted that this is a strategy in an IMA format and is not offered as a fund. An IMA solution can be a more cost and tax effective solution, for clients who wish to own fewer stocks in a long only strategy. |
Manager Comments | The Delft Partners Global High Conviction Strategy has a track record of 10 years and 6 months and has outperformed the Global Equity Index since inception in August 2011, providing investors with an annualised return of 15.7% compared with the index's return of 14.59% over the same period. On a calendar year basis, the strategy has experienced a negative annual return on 3 occasions in the 10 years and 6 months since the start of its track record. Over the past 12 months, the strategy's largest drawdown was -4.36% vs the index's -3.04%, and since inception in August 2011 the strategy's largest drawdown was -13.33% vs the index's maximum drawdown over the same period of -13.19%. The strategy's maximum drawdown began in February 2020 and lasted 1 year, reaching its lowest point during July 2020. The strategy had completely recovered its losses by February 2021. The Manager has delivered these returns with 1.46% 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 1.16 since inception. The strategy has provided positive monthly returns 88% of the time in rising markets and 14% of the time during periods of market decline, contributing to an up-capture ratio since inception of 100% and a down-capture ratio of 93%. |
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28 Feb 2022 - Performance Report: ASCF High Yield Fund
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Fund Overview | Does not require full valuations on loans <65% LVR. Borrowing rates are from 12% per annum on 1st mortgage loans and 16% per annum on 2nd mortgage/caveat loans. Pays investors between 5.55% - 6.25% per annum depending on their investment term. |
Manager Comments | The ASCF High Yield Fund has a track record of 4 years and 11 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 March 2017, providing investors with an annualised return of 8.77% compared with the index's return of 3.03% over the same period. On a calendar year basis, the fund hasn't experienced any negative annual returns in the 4 years and 11 months since the start of its track record. Since inception in March 2017, 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 -5.31%. The Manager has delivered these returns with 3.35% 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 24.14 since inception. The fund has provided positive monthly returns 100% of the time in rising markets and 100% of the time during periods of market decline, contributing to an up-capture ratio since inception of 87% and a down-capture ratio of -94%. |
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28 Feb 2022 - Fund Review: Bennelong Twenty20 Australian Equities Fund January 2022
BENNELONG TWENTY20 AUSTRALIAN EQUITIES FUND
Attached is our most recently updated Fund Review on the Bennelong Twenty20 Australian Equities Fund.
- The Bennelong Twenty20 Australian Equities Fund invests in ASX listed stocks, combining an indexed position in the Top 20 stocks with an actively managed portfolio of stocks outside the Top 20. Construction of the ex-top 20 portfolio is fundamental, bottom-up, core investment style, biased to quality stocks, with a structured risk management approach.
- Mark East, the Fund's Chief Investment Officer, and Keith Kwang, Director of Quantitative Research have over 50 years combined market experience. Bennelong Funds Management (BFM) provides the investment manager, Bennelong Australian Equity Partners (BAEP) with infrastructure, operational, compliance and distribution services.
For further details on the Fund, please do not hesitate to contact us.
28 Feb 2022 - Webinar | Premium China Funds Management - Asian Equities
Webinar | Premium China Funds Management - Asian Equities 2022 has begun with extreme volatility in global equity markets. In this webinar, Jonathan Wu, shares a perspective on Asian markets
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28 Feb 2022 - Global Matters: 2022 outlook
Global Matters: 2022 outlook 4D Infrastructure February 2022 2022 is shaping up as potentially another challenging year, with the combined effects of the ongoing COVID crisis together with evolving inflationary pressures presenting governments and central banks around the world with some challenging policy decisions.
2022 outlook However, the two key factors dominating economic discussions and providing some near-term threat to a generally robust outlook as we enter 2022 are COVID-19 (again) and evolving inflationary pressures. COVID-19/Omicron variant While the ongoing COVID saga keeps pressure on equity markets, we continue to believe it represents a unique buying opportunity for infrastructure investors. The infrastructure investment thematic has not been derailed by COVID, but rather has been enhanced by the pandemic - huge government stimulus programs are fast-tracking infrastructure investment (in particular the energy transition), increasingly stretched government balance sheets will see a greater reliance on private sector capital to build much-needed infrastructure, and the interest rate environment remains supportive of infrastructure investment and valuations. Global inflationary forces Broadly, the price increases are being driven by a combination of supply chain disruptions, causing critical supply shortages of key items (such as computer chips), together with the huge global monetary stimulus pushing up the amount of money in the global economy, with inflationary forces being the consequence (e.g. Australian house prices). Importantly, we are also seeing real wage pressure in certain industries and markets as a result of the combination of COVID disruptions and job rotations as stimulus flows through. This is compounding near-term inflationary pressure. Central banks are already beginning to tighten monetary policy in an attempt to curtail these inflationary forces. After its January 2022 Fed meeting, Chair Jerome Powell said the Fed is ready to raise rates in 2 months. He spoke after the FOMC communicating that it would hike 'soon' and then shrink its bond holdings. Mr Powell declined to rule out tightening at every meeting this year, said officials may have to move sooner and faster on shrinking the central bank's US$8.9 trillion balance sheet, and warned there's a risk of a prolonged period of surging prices. The risk now is that if the Omicron variant continues to spread, this may itself lead to a crimping of global growth just as central banks take their feet of the stimulus pedal, compounding the slowdown. Ultimately, we believe central banks will act prudently and cautiously in easing policy. We are also of the belief that they may let inflation run somewhat ahead of target over the short to medium term to assist in the reduction of headline nominal government debt to GDP levels. But just at the present, uncertainty prevails and caution is warranted. In this regard, infrastructure is an asset class that can do well in an inflationary environment and we believe it is a sensible portfolio allocation at the current stage of the economic cycle. As discussed in a number of our previous Global Matters articles, many infrastructure stocks have built-in inflation protection, either directly linked to tariffs or indirectly through their regulatory construct. As such, in an inflationary scenario some parts of the infrastructure universe, namely User Pays, may enjoy the perfect storm over the short/medium term -interest rates supportive of future growth, economic activity flowing through to volumes, and explicit inflation hedges through their tariff mechanisms to combat any inflationary pressure they may experience. In contrast, Regulated Utilities can be more immediately adversely impacted by rising interest rates/inflation because of the regulated nature of their business. The flow-through of inflation is dictated by whether the Utility's return profile is 'real' or 'nominal'. If the Utility operates under a real return model, inflation is passed through into tariffs much like a User Pay asset. This model is more prevalent in parts of Europe and Brazil, for example, and limits the immediate impact of inflationary pressure - and in fact can positively boost near-term earnings. In contrast, if the Utility is operating under a nominal return model, it must bear the inflationary uptick reflected in certain costs until it has a regulatory reset, when the changing inflationary environment is acknowledged by the regulator and approved to be incorporated in new tariff/revenue assumptions. This nominal model is the standard model for the US Utility sector. As such, those Utilities in a real model will weather inflationary spikes a little better than their nominal peers. However, in terms of interest rates shifts, the issues for both real and nominal models are consistent. For a Regulated Utility to recover the cost of higher interest costs, it must first go through its regulatory review process. While a regulator is required to have regard for the changing cost environment the Utility faces, the process of submission, review and approval can take some time or can be dictated by a set regulatory period of anywhere between 1-5 years. In addition, the whole environment surrounding costs, household rates and utility profitability can be highly politically charged. As a result, both the regulatory review process and the final outcome can be quite unpredictable. The differences between User Pay and Regulated Utility assets should see certain sub-sets fundamentally outperform during a rising inflation/interest rate period due to a more immediate and direct inflation hedge. At 4D we remain overweight User Pay assets and, within the Regulated Utility sector, favour those with real returns. However, should the market overreact to the economic outlook we would use it as a buying opportunity across all sectors. Key ongoing macro themes However, in summary, current investment forces that we at 4D find particularly interesting include the:
What could derail our outlook?
We continue to monitor the near and long-term trends and will actively position accordingly as events unfold. Conclusion |
Funds operated by this manager: 4D Global Infrastructure Fund, 4D Emerging Markets Infrastructure Fund |
28 Feb 2022 - Spotlight Series, Feb Edition
Spotlight Series, Feb Edition Montaka Global Investments February 2022 The average stock in the S&P 500 has already declined from its peak late last year, while the average NASDAQ Stock is down a staggering 44%! This month's Spotlight Series Podcast unpacks the inflation and interest rate fears, demonstrating why equity markets may well have already overshot to the downside. Speakers: Andy Macken, Chief Investment Officer & Chris Demasi, Portfolio Manger Funds operated by this manager: |
25 Feb 2022 - Hedge Clippings |25 February 2022
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Hedge Clippings | Friday, 25 February 2022 The old saying that "People behave the way they're allowed to" accurately describes Vladimir Putin at the current time. The Russian president/dictator has clearly (and correctly) judged that the likelihood of a military response from the West is nil, and presumably estimates that the political and economic cost of retaliation in the form of sanctions will be worthwhile compared to the benefits of returning Ukraine to the Russian fold. The West has stated it won't put troops on the ground so the military risks themselves seem slight, and to someone of Putin's mentality, are minimal and one-sided. It is down to the economic and strategic damage, with the problem that sanctions are likely to cost the West, and Europe in particular, dearly as well. Meanwhile, history tells us that the Russian people are much more resilient in the face of the economic and physical hardship they endure in everyday life than their "soft" democratic counterparts. Beyond the shorter term outcome of the invasion, the longer term question will be what happens when/if the Russian forces reach the western and northern borders of Ukraine? What, or where next? Meanwhile, President Xi will be watching with interest the rationale that historically Ukraine and many Ukrainians is/are Russian. That sounds much like China's claims on Taiwan, hence it is little wonder there's been no condemnation of the invasion from Beijing. Whilst the world's reaction to Xi following Putin's lead in Taiwan may be even more strident, actually going to war over an invasion is another question altogether. Which leaves sanctions. However, as above, sanctions have a habit of damaging both sides, and given the size and importance of the Chinese economy on the rest of the world, how far might those sanctions be taken, and how effective might they be? Would Australia cease to import Chinese made goods? And if we did, what tolerance would there be amongst a democratic population that would be forced to do without the everyday necessities they're used to? Even more important are our exports, where China represents 43% of our exports by value, slightly more than the combined exports of the next 15 countries on the list. Even if Australia were so indignant at any invasion of Taiwan, would we ban exports of iron ore and coal to China in retaliation, given the hue and cry over China's current ban on rock lobsters and red wine? The West has a problem that totalitarian regimes such as Russia and China don't have, notably open and fair democratic elections. Putin and Xi will behave the way they're allowed to, unless, or until their own populations decide otherwise. Which is unlikely to occur any time soon. News & Insights Intercontinental Exchange | Magellan Asset Management 10k Words - February Edition | Equitable Investors Investment Perspectives: House prices - what's in store for 2022 and beyond | Quay Global Investors |
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January 2022 Performance News Equitable Investors Dragonfly Fund Insync Global Quality Equity Fund |
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25 Feb 2022 - Fund Review: Bennelong Long Short Equity Fund January 2022
BENNELONG LONG SHORT EQUITY FUND
Attached is our most recently updated Fund Review on the Bennelong Long Short Equity Fund.
- The Fund is a research driven, market and sector neutral, "pairs" trading strategy investing primarily in large-caps from the ASX/S&P100 Index, with over 19-years' track record and an annualised return of 13.78%.
- The consistent returns across the investment history highlight the Fund's ability to provide positive returns in volatile and negative markets and significantly outperform the broader market. The Fund's Sharpe Ratio and Sortino Ratio are 0.81 and 1.26 respectively.
For further details on the Fund, please do not hesitate to contact us.
25 Feb 2022 - Big opportunities for small cap investors in IPOs and secondary placements
Big opportunities for small cap investors in IPOs and secondary placements Firetrail Investments January 2022 2021 was an exciting year for initial public offerings (IPOs) and placements. 55 companies with an offer price greater than A$20 million made their debut on the ASX during the year. Up a staggering 62% from the year before! Secondary placements experienced a more modest increase, up 6% from 2020. Most equity capital market (ECM) activity took place in the small cap end of the market. Providing a material opportunity for institutional small cap managers like Firetrail to add value for their investors. In this article, we analyse the success of small cap IPOs and placements in 2021, provide key takeaways for investors, and what to expect in capital markets in 2022. We conclude that corporate activity will remain elevated in small companies throughout 2022. Creating meaningful opportunities for investment managers willing to do the work to identify the best opportunities. IPOs and placements outperformed in 2021It wasn't just the sheer number of IPOs and placements that broke records in 2021. Together, new ASX-listings raised a total of A$12 billion! Among them were a record number of billion-dollar floats, such as APM, SiteMinder and PEXA. On the first day of trading, these IPO companies outperformed the market by an average of 20%. However, we did see this outperformance moderate by the end of the year. We saw the inverse occur in the market for secondary offerings. Average day one performance hovered around 10.1%. While calendar year performance rose to 15.4%! The total amount raised by secondary offers was A$37.7 billion. But that doesn't seem like an accurate reflection of performance from a market perspective. Careful stock selection is criticalIf we adjust for the size of the raise, the story changes. We see big declines for first day and calendar year performance for both IPOs and secondary placements. Suggesting that the relative performance is skewed by a handful of big winners. In the IPO space, performance was dominated by a few key players. DGL, a chemical manufacturing and storage group, and Trajan, an analytical science and devices company, experienced greater than 100% returns in the calendar year. To account for this asymmetry, we took the median performance for the calendar year. The median return for IPO stocks was just -4%. Providing a more accurate reflection of capital market performance. Clearly, an ability to pick winners is key to harnessing value from corporate activity. The chart below compares the relative performance of IPOs that raised more than $50 million. While average performance was strong, there were more losers than winners. Through deep fundamental analysis, Firetrail were able to pick the winners this year. The median return from our IPO participation was 18% for the 2021 calendar year (shaded in grey in Figure 1). Careful selection is also key for managers trying to maximise returns from secondary placements. In 2021, we saw a wide dispersion in results. The best returning secondary issuances were in companies in need of balance sheet repair. The average placement in this category delivered 33% excess. In many instances we observed that the 'raise' was already priced in by the market. Hence recapitalisation was the catalyst to refocus the market on business fundamentals. The market also rewarded companies raising capital to grow organically far more than M&A. Raisings for growth dominated the market (Figure 3). In contrast, there were few M&A bargains in 2021 due to intense competition for assets. Many companies were willing to pay listed multiples for strategic acquisitions.
Opportunities will remain elevated in small caps in 2022ECM events are a consistent source of opportunity and strong returns for small cap investors. Access to these opportunities is key, and the Firetrail team have a strong track record of leveraging our corporate relationships and fundamental expertise to access attractive corporate opportunities for our investors. Since the inception of the Firetrail Team's Small Companies strategy in 1998, previously the Macquarie Australian Small Companies Fund, these events have contributed an average 20% of the total excess returns, or ~3% p.a. Looking ahead to 2022, low interest rates and high valuations will continue to encourage companies to raise capital. We expect ECM activity to remain elevated and to continue delivering material opportunities for small cap investors like Firetrail. Conclusion2021 was a year of frantic ECM activity and we see no sign of this abating as we move through 2022. As small cap investors, we are excited by the opportunity and potential returns offered by IPOs and secondary placements in the coming year. Our experience shows that meaningful returns are out there if managers are willing to do the work to find them! Funds operated by this manager: Firetrail Absolute Return Fund, Firetrail Australian High Conviction Fund Disclaimer This article is prepared by Firetrail Investments Pty Limited ('Firetrail') ABN 98 622 377 913 AFSL 516821 as the investment manager of the Firetrail Australian Small Companies Fund ARSN 638 792 113 ('the Fund'). This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person's objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance. Pinnacle Fund Services Limited ABN 29 082 494 362 AFSL 238371 ('PFSL') is the product issuer of the Fund. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited ('Pinnacle') ABN 22 100 325 184. The Product Disclosure Statement ('PDS') and the Target Market Determination ('TMD') of the Fund is available at www.firetrail.com. Any potential investor should consider the PDS before deciding whether to acquire, or continue to hold units in, the Fund. Whilst Firetrail, PFSL and Pinnacle believe the information contained in this communication is reliable, no warranty is given as to its accuracy, reliability or completeness and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Firetrail, PFSL and Pinnacle disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information. This disclaimer extends to any entity that may distribute this communication. The information is not intended for general distribution or publication and must be retained in a confidential manner. Information contained herein consists of confidential proprietary information constituting the sole property of Firetrail and its investment activities; its use is restricted accordingly. All such information should be maintained in a strictly confidential manner. Any opinions and forecasts reflect the judgment and assumptions of Firetrail and its representatives on the basis of information available as at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future. Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this communication is prohibited without obtaining prior written permission from Firetrail. Pinnacle and its associates may have interests in financial products and may receive fees from companies referred to during this communication. This may contain the trade names or trademarks of various third parties, and if so, any such use is solely for illustrative purposes only. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with, endorsement by, or association of any kind between them and Firetrail.
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24 Feb 2022 - Fund Review: Insync Global Capital Aware Fund January 2022
INSYNC GLOBAL CAPITAL AWARE FUND
Attached is our most recently updated Fund Review on the Insync Global Capital Aware Fund.
We would like to highlight the following:
- The Global Capital Aware Fund invests in a concentrated portfolio of 15-30 stocks, targeting exceptional, large cap global companies with a strong focus on dividend growth and downside protection.
- Portfolio selection is driven by a core strategy of investing in companies with sustainable growth in dividends, high returns on capital, positive free cash flows and strong balance sheets.
- Emphasis on limiting downside risk is through extensive company research, the ability to hold cash and long protective index put options.
For further details on the Fund, please do not hesitate to contact us.