NEWS
23 Sep 2021 - Is Evergrande Contagious?
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Is Evergrande Contagious? Jonathan Wu, Premium China Funds Management September 2021
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23 Sep 2021 - What are the Benefits of Life Settlements for Society?
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What are the Benefits of Life Settlements for Society? Tony Bremness, Laureola Advisors September 2021 Alignment with ESG principles is becoming imperative in investment management. A majority of Australians expect their super or other investments to be invested responsibly and ethically. In addition to the expectation of returns not being compromised, investors also expect these investments to have a real environmental, societal or governance impact, not just "ethics washing." Due to slow-changing legacies, popular investments such as equity and bonds, funds usually start their ESG journey through implementing negative screening to exclude investments whose activities are considered harmful. However, it is still difficult to directly link the remaining assets to having actual positive ESG impact. These assets might just be less harmful. Positive ESG impact assets are not immediately obvious because most investors are not used to the idea that assets that service a societal need can be profitable. The opportunity in life settlements shows how helping others can be profitable too. How can an investment in life settlements, where returns are made when the insured dies, be a social good? The positive impact that can arise from an investment in life settlements is improved physical and financial wellbeing of senior citizens in the US (where the most active life settlements transactions market operates). An investment in a life settlements fund can help vulnerable retirees and tackle three ESG-related issues in the US: There is a shortfall of retirement savings in the US The National Institute of Retirement Security estimates that approximately 44% of people born between 1944 and 1979 are at risk of having insufficient income to meet basic day-to-day expenses in retirement. Due to the savings shortfall, seniors cannot access long-term care The average middle-class senior citizen does not have sufficient savings to cover the cost of long-term care. When accounting for long-term care costs, 69% of households are at risk of being unable to maintain their standard of living in retirement. Instead of helping to ease this shortfall, life insurance policies add to the burden with regular ongoing demands for insurance premiums while the senior is alive. Every year since 2009, over 33 million life insurance policies terminate prematurely which means the policyholder does not realise a benefit from the policy despite paying premiums for decades. The American Council of Life Insurer reported over 90% of life policies terminate without paying a death benefit in 2018. Life settlements provide a solution to these issues by providing a cash payout to the seniors and by shifting the burden of the insurance premium to life settlements investors. By investing in this asset class there is potential for:
Researchers from London Business School estimated in 2013 that the value unlocked by the life settlement market is on average about four times greater than that of the surrender value offered by insurance companies. While life settlements might not look like a candidate as a force for ESG- aligned investing, its fundamental raison d'etre is to address a societal need for better retirement provision. In return for such social good, life settlement investors can obtain stable, uncorrelated returns which has historically been in the teens. Tomorrow, we continue this release with a follow-up article 'What is a Life Settlements Investment?". Funds operated by this manager: |
22 Sep 2021 - Performance Report: Prime Value Emerging Opportunities Fund
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| Fund Overview | The Fund is comprised of a concentrated portfolio of securities outside the ASX100. The fund may invest up to 10% in global equities but for this portion typically only invests in New Zealand. Investments are primarily made in ASX listed and other exchange listed Australian securities, however, it may also invest up to 10% in unlisted Australian securities. The Fund is designed for investors seeking medium to long term capital growth who are prepared to accept fluctuations in short term returns. The suggested minimum investment time frame is 3 years. |
| Manager Comments | The fund's Sharpe ratio has ranged from a high of 3.32 for performance over the most recent 12 months to a low of 0.94 over the latest 60 months, and is 1.08 for performance since inception. By contrast, the ASX 200 Total Return Index's Sharpe for performance since October 2015 is 0.77. The fund has a down-capture ratio for returns since inception of 45.74%. Over all other periods, the fund's down-capture ratio has ranged from a high of 68.03% over the most recent 36 months to a low of -4.64% over the latest 12 months. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months over the specified period, and negative down-capture ratio indicates that, on average, the fund delivered positive returns in the months the market fell. |
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22 Sep 2021 - Performance Report: Bennelong Emerging Companies Fund
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| Fund Overview | The Fund may invest in securities expected to be listed on the ASX within 12 months. The Fund may also invest in securities listed, or expected to be listed, on other exchanged where such securities relate to ASX-listed securities |
| Manager Comments | The fund's Sharpe ratio has ranged from a high of 3.14 for performance over the most recent 12 months to a low of 0.82 over the latest 24 months, and is 0.98 for performance since inception. By contrast, the ASX 200 Total Return Index's Sharpe for performance since November 2017 is 0.67. Since inception in November 2017 in the months where the market was positive, the fund has provided positive returns 85% of the time, contributing to an up-capture ratio for returns since inception of 321.13%. Over all other periods, the fund's up-capture ratio has ranged from a high of 276.99% over the most recent 36 months to a low of 123.55% over the latest 12 months. An up-capture ratio greater than 100% indicates that, on average, the fund has outperformed in the market's positive months over the specified period. |
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22 Sep 2021 - Crispin Murray: What's driving ASX stocks this week
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Crispin Murray: What's driving ASX stocks this week Crispin Murray, Pendal 20 September 2021 |
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Here are the main factors driving Australian equities this week according to our head of equities Crispin Murray. Reported by quantitative analyst Lee Ma GLOBAL EQUITY markets remained soft last week. The S&P500 fell 0.5%, bringing month-to-date performance to -1.9%. In Australia the S&P/ASX 300 was flat, though there was some meaningful sector divergence. Metals and Mining came off 4.4% while Energy was up 3.5%. There were two key drivers of this performance:
Covid and vaccines Domestic news has been generally positive. NSW Covid cases peaked at a lower level than feared and vaccine penetration has continued to grow solidly. Take-up rate for the first dose has risen to 82.2% — up 3.7% compared to last week. This rate has been holding up well. That's important since a higher rate will help relieve potential strain on hospital systems in future outbreaks and reduce the likelihood of future lockdowns. The seven-day moving average for second-dose vaccinations is close to 61,000 this week — up from about 50,000 last week. If this trend continues we might get to 80% full vaccinated — and further relief from lockdowns — before October 18. Globally case numbers continue to improve, albeit marginally in the UK and the US. Return-to-school impact can be seen in the higher ratio of kids in case numbers. Though this is tending to sustain case numbers rather than increase them. Hospitalisation numbers have been slowly improving in both counties. This is leading to some evidence of improved sentiment in the US. Economics and policy Tension has been building for weeks around Evergrande, China's (and the world's) most indebted property developer. Evergrande's bond interest payments are due on September 23. The question is whether the market will see a bankruptcy or some form of debt restructure. More importantly, people are contemplating whether this will have a cascading effect on China's other property developers and the economy more broadly. Weakened sentiment contributed to the precipitous drop in iron ore over the week. We see great uncertainties around how this will eventually play out. There is a good chance a default is possible with the Chinese government choosing to send a strong message on property speculation. But we think the outcome will be something the government can manage, since Evergrande is not a state-owned enterprise and is not as systemically important. That said, we will reach a crescendo of concern over the next couple of weeks. Outside China, the focus has been on renewed concerns that inflation is set to be persist for longer, leading to faster tapering and potentially an earlier move in rates. Inflation fears in the US have come mainly from a combination of labour shortages and unemployment insurance (UI) payments coming to an end. The next few weeks will be an important test of the durability of labour tightness. Recent pricing power surveys clearly indicate that US companies are pushing through pricing increases in a number of sectors. This reflects input price pressures, constrained availability of product and higher labour costs. Also, gas prices continue to remain far higher than we have seen for years in the US and Europe. Inventories are low heading into winter. There is a 70% probability of a La Nina weather event, which may lead to a colder winter. There are concerns elevated gas prices will persist, which has already led to higher electricity prices in the US and UK. All eyes are on the Fed's September meeting this week. The market will closely watch how they signal the pacing of tapering and their quarterly update on the dot plots. The dots are expected to have shifted forward again towards the median rate rise around the turn of 2023. The other focus will be on the number of rate rises through to the end of 2024. Similarly, there was media attention on unpublished forecasts by the ECB, which could see inflation rising 2% by 2025. This may lead to rates rising in 2023. All this has added to the market's wariness on the inflation impact on central bank policies. Markets The market saw a continued drop in iron ore price. The seaborne benchmark fell 22% last week and is now down 37% for the calendar year-to-date. In contrast the oil price was up by 3% and 45% in the same periods. The main reason for this disconnect was iron ore's reliance on Chinse demand, compared to oil's link to global demand. The fall in iron ore has been driven by a number of factors. It had an over-extended starting point, driven by surging steel production in China in 1H21. The production surge was then met by a dramatic slowdown starting from 2H21: steel production was down 18% in July and a further 10% in August. The Chinese government has an aggressive rhetoric around holding down steel production through 2H21 for environmental reasons and trying to keep production growth flat for the full year. These restrictions are expected to continue limiting steel production through to the end of the winter Olympics in late February next year. At the same time the Chinese government has introduced policies to maintain controls of the property sector, which is a key driver of steel demand. Fears for the overall sector have been exacerbated by the Evergrande situation. Also weighing on demand, the Chinese economy has been generally softer recently due to rolling COVID lockdowns. More stimulatory policies on local government bond issuance that funds infrastructure spend are unlikely to kick in until 2022. Lastly, the deteriorating relationship between China and Australia may have led to other measures impacting on the commodity price. Where to from here? The debate is not so much whether iron ore bounces much, but rather whether it can hold in the US$100s or if it continues to move towards a longer term price of US$70. The Evergrande final resolution may mark a sentiment low in China and its property sector. Consequently, some measures to support the economy may be introduced such as the RRR cut. We should still expect relatively subdued demand from China, but the real-time indicators on the economy look to be near their lows. Global demand for steel remains strong, as evident from the very high global steel spreads, suggesting there are still cyclical tail winds. Supply disruption also continues to emerge, with Vale announcing this week its iron ore production next year will be lower than expected. Overall, this week could be the crescendo in negative sentiment before investors start to rebuilding confidence slowly. Against this backdrop, equity markets overall are re-testing support levels. There could be support in early evidence that the US economy is experiencing a re-acceleration as Covid cases start to stabilise and fall. And liquidity from Central Banks remains abundant. Lastly, we note the rotation of value to growth has been mirrored by fund flows. Inflows to tech and outflows from cyclicals look to be at extremes. As such, we continue to see cyclicals holding better from here. |
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Funds operated by this manager: Pendal Total Return Fund |
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This article has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and the information contained within is current as at August 11, 2021. It is not to be published, or otherwise made available to any person other than the party to whom it is provided. This article is for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient's personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information in this article may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information in this article is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections contained in this article are predictive and should not be relied upon when making an investment decision or recommendation. While we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. |
21 Sep 2021 - Performance Report: Premium Asia Fund
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| Fund Overview | The Fund is managed by Value Partners using a disciplined value-oriented approach supported by intensive, on-the-ground bottom-up fundamental research resulting in a portfolio of individual holdings, which are, in the view of Value Partners, undervalued and of high quality, on either an absolute or relative basis, and which have the potential for capital appreciation. The Fund will primarily have exposure to the equity securities of entities listed on securities exchanges across the Asia (ex-Japan) region, however, the Fund may also gain exposure to entities listed on securities outside the Asia (ex-Japan) region which have significant assets, investments, production activities, trading or other business interests in the Asia (ex-Japan) region as well as unlisted instruments with equity-like characteristics, such as participatory notes and convertible bonds. The Fund may also invest in cash and money market instruments, depositary receipts, listed unit trusts, shares in mutual fund corporations and other collective investment schemes (including real estate investment trusts), derivatives including both exchange-traded and OTC, convertible securities, participatory notes, bonds, and foreign exchange contracts. |
| Manager Comments | The fund's Sharpe ratio has ranged from a high of 2.36 for performance over the most recent 12 months to a low of 1.04 over the latest 48 months, and is 0.82 for performance since inception. By contrast, the MSCI All Country Asia Pacific ex-Japan Index's Sharpe for performance since December 2009 is 0.43. Since inception in December 2009 in the months where the market was positive, the fund has provided positive returns 89% of the time, contributing to an up-capture ratio for returns since inception of 160.89%. Over all other periods, the fund's up-capture ratio has ranged from a high of 160.25% over the most recent 12 months to a low of 140.92% over the latest 48 months. An up-capture ratio greater than 100% indicates that, on average, the fund has outperformed in the market's positive months over the specified period. The fund's down-capture ratio for returns since inception is 90.46%. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months. |
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21 Sep 2021 - Performance Report: Quay Global Real Estate Fund
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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 fund's returns over the past 12 months have been achieved with a volatility of 8.73% vs the index's 16.09%. The annualised volatility of the fund's returns since January 2016 is 11.83% vs the index's 20.64%. Over all other periods, the fund's returns have been consistently less volatile than the index. The fund's down-capture ratio for returns since January 2016 is 51.65%. Over all other periods, the fund's down-capture ratio has ranged from a high of 50.06% over the most recent 60 months to a low of -51.69% over the latest 12 months. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months over the specified period, and negative down-capture ratio indicates that, on average, the fund delivered positive returns in the months the market fell. |
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21 Sep 2021 - Jamieson Coote Bonds - August 2021 Market and Performance Review
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Jamieson Coote Bonds - August 2021 Market and Performance Review Channel Capital August 2021 Charlie Jamieson, Chief Investment Officer at Jamieson Coote Bonds discusses the market and performance of high grade bonds in August 2021.
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Funds operated by this manager: CC Jamieson Coote Bonds Active Bond Fund (Class A), CC Jamieson Coote Bonds Dynamic Alpha Fund, CC Jamieson Coote Bonds Global Bond Fund (Class A - Hedged), CC Jamieson Coote Bonds Global Bond Fund (Class B - Unhedged) |
20 Sep 2021 - Performance Report: NWQ Fiduciary Fund
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| Fund Overview | The Fund aims to produce returns after management fees and expenses of RBA Cash Rate + 4.0-5.0% p.a. over rolling five-year periods. Furthermore, the Fund aims to achieve these returns with volatility that is a fraction of the Australian equity market, in order to smooth returns for investors. |
| Manager Comments | The fund's returns over the past 12 months have been achieved with a volatility of 5.2% vs the index's 10.33%. Over all other periods, the fund's returns have been consistently less volatile than the index. The fund's Sortino ratio (which excludes volatility in positive months) has ranged from a high of 5.99 for performance over the most recent 12 months to a low of 0.95 over the latest 36 months, and is 1.35 for performance since inception. By contrast, the ASX 200 Total Return Index's Sortino for performance since May 2013 is 0.72. Since inception in May 2013 in the months where the market was negative, the fund has provided positive returns 53% of the time, contributing to a down-capture ratio for returns since inception of 13.25%. Over all other periods, the fund's down-capture ratio has ranged from a high of 30.01% over the most recent 36 months to a low of -8.46% over the latest 12 months. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months over the specified period, and negative down-capture ratio indicates that, on average, the fund delivered positive returns in the months the market fell. |
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20 Sep 2021 - Performance Report: Bennelong Concentrated Australian Equities Fund
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| Fund Overview | The overriding objective of the Concentrated Australian Equities Fund is to seek investment opportunities which are under-appreciated and have the potential to deliver positive earnings, while satisfying our stringent quality criteria. Bennelong's investment process combines bottom-up fundamental analysis together with proprietary investment tools which are used to build and maintain high quality portfolios that are risk aware. The portfolio typically consists of 20-35 high-conviction stocks from the S&P/ASX 300 Index. The Fund may invest in securities listed on other exchanges where such securities relate to ASX-listed securities. Derivative instruments are mainly used to replicate underlying positions and hedge market and company specific risks. |
| Manager Comments | The fund's returns over the past 12 months have been achieved with a volatility of 9.4% vs the index's 10.33%. The annualised volatility of the fund's returns since inception in January 2009 is 14.94% vs the index's 13.5%. The fund's Sharpe ratio has ranged from a high of 3.59 for performance over the most recent 12 months to a low of 0.86 over the latest 36 months, and is 1.04 for performance since inception. By contrast, the ASX 200 Total Return Index's Sharpe for performance since February 2009 is 0.66. Since inception in January 2009 in the months where the market was positive, the fund has provided positive returns 92% of the time, contributing to an up-capture ratio for returns since inception of 164.56%. Over all other periods, the fund's up-capture ratio has ranged from a high of 154.88% over the most recent 24 months to a low of 126.7% over the latest 12 months. An up-capture ratio greater than 100% indicates that, on average, the fund has outperformed in the market's positive months over the specified period. |
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