NEWS

14 Oct 2021 - 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 fund's returns over the past 12 months have been achieved with a volatility of 9.29% vs the index's 9.42%. The annualised volatility of the fund's returns since inception in May 2006 is 7.6% vs the index's 14.18%. 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 inception is 49.23%. Over all other periods, the fund's down-capture ratio has ranged from a high of 62.37% over the most recent 48 months to a low of 45.61% over the latest 24 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. |
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14 Oct 2021 - Webinar Recording | Paragon
Webinar recording: Performance Update & Outlook
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14 Oct 2021 - Sic Parvis Magna: Great Things from Small Beginnings

13 Oct 2021 - 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 fund's down-capture ratio for returns since inception is 41.96%. Over all other periods, the fund's down-capture ratio has ranged from a high of 66.66% over the most recent 36 months to a low of -141.82% 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. The fund's Sharpe ratio has ranged from a high of 4.96 for performance over the most recent 12 months to a low of 1.04 over the latest 60 months, and is 1.35 for performance since inception. By contrast, the ASX 200 Total Return Index's Sharpe for performance since January 2013 is 0.65. |
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13 Oct 2021 - Webinar | Premium China Funds Management
Premium China Funds Management: ESG and Asia - Oxymoron?
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13 Oct 2021 - New Funds on Fundmonitors.com
New Funds on Fundmonitors.com |
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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Ellerston Global Mid Small Cap Fund (Class A) | ||||||||||||||||||||||||||||
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13 Oct 2021 - Active dividend income after the pandemic
Active dividend income after the pandemic: From 'pub with no beer' to multi-year growth outlook Michael Price, Ausbil Investment Management
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The pandemic and the COVID sell-down, a potential nightmare scenario for income investors, has given us a real-life stress test in which some companies lost almost all revenue in a demand shock from which we are still unwinding. Michael Price, Portfolio Manager, Equity Income, answers your questions on how dividends changed in the pandemic, with some encouraging and valuable lessons on active dividend investing for the future. Q: Give us the 'elevator pitch' on what is happening in ASX dividends. A: In short and simple terms, the elevator pitch on dividends is as follows. The recent boom in resources as part of a mega-cycle in bulk and base metals, and battery materials has seen dividends from resources companies take share from the usually dominant banks. At the end of 2021, this expected to see resource dividends exceed bank dividend payments in 2021 and 2022, as illustrated in Chart 1. Chart 1: Banks ceded their traditional dividend dominance in 2020 (% of market dividends paid) Banks had a tough few years, and in the pandemic they had to cut (cancel in Westpac's case) dividends to help provision for potential bad and doubtful debts (which did not eventuate to anywhere near the level projected), as illustrated in Chart 2. The recent dividends show the switch to growth momentum in bank earnings as the economy surges. Chart 2: Bank dividends took a hit, but they are coming back Banks, resources companies and the broad market are now looking at multi-year earnings upgrades that we forecast will result in multi-year dividend upgrades. An active approach to dividends can optimise the opportunities this brings, including capturing more franking credits across the year from this fundamental earnings growth. Q: What do dividends look like compared to the past? A: The long-term average dividend yield for the S&P/ASX 200 over the last 20-years has been around 4% before adjusting for any franking credits. During this period, there have been two major dividend tail events. The first was the GFC, with COVID-19 the second, as illustrated in Chart 3. Chart 3: Dividend yields set for a rerate The GFC saw dividends per share fall some 30% as the world entered financial crisis, and the US suffered a major recession. Move forward a decade, and the pandemic of 2020 saw an even larger disruption, with dividends falling some 33% during COVID. The nature of the pandemic, which for many companies involved seeing their revenue line almost instantaneously run dry like 'a pub with no beer', impacted payout ratios through companies retaining earnings to fund the impact of COVID. This saw a general re-basing of dividends across the market in effected stocks, including banks, where APRA determined that banks should pay smaller dividends and retain additional capital for the purposes of provisioning. Contactus@ ausbil.com.au 2 Bank dividends 30% fall in GFC 3 Q: Why are dividends complicated, what are some of the considerations for investors? A: The old heuristics around which companies are income generators and who pays the best dividends are out the window as markets have become increasingly volatile, and many of the perennial 'dividend darlings' have been supplanted. An active approach to dividend investing is more important than ever, for a number of reasons. Firstly, dividends are paid almost every month of the year, as evidenced in Chart 4. A simple buy-and-hold strategy cannot maximise the spread of dividends and franking credits on offer across the calendar year. Chart 4: An active dividend strategy can find more dividends and more franking credits for investors across the year Secondly, stocks have become more volatile around reporting season, as illustrated in Chart 5. Understanding the underlying fundamentals of each company, and tactical allocation can help reduce the impact of this price volatility on overall portfolio value. Chart 5: An active dividend income approach can help manage volatility around reporting Q: So, what is your outlook for dividends in the coming years? A: We are at an interesting point in time, where monetary policy has seen yields across non-equity asset classes fall dramatically to lows they are expected to hold for a number of years. Relative to bond, credit and cash yields, the yield on equities (excluding any potential from capital gains) is relatively higher, as illustrated in Chart 6. Chart 6: Investors continue to look to equity yields as an anchor for income strategies While dividend yields fell away during the pandemic, they are showing recovery, as illustrated in Chart 6. Across 2020 and into early 2021, dividends across the year had fallen with lockdowns across Australia, and globally. The February 2021 half-year reporting season showed that company earnings were recovering on the back of a growing economy. As a result, the consensus outlook for dividends has also risen, showing growth not just for the coming year, but also into 2022 and 2023, as illustrated in Chart 7. Chart 7: Recovery and a new dividend growth story The two key sectors where we see the potential for earnings surprise are the banks and resources sectors. Banks, which offer primary exposure to a recovering economy, entered the pandemic after heavy barrage from the Hayne Inquiry and having already been sold down. The pandemic saw them sold down further on fears that the recession and COVID job losses would impact their lending books. All the banks provisioned majorly for the potential for credit loss, and APRA further enforced capital retention through limiting the dividends they were allowed to pay. Looking at the banks in the 2021 New Year, it was evident that the bad and doubtful debt experience was nowhere near predictions, and that the banks had over-provisioned for losses. With APRA allowing a return to more commercial dividend levels, and the economy resurging from the 2020 lows, we could see banks were in a position to reduce these provisions and grow their books further in a renewing real estate market. The result is that over the next few years, the unwind of this over-provisioning will see a rerating of earnings, ahead of the consensus expectation at the time we began up-weighting into banks. Metals and mining are in the midst of two fundamental themes in global resources investing. The first is the super-cycle demand for Australia's bulk commodities including iron ore, from China in terms of building and infrastructure demand, and as a function of the growth path of the world economy. This theme is expected to drive earnings in companies like BHP, Rio Tinto and Fortescue Metals. The second is the fundamental shift in the energy transition to renewable energy, and the rapid adoption of electric vehicles, which is sparking a secular demand for bulk, base and battery materials (copper, lithium, cobalt, zinc, manganese and rare earths) that is expected to last for decades, underwriting the fundamentals of a strong resources market. Ausbil has been overweight Banks and Resources (metals and mining) for some time. These overweights remain in place across our portfolios and have driven outperformance across our different strategies. Importantly, we are still in the early stages of the economic cycle, with a positive growth outlook for multiple years that is expected to drive performance in these megasectors. Taking in the broader economic context, Ausbil's view is that economies will run 'hot' for some time, with the support of policymakers, and are delivering the best growth figures since 1983, across a multi-year growth profile. While inflation will remain an ongoing source of worry as the perennial flipside to growth, it is important to understand whether inflation spikes are intermittent or if they are moves to a higher sustained level. It is our view, and indeed that of most global central banks, that inflation will not be a problem for some years as the world economy returns to health. Since the historic reversal in consensus across the February reporting season that saw the FY21 consensus earnings outlook for the broad market rebound from -1.6% to +15.6%, consensus earnings outlook for both indices has rerated to +22.5% (S&P/ASX 200) and +22.6% (S&P/ASX 300). While these earnings figures are strong, Ausbil's house view is that consensus is still underestimating the rebound in earnings that will occur in the prevailing economic conditions, with rates to remain low, and with the world economy providing a tailwind to Australia's current expansion. This will only further benefit the dividend payers on the market, and most benefit investors who are able to actively allocate to the best blend of dividend and franking credits across the market, across each month of the year. |
Funds operated by this manager: Ausbil 130/30 Focus Fund, Ausbil Australian Active Equity Fund, Ausbil Global SmallCap Fund, Ausbil MicroCap Fund |
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A public health crisis, pandemic, epidemic or outbreak of a contagious disease, such as the recent outbreak of Coronavirus (or Covid-19) in Australia, Italy, China, South Korea, the United States and other countries, could have an adverse impact on global, national and local economies, which in turn could negatively impact investment returns in any of Ausbil Investment Management Limited's registered managed investment schemes (the Funds). Disruptions to commercial activity relating to the imposition of quarantines or travel restrictions (or more generally, an inability on behalf of authorities to contain this pandemic) may adversely impact any investment, including by delaying or causing supply chain disruptions or by causing staffing shortages. The outbreak of Coronavirus has contributed to, and may continue to contribute to, volatility in financial markets. The impact of a public health crisis such as the Coronavirus (or any future pandemic, epidemic or outbreak of a contagious disease) is difficult to predict, which presents material uncertainty and risk with respect to any investment or fund performance. |

12 Oct 2021 - Performance Report: Bennelong Concentrated Australian Equities Fund
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Fund Overview | 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 9.08% vs the index's 9.42%. The annualised volatility of the fund's returns since inception in February 2009 is 14.91% vs the index's 13.48%. Over all other periods, the fund's returns have been more volatile than the index. Since inception in February 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 154.9% 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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12 Oct 2021 - Misunderstood Multiples
Misunderstood Multiples Amit Nath, Montaka Global Investments September 2021
This is one of the most used and repeated phrases of market commentary. In fact, multiples are probably the most enduring pieces of investment analysis of all time. Unfortunately, they are often completely useless. The law of the instrument, or 'Maslow's hammer', is a cognitive bias where people rely too much on a familiar tool. The renowned American phycologist, Abraham Maslow, articulated this concept with his hammer and nail metaphor -
Multiples are a short-cut, lazy approximation for valuing a business For many market commentators and armchair enthusiasts, valuation multiples are their Maslow's hammer, and they apply it indiscriminately - perhaps because it is the only valuation tool they possess in their toolkit. Valuation multiples are a simplified, abbreviated and short-cut methodology for thinking about the value of a company. They blindly take a company's price (market cap, enterprise value) and divide it by a fundamental metric (revenue, operating income, EPS, etc). But they don't tell the whole story or give a complete picture of underlying value and are prone to sizeable error when applied in isolation. And, sadly, multiples have never been less useful than they are today. If investors can understand how multiples can mislead, and how to value companies in this new complex market, they will be better placed to identify and ride 'multi-decade compounders' - the current and next generation of Amazons and Microsofts that build massive long-term wealth. Multiples were not designed for today's world For traditional valuation multiples to be effective, a company needs stable and predictable cash-flows, which are generally found in mature industries like utilities, real-estate and infrastructure. Multiples do a poor job of valuing privileged businesses models that have advantaged economics, including barriers to entry, network effects, and unique datasets. They also fail to reflect the value of emerging opportunities (aka real options) embedded in the world's best businesses, including the likes of Facebook's AR/VR platform and Alphabet's AI unit. Multiples provide an inadequate view when companies have high and relatively sustained growth rates, particularly for the world's best software-driven ecosystems like Microsoft, Google, Amazon or in the alternative asset management space, like Blackstone, KKR, and Carlyle. Basically, multiples simply break down when investors are analyzing a disruptive company in the midst of an inflection or an industry that is adapting to a new world, a world we are seeing across myriad of sectors such as technology, healthcare, financials, transportation, and energy. The problem: Humans are very bad at exponential thinking The core of the problem can be traced back to the fact that humans are very bad at exponential thinking. We prefer to use a simplifying linear concept (like a multiple) for a more complex non-linear concept (high growth business). But we lose information, and that mapping mismatch can lead to errors and ultimately incorrect conclusions. Google's world-renowned futurist and Director of Engineering, Raymond Kurzweil, believes humans are linear thinkers by nature, whereas technology, biology and our environment are often exponential. That, he says, creates enormous blind spots when we pursue higher-order thinking and seek to solve increasingly complex problems. Let's consider a simple thought experiment often sighted as Kurzweil's 'law of exponential doublings'. It takes seven doublings to go from 0.01% to 1%, and then seven more doublings to go from 1% to 100%. So within 14 time periods an emerging system has gone from being completely invisible in the linear world (0.01%), to entirely encompassing it (100%). The Covid-19 pandemic and the exponential spread of the virus gave us a real-world look at what exponential growth feels like as our lives were significantly disrupted. Yet most of us are simply not built to intuitively reconcile this phenomenon. Visualizing exponential growth through doublings Source: Montaka Multiples meant investors missed massive Microsoft gainsMicrosoft is an example of a company where the use of multiples fail. For the last decade the company has been consistently criticized by some investors for having an 'extremely high multiple' and is on the verge of a sharp pull-back. This narrative continues to persist in parts of the market even today. Yet Microsoft's multiple has consistently expanded for the entirety of that time. A linear conversation about Microsoft's multiple ignores several underlying drivers of Microsoft's valuation, from its virtual monopoly in enterprise computing (Windows), strangle hold on productivity applications (Office), to the enormous opportunity ahead of its cloud business (Azure). Some six years ago Azure was an invisible real option within Microsoft. But it certainly feels pretty real today after growing from basically zero revenue to an estimated $40 billion annualized run-rate (June-2021). Azure continues to grow at around 40-50% year on year with enormous runway ahead. It demonstrates the exponential growth that many investors still struggle to believe or comprehend. Another fallacy those decrying Microsoft's 'high multiple' is that its market capitalization gains have been entirely driven by multiple expansion and the low-interest-rate environment. Those factors certainly play a role, but multiple expansion only explains a third of Microsoft's value gains. While Microsoft's multiple has expanded four-fold over the last decade, its market cap has increased nearly eleven-fold during that time - driven by a massive earnings inflection and exponential growth within the Azure business. That's an extremely significant error produced by the unhelpful market heuristic of multiples. Entrenched habits and lazy analysis have a very long-tail and multiples are a seductive short-cut. Microsoft's multiple has expanded for a decade Source: Bloomberg, Montaka How to value companies in today's complex marketSo if multiples mislead, how do investors value companies in this new environment? The truth is, there are no short-cuts in valuing a business. It is a hard, detailed, and rigorous exercise that takes considerable time and insight to get right. At Montaka, all our investment theses are fundamentally driven and while not an exhaustive list, we look to gain insights across the following areas: - Detailed, bottoms-up, DCF (discounted cash flow) assessment of each company we invest in with an exploration of business model economics, TAM (total addressable market), competition, etc - Top-down perspective of the markets the company currently serves and potentially will serve in the future - Considerable time is spent considering what the business and industry will look like in 5 to 10 years and what challenges / opportunities may be encountered (this is a never-ending cycle of course) - We also establish a set of valuation scenarios that are weighted by the probability of the scenario being reached. They guide our view around upside and downside, and color our level of conviction in the position. We then effectively take a 'time machine' to several points in the future. For each time period we observe the multiple our valuation implies. This helps us check whether we are being too conservative, or too exuberant relative to what the market is willing to pay for the business today. In fact we often find instances where our DCF has compressed multiples in an unreasonable way or the market is being too conservative with its current price level. Get comfortable with high multiplesIf we continue with Microsoft as an example. The current share price (US$300) implies the market is being extraordinarily bearish on the Azure cloud business, and also believes Microsoft's future multiple will materially compress over the coming decade. We strongly disagree with the market's assessment on both fronts and believe it is significantly underestimating Microsoft's earnings potential and opportunity set, plus unreasonably discounts the quality of these earnings by slashing its multiple by more than half. In fact, under our bullish scenarios, we believe Microsoft's share price could increase several fold, even from here. Significant multiple compression implied by current share price Source: Montaka Compounding your wealth over decadesWhen an investor looks at a multiple, it may seem high at first glance. But it is essential to focus beyond this and understand the underlying business, its growth opportunities and what current market expectations imply. Certainly, a high multiple can be a red flag for overvaluation. However, in isolation an investor can't draw any real conclusions from that multiple. As we've seen, in certain situations the current multiple may be outrageously low despite the incessant noise claiming the opposite. Let look at Amazon for example, in 2006, it was trading at an EBITDA multiple of 26x versus the market (S&P 500) which was trading at 10x. Certainly not cheap by typical measures. But as a thought experiment, if we were to discount the current Amazon enterprise value at an annual rate of 10% back to 2006, an investor should have willing to pay close to 690x EBITDA and they still would have quadrupled their money today. The market, however, materially undervalued Amazon and it went on to deliver investors 115x over that period. In fact, you could have paid double the share price for Amazon in 2006 and still made nearly 60x your money today. Source: Montaka. Based on June-2021 LTM earnings for 2021 column. At Montaka we have a single clear goal: to maximize the probability of achieving multi-decade compounding of our clients' wealth, alongside our own. We are convinced that the months and years ahead will present opportunities to make attractive, multi-generational investments and we are prepared and well-positioned to take advantage of these. To achieve that, we won't let multiples become our Maslow's hammer! Funds operated by this manager: Montaka Global 130/30 Fund, Montaka Global Fund, Montaka Global Long Only Fund |
11 Oct 2021 - Performance Report: Collins St Value Fund
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Fund Overview | The managers of the fund intend to maintain a concentrated portfolio of investments in ASX listed companies that they have investigated and consider to be undervalued. They will assess the attractiveness of potential investments using a number of common industry based measures, a proprietary in-house model and by speaking with management, industry experts and competitors. Once the managers form a view that an investment offers sufficient upside potential relative to the downside risk, the fund will seek to make an investment. If no appropriate investment can be identified the managers are prepared to hold cash and wait for the right opportunities to present themselves. |
Manager Comments | Since inception in February 2016 in the months where the market was negative, the fund has provided positive returns 67% of the time, contributing to a down-capture ratio for returns since inception of 26.11%. Over all other periods, the fund's down-capture ratio has ranged from a high of 66.25% over the most recent 24 months to a low of -370.51% 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. The fund's Sortino ratio (which excludes volatility in positive months) has ranged from a high of 28.96 for performance over the most recent 12 months to a low of 1.28 over the latest 48 months, and is 1.47 for performance since inception. By contrast, the ASX 200 Total Return Index's Sortino for performance since February 2016 is 0.95. |
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