NEWS

29 Jul 2021 - Performance Report: Equitable Investors Dragonfly Fund
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Fund Overview | The Fund is an open ended, unlisted unit trust investing predominantly in ASX listed companies. Hybrid, debt & unlisted investments are also considered. The Fund is focused on investing in growing or strategic businesses and generating returns that, to the extent possible, are less dependent on the direction of the broader sharemarket. The Fund may at times change its cash weighting or utilise exchange traded products to manage market risk. Investments will primarily be made in micro-to-mid cap companies listed on the ASX. Larger listed businesses will also be considered for investment but are not expected to meet the manager's investment criteria as regularly as smaller peers. |
Manager Comments | The Fund's 12-month up-capture and down-capture ratios, 245% and 84% respectively, indicate that, on average, it has outperformed during both the market's positive and negative months over that period. The Fund returned -5.29% over the June quarter. Top contributors included Geo (NZX: GEO) and iSelect (ISU). Key detractors included Scout Security (SCT) and 8Common (8CO). Equitable Investors noted that, after a catalyst rich run for the fund earlier in FY21, the June quarter was a quiet one as the Fund's big movers (both up and down) didn't have any significant news to drive them. Value catalysts are what Equitable Investors are looking for and they hope to see triggers for re-ratings across a number of key holdings in the December half. Stepping back from the individual investments to the broader market, they've observed a wide gap between the valuation multiples of larger and smaller stocks. They expect investors will be enticed to look at smaller stocks in a world where large caps are priced at extreme levels based on a number of measures. |
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29 Jul 2021 - Fund Review: Bennelong Twenty20 Australian Equities Fund June 2021
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.


29 Jul 2021 - How to fire up the dividend machine
How to fire up the dividend machine Dr Don Hamson, Plato Investment Management July 2021 Based on Plato's analysis, 2020 was the worst year for dividends in Australia over the past forty years, with the 35% cut in dividends surpassing the falls seen over three years in the recession we had to have and the GFC. For investors holding just bank shares, the outcome was even worse, with big four bank dividends falling roughly 60% in calendar 2020. Self-funded retirees also took a huge hit on their interest income, with term deposit rates plunging to near zero. But that was last year. We faced nationwide lockdowns, no one knew how bad things may get, many assumed the worse, the Reserve Bank of Australia slashed rates to an all-time low of 0.1%, APRA initially discouraged banks from paying any dividends at all, and the Federal Government literally threw money at COVID with its Jobkeeper and Jobseeker payments. As we have seen, Australia's island quarantine strategy has proved relatively successful, in fact very successful on a global context. Our economy has bounced back quicker than anyone thought, and our GDP has now surpassed its pre-COVID levels. For most companies, too, the outlook is bright, apart from those still directly affected by international travel bans and local lockdowns. On our analysis, 2021 has emerged as very strong year for dividend income and with the August reporting season ahead we expect the good news for dividend investors to continue into the remainder of the year. The picture for income from ASX-listed equities is stark when compared to other asset classes. Below we've charted the real earnings on $1,000,000 from the overnight cash rate, 1-year term deposits and 10-year bond yields. These so-called safe assets are producing negative real rates of return. So, in a world where real returns on cash-backed assets are in the red, and will likely remain there for the foreseeable future, how can investors ensure they don't miss out on a piece of the dividend pie? The dividend outlook looks good We model expected dividends for S&P/ASX300 companies and our expectations for future dividends is looking very bright. We also forecast the likelihood of companies potentially cutting their future dividends. This helps us avoid dividend traps, which we think is key for income investors. We can use our dividend cut model to get a picture of the market as a whole, by calculating the average probability of a dividend cut across all stocks. The following chart shows how the probability has varied over time. The GFC in 2008/9 and the COVID pandemic in 2020 are very clear to see. The global pandemic set a new high for market wide probability of dividend cuts, but what is very interesting is how quickly the cut probability has fallen from its peak in April 2020 to a below average level. This underpins our positive outlook for dividends in 2021. Source: Plato Global Dividend Cut Model Diversify, but don't set and forget We manage the portfolio of our Listed Investment Company, the Plato Income Maximiser (ASX:PL8), with the aim of paying monthly dividends and delivering investors above-market levels of income annually. It may come as a surprise that the majority of our top yielding holdings aren't what many consider to be Australia's traditional dividend-paying stocks. Consider the miners. 3 of the top 6 dividend payers in Australia today are mining companies - Fortescue Metals (ASX: FMG), Rio Tinto (ASX: RIO) and BHP (ASX: BHP). For many investors this would have been inconceivable just a few years ago. We've held a very positive view on the sector for a number of years, comfortable with the global supply/demand equation for iron ore. Over the past three years, FMG, RIO and BHP alone have delivered our portfolio 3.4% p.a. gross income. The question we now face is how long will the mining stock dividend boom continue? We still maintain a positive outlook on mining stock dividends for the foreseeable future. Our experience in active equity management has taught us things always take longer to play out than markets would indicate. Samarco (the massive Brazilian Iron Ore miner owned by BHP and Vale) is only just coming back to full production five years after a devastating dam disaster. We often see miners forecast swift production resumption after major issues, but the reality is it usually takes longer. The COVID situation in Brazil is also another impediment. Even when this Brazilian supply comes back on, steel production is on the rise with historical levels of infrastructure stimulus leaving the supply and demand fundamentals intact. Should Iron Ore prices for come off $100-$150 per tonne from the current highs, Fortescue, Rio Tinto and BHP will still be very profitable businesses. Mining stocks do go through cycles, and this fact shouldn't be ignored. It's why a 'set and forget' approach isn't optimal for dividend investing. We like miners for the short-medium term, but our view is likely to evolve in the future as conditions change. The same applies to retailers- again not a traditional area for dividends in the eyes of income investors - however it's a sector that has produced exceptional income in recent times for investors who have actively added the right names to their portfolios. In the consumer discretionary space in particular, leading retailers including JB Hi-Fi (ASX: JBH), Super Retail (ASX: SUL) and Harvey Norman (HVN) have been thriving and delivering income far superior than most other asset classes. These consumer discretionary businesses (and others) experienced a COVID-19 sugar-hit has consumers stocked up on products needed for working from home and increased domestic tourism, and we expect this to continue until borders are opened. So, like the miners, as active managers we must consider if this will continue into the short-medium term. It remains to be seen when full-scale international travel will resume. Australians love to travel and spend a lot of money abroad. A large chunk of that money is likely to continue flowing into domestic discretionary spending. There was evidence of this recently. When it comes to the big 4 banks, they've traditionally been a major focus for income investors but in 2020 the outlook appeared dire as dividends were slashed across the board amongst the financials. There has, however, been a remarkable turnaround, for three reasons. First, APRA have taken off all restrictions on bank and financial institution dividends in late 2020. Second, bad debts have proven much lower than expected, and finally, banks are seeing good loan growth fuelled by low interest rates. In May we saw half-year results from Westpac (ASX: WBC), ANZ (ASX: ANZ) and National Australian Bank (ASX: NAB). Across the board, there has been a significant write-back of provisions and strong increases in cash earnings, resulting from improving economic conditions. Outside of the big 4, dividend strength is also evident. Bendigo and Adelaide Bank's half-year result earlier this year came in at almost 30% above expectations, Macquarie's FY21 net profit revealed in May, was up 10% on FY20. While bank dividends aren't fully back to pre-COVID levels we believe the outlook is very positive for the sector and think Financial are once again an important element of a diverse equity income portfolio. Individual dividend investors who set and forget can see their income plunge when the typical dividend stocks go through tough patches - such as the banks during the royal commission or the peak of the COVID crisis. On the flip-side we're able to take a dynamic approach to generating high yield, moving around the market at any point in time to find the strong dividends and capital returns. Dividend income to make ends meet In our low-rate world, effective dividend investing has been a shining light for income-seeking investors. With Australia seemingly through the worst of the COVID-19 crisis the outlook for dividends is on the improve. Looking forward to the remainder of 2021 and into 2022, we think there's a positive outlook for dividends, particularly from ASX iron ore miners, select consumer discretionary and the banks. Diversification, active management, and tax-effective investing can help fire up the dividend machine and ensure investors, who rely on their capital for income, don't miss out. Dr Don Hamson is the managing director of Plato Investment Management - a Sydney-based fund manager dedicated to maximising income for retirees, SMSFs and other low-tax investors. Funds operated by this manager: Plato Australian Shares Income Fund (Class A), Plato Global Shares Income Fund (Class A) |

28 Jul 2021 - AIM 2021 Interim Letter

28 Jul 2021 - Fund Review: Bennelong Kardinia Absolute Return Fund June 2021
BENNELONG KARDINIA ABSOLUTE RETURN FUND
Attached is our most recently updated Fund Review. You are also able to view the Fund's Profile.
- The Fund is long biased, research driven, active equity long/short strategy investing in listed ASX companies.
- The Fund has significantly outperformed the ASX200 Accumulation Index since its inception in May 2006 and also has significantly lower risk KPIs. The Fund has an annualised return of 8.57% p.a. with a volatility of 7.64%, compared to the ASX200 Accumulation's return of 6.64% p.a. with a volatility of 14.28%.
- The Fund also has a strong focus on capital protection in negative markets. Portfolio Managers Kristiaan Rehder and Stuart Larke have significant market experience, while Bennelong Funds Management provide infrastructure, operational, compliance and distribution capabilities.
For further details on the Fund, please do not hesitate to contact us.


28 Jul 2021 - Performance Report: Insync Global Quality Equity Fund
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Fund Overview | Insync employs four simple screens to narrow the universe of over 40,000 listed companies globally to a focus group of high-quality companies that it believes have the potential to consistently grow their profits and dividends. These screens are: size of the company, balance sheet performance, valuation and dividend quality. Companies that pass this due diligence process are then valued using dividend discount models, free cash flow yield and proprietary implied growth and expected return models. The end result is a high conviction portfolio typically of 15-30 stocks. The principal investments will be in shares of companies listed on international stock exchanges (including the US, Europe and Asia). The Fund may also hold cash, derivatives (for example futures, options and swaps), currency contracts, American Depository Receipts and Global Depository Receipts. The Fund may also invest in various types of international pooled investment vehicles. |
Manager Comments | Over the past 12 months, the fund's volatility has been 13.11% compared with the index's volatility of 7.95%. Since inception the fund's volatility has been 10.89% vs the index's volatility of 10.19%. The fund's Sharpe ratio has ranged from a high of 1.82 over the most recent 12 months, to a low of 1.1 since inception. Its Sortino ratio (which excludes volatility in positive months) vs its index has ranged from a maximum of 4.69 over the most recent 12 months, to a low of 2.12 since inception. Since inception in the months when the market was positive the fund provided positive returns 81% of the time. |
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28 Jul 2021 - Is Greed feeding the macro environment?
Is Greed feeding the macro environment? Jesse Moors, Spatium Capital July 2021 As society was exhaling from the post-war world of 1946, Arthur Lefford from NYU's Department of Psychology took particular interest in people's decision-making ability, especially as many generations (if they were so lucky) had just survived several globally disruptive periods. The new world presented choices and options that could lead to solutions on the social and economic problems that were now presented before them. This evolving case study provided Lefford the platform to challenge whether people expressed the (in)ability to act based on objectivity and rationality. Unsurprising to many of us in 2021, the results of the study found that people's agreeability to a message is often strongly correlated with their perception of the choice being more logical or rational. The inverse also applies; when there is disagreement with a message, people often consider this to be emotional. Decades later as the natural progression of this field of study cascaded into the world of finance, behavioural finance emerged and sought to study the effect of psychological factors on the economic decision-making process. The focus of behavioural finance is the idea that investors are limited in their ability to make rational economic decisions, whether that be influenced by their own biases, by a lack of self-control or resources (i.e. time), by peer pressure (i.e. herd mentality) or a number of other social, cultural and external factors. If studied and watched closely, this irrationality can begin to reveal some patterns of behaviour and can lead to opportunities. The opposing camp to behavioural finance however, is the Efficient Market Hypothesis. The Efficient Market Hypothesis asserts that investors are rational, fully-informed, and that (stock) prices reflect all available information at any given time and therefore always trade at their fair value. Essentially making the ability to generate an excess return impossible. From our perch, it currently appears that the broader financial system may be playing out a behavioural finance tragic's greatest fantasy. Alongside the apparent equity market exuberance and interest in speculative assets, it seems experts and arm-chair journalists are also attempting to forecast when the RBA interest rates will begin to rise. Whilst these pre-emptive calls make for fascinating reading, they can feed into the broader market's fear & greed complex. Simply, when interest rates are rising (or are lifted ahead of schedule), people are fearful they won't be able to pay their (increased) mortgage repayment and when they are declining (or are cut AHEAD of market consensus), greed dominates as money is perceivably cheap(er). From a business perspective, when interest rates rise, it tends to have a detractive effect overall as debt becomes more expensive (increasing the cost of starting new projects, assuming they are partially debt funded), consumer spending rates generally reduce, and cash leaves the system to be channelled elsewhere (e.g. the household mortgage). The converse also remains true, should interest rates be lifted at a point which is BEHIND consensus, this may allow markets to continue climbing further over the near term. Interestingly however, should interest rates rise ahead of schedule and shock the market into price recalibration to reflect this new environment, one would expect fear and by that virtue, volatility to accompany irrationality as it replaces the current market exuberance. Perhaps this is what pundits and experts alike are trying to time or forecast. Timed correctly, one can quickly adjust a portfolio on a value vs growth or technical vs fundamental basis with the intent to be in the more favoured style. We however prefer not to market time or fluctuate between styles to try and match the macro environment. Conviction (or lack thereof) to an investment strategy and ethos can often be the difference between consistent and inconsistent returns. It appears quite likely that at some point in the medium term the RBA will lift interest rates; from the lens of our investment strategy, we believe that timing this movement is largely an exercise in futility. For as long as irrational economic decision-making continues, one can expect volatility and with it, market opportunities for those who look. Funds operated by this manager: Spatium Small Companies Fund |

27 Jul 2021 - AIM FY21 Investor Webinar
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In a year largely driven by narrative ("Value! Growth! Reflation! Deflation!"), the AIM GHCF's portfolio of high-quality companies delivered a solid return (+25.8%), with much lower volatility than the market. In this Webinar, the AIM investment team looks at what drove those returns and discusses why we believe ignoring market narratives and focusing on fundamentals is a much better recipe for long-term sustainable returns. Summary: Funds operated by this manager: |

27 Jul 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 | Over the past 12 months, the fund's volatility has been 6.49% compared with the ASX200 Accumulation Index's volatility of 10.42%. Since inception the fund's volatility has been 5.76% vs the index's volatility of 13.67%, and over all other time periods the fund's volatility has been lower than the ASX 200 Total Return index. The fund's Sharpe and Sortino ratios (since inception) are 0.8 and 1.23. Since inception in the months when the market was positive the fund provided positive returns 72% of the time, and in months when the market fell, the fund has returned a positive return 53% of the time. It has a down-capture ratio of 13.25% since inception, and ranging between 30.01% (3 years) and -8.46% (12 months) over all other time periods. |
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27 Jul 2021 - Performance Report: 4D Global Infrastructure Fund
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Fund Overview | The fund will be managed as a single portfolio of listed global infrastructure securities including regulated utilities in gas, electricity and water, transport infrastructure such as airports, ports, road and rail as well as communication assets such as the towers and satellite sectors. The portfolio is intended to have exposure to both developed and emerging market opportunities, with country risk assessed internally before any investment is considered. The maximum absolute position of an individual stock is 7% of the fund. |
Manager Comments | Over the past 12 months, the fund's volatility has been 12.72% compared with the index's volatility of 14.06%. Since inception the fund's volatility has been 12.43% vs the index's volatility of 16.13%, and over all other time periods the fund's volatility has been lower than the S&P Global Infrastructure Index index. It has a down-capture ratio of 55.14% since inception, and ranging between 59.08% (5 years) and 46.28% (12 months). |
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