Future Quality Insights: Focus on the knowns in an era of unknowns

Yarra Capital Management

October 2023

Funds operated by this manager:

The Rise of Meta: AI, Innovation, and Sustainable Growth

Insync Fund Managers

October 2023

Meta's resurgence can be attributed to its focus on cost optimization and a robust rebound in advertising revenues. Profiting from the burgeoning wave of AI, Meta also ventured into the development of its 'expansive language model', bolstering its ability to drive innovative applications. Notably, its AI prowess paved the way for novel advertising solutions tailored to the needs of businesses which we believe will deliver sustainable earnings growth for many years.

The potential of an even more profound transformation from the deployment of AI-powered agents within WhatsApp, Messenger, and Instagram looms large. Their capacity to substantially enhance the search and shopping functionalities of these massive platforms promises a paradigm shift in both user experiences and business interactions. Meta's journey from hardship to revival imparts valuable insights into dispelling the 'crowded trade' theory. Firstly, adaptability is paramount in our now dynamic world. Companies that can pivot and innovate fast, thrive. Secondly, an enduring long-term vision is a potent asset. Founder-led firms driven by unique insight often excel beyond their peers. Moreover, investors must remember that markets are not always efficient and so deliver exploitable opportunities.

Funds operated by this manager:

Insync Global Capital Aware Fund, Insync Global Quality Equity Fund

Disclaimer
Equity Trustees Limited ("EQT") (ABN 46 004 031 298), AFSL 240975, is the Responsible Entity for the Insync Global Quality Fund and the Insync Global Capital Aware Fund. EQT is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT). This information has been prepared by Insync Funds Management Pty Ltd (ABN 29 125 092 677, AFSL 322891) ("Insync"), to provide you with general information only. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Neither Insync, EQT nor any of its related parties, their employees or directors, provide and warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Product Disclosure Statement before making a decision about whether to invest in this product.

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Hedge Clippings | 03 November 2023

While most punters will focus on the result of the Melbourne Cup just after 3 pm next Tuesday, homeowners with a mortgage will be more interested in the outcome of the RBA's November board meeting, due half an hour earlier at 2:30. Given most Australians' obsession with the Cup, it's unlikely many will wait until after the RBA's announcement to decide if they should have a bet or not, but given all four of the big banks are tipping a rate rise, they can probably make their decision beforehand. In addition, the queues at the TAB make a last minute bet difficult to place anyway.

It will be too late for Michele Bullock and her board colleagues to take on board, but it will be interesting to see if the number or value of wagers drop in the face of a general tightening of belts in mortgage land.

As we mentioned last week, Hedge Clippings is not convinced there will be a rise of 0.25%, in spite of the RBA increasing their forecast for inflation in the December quarter to 4.5%. They're still of the view that inflation will fall to 3.3% by the end of 2024, and further to 2.9% by the end of 2025, back (just) within their target range of 2-3%. The quarterly inflation figure of 5.4% released by the ABS last week showed a continuing downward trend from last December's peak of 7.8%, in spite of an uptick in September's monthly figure to 5.6%. The reason behind our lack of conviction lies in the price of oil, and volatility of the price of petrol at the pump, with automotive fuel jumping 7.2% in the September quarter, as outlined in this piece from the Conversation.

Had the price of fuel stayed constant (we wish!) over the quarter, September's quarterly inflation would have been 5.1% rather than 5.4%. And given the necessity for many Australians of filling up at the pump, and the flow-on effects via transport costs contributing to the supply chain, fuel's impact on discretionary spending is likely to dampen consumer demand across the board.

While we may be out of step with the expectations of the big four banks, there's no doubt rates are going to stay higher for longer - as they are in the US, with the Federal Reserve keeping rates on hold this week. We're certainly better off than the UK, where inflation is still stubbornly high at 6.7%, having hit a 41 year peak of 11.1% in October 2022.

However, things can't be all bad in the Old Dart, as evidenced by this snippet we came across this week: "The latest figures from the Department for the Environment and Rural Affairs (Defra) show that grapes currently account for 36% of England's soft fruit crop. In England and Wales, vine planting has increased 74% to 4,300 hectares in the last five years, and is expected to rise to a total of 7,600 hectares by 2032 - yielding a potential 24.7 million bottles of wine annually."

So no more jumping in the car, nipping across the channel, and filling the boot up with cases of French plonk. However, a trip down the A3 or M4 doesn't quite have the same allure.

Changing tack:

For those interested in trend following and systematic trading, Hedge Clippings has been offered a strictly limited number of spaces to a presentation and launch of the "Aussie Turtles" systematic trend following investment style, where a panel including Jerry Parker from Chesapeake Capital, one of the original Turtle Traders will speak to the "Turtles Experiment" which aimed to determine whether trading is a skill that can be learned, or requires innate talent.

The event is sponsored by East Coast Capital Management, and being held in Double Bay in Sydney on Thursday, 16 November 2023, from 6.00pm to 8.30pm, and will include refreshments. As above, space is strictly limited. For further details, please register your interest to attend here.

News & Insights

New Funds on FundMonitors.com

The growth thematics immune to economic volatility | 4D Infrastructure

Global Quarterly Update | Magellan Asset Management

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Airlie Quarterly Update

Airlie Funds Management

October 2023

Emma Fisher, Portfolio Manager, chats to Airlie's Analysts Joe Wright and Jack McNally about their recent US trip and findings from their discussions with companies, Aristocrat, QBE and SANTOS which are holdings in the Airlie Australian Share Fund.

Funds operated by this manager:

Airlie Australian Share Fund

Important Information: Units in the fund(s) referred to herein are issued by Magellan Asset Management Limited (ABN 31 120 593 946, AFS Licence No. 304 301) trading as Airlie Funds Management ('Airlie') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation. This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to an Airlie financial product or service may be obtained by calling +61 2 9235 4760 or by visiting www.airliefundsmanagement.com.au.

Past performance is not necessarily indicative of future results and no person guarantees the future performance of any financial product or service, the amount or timing of any return from it, that asset allocations will be met, that it will be able to implement its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of an Airlie financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.

This material may include data, research and other information from third party sources. Airlie makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material. Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Airlie. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon.

Any third party trademarks contained herein are the property of their respective owners and Airlie claims no ownership in, nor any affiliation with, such trademarks. Any third party trademarks that appear in this material are used for information purposes and only to identify the company names or brands of their respective owners. No affiliation, sponsorship or endorsement should be inferred from the use of these trademarks.. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Airlie.

Doing good, feeling good: How investors can

benefit from the resources sector's key role in decarbon

Janus Henderson Investors

October 2023

Funds operated by this manager:

Janus Henderson Australian Fixed Interest Fund, Janus Henderson Australian Fixed Interest Fund - Institutional, Janus Henderson Cash Fund - Institutional, Janus Henderson Conservative Fixed Interest Fund, Janus Henderson Conservative Fixed Interest Fund - Institutional, Janus Henderson Diversified Credit Fund, Janus Henderson Global Equity Income Fund, Janus Henderson Global Multi-Strategy Fund, Janus Henderson Global Natural Resources Fund, Janus Henderson Tactical Income Fund

This information is issued by Janus Henderson Investors (Australia) Institutional Funds Management Limited ABN 16 165 119 531, AFSL 444266 (Janus Henderson). The funds referred to within are issued by Janus Henderson Investors (Australia) Funds Management Limited ABN 43 164 177 244, AFSL 444268. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Past performance is not indicative of future performance. Prospective investors should not rely on this information and should make their own enquiries and evaluations they consider to be appropriate to determine the suitability of any investment (including regarding their investment objectives, financial situation, and particular needs) and should seek all necessary financial, legal, tax and investment advice. This information is not intended to be nor should it be construed as advice. This information is not a recommendation to sell or purchase any investment. This information does not purport to be a comprehensive statement or description of any markets or securities referred to within. Any references to individual securities do not constitute a securities recommendation. This information does not form part of any contract for the sale or purchase of any investment. Any investment application will be made solely on the basis of the information contained in the relevant fund's PDS (including all relevant covering documents), which may contain investment restrictions. This information is intended as a summary only and (if applicable) potential investors must read the relevant fund's PDS before investing available at www.janushenderson.com/australia. Target Market Determinations for funds issued by Janus Henderson Investors (Australia) Funds Management Limited are available here: www.janushenderson.com/TMD. Whilst Janus Henderson believe that the information is correct at the date of this document, no warranty or representation is given to this effect and no responsibility can be accepted by Janus Henderson to any end users for any action taken on the basis of this information. All opinions and estimates in this information are subject to change without notice and are the views of the author at the time of publication. Janus Henderson is not under any obligation to update this information to the extent that it is or becomes out of date or incorrect.

The growth thematics immune to economic volatility

4D Infrastructure

October 2023

Global Portfolio Manager and CEO, Sarah Shaw, speaks with Bennelong Account Director, David Whitby, about the long-term growth opportunities for infrastructure despite the current economic and geopolitical environment. 

"The growth opportunity is still largely underappreciated. We see five key growth dynamics within the infrastructure space that are ... completely immune to the short-term economic events. So while we do have a great deal of volatility in the market at the moment, and a great deal of geopolitical and economic uncertainty, these growth thematics underpin the infrastructure investment case and are going nowhere, regardless of what happens in the short term."

• 0:43 - Infrastructure's growth opportunities beyond the short-term volatility
• 3:45 - How technology and AI are shaping the infrastructure sector 
• 7:00 - 4D's approach to dealing with policy and regulation 
• 9:37 - Capturing and mitigating investment risk in the current economic landscape

Funds operated by this manager:

4D Global Infrastructure Fund (Unhedged), 4D Global Infrastructure Fund (AUD Hedged), 4D Emerging Markets Infrastructure Fund

For more information about 4D Infrastructure, visit https://www.4dinfra.com/

^{The content contained in this audio represents the opinions of the speakers. The speakers may hold either long or short positions in securities of various companies discussed in the audio. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely as an avenue for the speakers to express their personal views on investing and for the entertainment of the listener.}

Global Quarterly Update

Magellan Asset Management

October 2023

Arvid Streimann discusses recent market volatility and the risks to watch out for, while Nikki Thomas shares her observations from her recent US trip and updates us on how the portfolio is positioned for the evolving investment landscape. (Viewing time: 15 mins)

Funds operated by this manager:

Magellan Global Fund (Hedged), Magellan Global Fund (Open Class Units) ASX:MGOC, Magellan High Conviction Fund, Magellan Infrastructure Fund, Magellan Infrastructure Fund (Unhedged), MFG Core Infrastructure Fund

Important Information: 

This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 ('Magellan') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation.  This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision about whether to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to a Magellan financial product may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au.

Past performance is not necessarily indicative of future results and no person guarantees the future performance of any financial product or service, the amount or timing of any return from it, that asset allocations will be met, that it will be able to implement its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of a Magellan financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.

This material may include data, research and other information from third party sources. Magellan makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material.  Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Magellan. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. No representation or warranty is made with respect to the accuracy or completeness of any of the information contained in this material. Magellan will not be responsible or liable for any losses arising from your use or reliance upon any part of the information contained in this material.

Any third party trademarks contained herein are the property of their respective owners and Magellan claims no ownership in, nor any affiliation with, such trademarks.   Any third party trademarks that appear in this material are used for information purposes and only to identify the company names or brands of their respective owners. No affiliation, sponsorship or endorsement should be inferred from the use of these trademarks. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Magellan.

Hedge Clippings | 27 October 2023

Australia's latest inflation data was released on Wednesday, triggering forecasts from three of the big four banks, and a multitude of other economists, for a Melbourne Cup rate rise. Depending on one's point of view, the numbers themselves weren't completely convincing:

CPI rose 1.2% in the September quarter, up from 0.8% from June's number, but as Michelle Marquardt, the ABS head of prices statistics noted, the September's number continued to be lower than those seen in 2022. The problem lies in the volatility of the quarterly figures, exaggerated by the price of fuel in particular, which rose 7.2% following two consecutive quarters where the cost of filling up at the pump fell. (If you hadn't noticed fuel costs have risen 20% over the past 12 months.)

So September's number of 1.2%, whilst higher than June's 0.8%, was still below the March figure of 1.4%, and still well down from all four quarters in 2022, which averaged 1.9% and led to a year end annual rate of 7.8%. Since that peak, the annualised number has been steadily falling, and is now down to 5.4% as shown below:

Source: ABS.gov.au

Cue Michele Bullock fronting the Senate estimates committee the following day, admitting that while slightly higher than the bank had been expecting, the numbers were pretty much "where we thought it would come out, given the information we've come into since then." The concern the RBA governor pointed to was in services inflation - electricity, rents and wages - which although "declining is still higher than it should be, and tends to be persistent." Therein lies the problem - although falling, inflation is staying higher than the December forecast of 4.1%, and still a long way from the RBA's target of 2-3%.

Bullock's dilemma (if she has one) is not only the volatility of the monthly numbers, but the persistence of higher inflation, which may lead to a vicious cycle of consumers' inflationary expectations adjusting upwards. If she increases rates on Cup day, the effect won't be evenly felt, and the risk of putting a dent in the economy remains - which is not what the "narrow path" journey is all about.

Our concern is to what extent would a further 0.25% to 4.35% prove to be an economic "tipping point"? We haven't discounted the RBA leaving rates where they are, or possibly giving them a nudge by 0.15%. Time will tell.

Global Matters

Albo, fresh from his Voice defeat, headed off to the US to be welcomed by a 21 gun salute, and as guest of honour at a black tie dinner for 300 at the White House, hosted by Joe Biden, who was technically wearing "a" black tie, just not a penguin suit and bow tie. Who would have thought Albo would be keeping Australia's sartorial standards up on the world stage?

One of the major topics of discussion, aside from the situation in Israel and Gaza, was China, with Biden urging Albanese to "trust but verify" which sounds more like a thinly veiled "don't trust and verify" message.

Co-incidentally - or otherwise - China released its "Outlook on China's Foreign Policy on Its Neighbourhood in the New Era," published in the People's Daily this week which included, among other things, this warning:

"China will resolutely take forward the endeavour of national reunification, firmly oppose 'Taiwan independence' separatist activities in any form, and firmly safeguard national sovereignty and territorial integrity. The more forceful our measures are to forestall separation, the greater possibility there is to ensure peace and stability across the Taiwan Strait and uphold peace and prosperity in the region."

With President Xi due to attend the Asia-Pacific Economic Cooperation (APEC) Summit in San Francisco on November 15-17, at which he will meet with President Biden, we suspect the discussions will be more far reaching - and less cordial - than those our Prime Minister enjoyed this week.

News & Insights

Investment Perspectives: The housing fate from interest rates | Quay Global Investors

Market Update | Australian Secure Capital Fund

September 2023 Performance News

4D Global Infrastructure Fund (Unhedged)

Insync Global Capital Aware Fund

Altor AltFi Income Fund

PURE Income & Growth Fund

Bennelong Twenty20 Australian Equities Fund

Equitable Investors Dragonfly Fund

PURE Resources Fund

Insync Global Quality Equity Fund

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