Magellan Global Strategy Update

Magellan Asset Management

January 2023

Magellan's Portfolio Managers Nikki Thomas, CFA and Arvid Streimann, CFA, discuss how they are viewing the current inflationary environment and chances of a recession. They explain how Magellan's Global Portfolio is positioned to manage these risks and take advantage of thematic investment opportunities.

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 read and consider any relevant offer documentation applicable to any investment product or service and consider obtaining professional investment advice tailored to your specific circumstances before making any investment decision. A copy of the relevant PDS relating to a Magellan financial product or service 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 strategy, the amount or timing of any return from it, that asset allocations will be met, that it will be able to be implemented and 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.

Any trademarks, logos, and service marks contained herein may be the registered and unregistered trademarks of their respective owners. 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.

10k Words 

Equitable Investors

January 2023

Funds operated by this manager:

Equitable Investors Dragonfly Fund

Disclaimer

Nothing in this blog constitutes investment advice - or advice in any other field. Neither the information, commentary or any opinion contained in this blog constitutes a solicitation or offer by Equitable Investors Pty Ltd (Equitable Investors) or its affiliates to buy or sell any securities or other financial instruments. Nor shall any such security be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.

The content of this blog should not be relied upon in making investment decisions. Any decisions based on information contained on this blog are the sole responsibility of the visitor. In exchange for using this blog, the visitor agree to indemnify Equitable Investors and hold Equitable Investors, its officers, directors, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to legal fees) arising from your use of this blog, from your violation of these Terms or from any decisions that the visitor makes based on such information.

This blog is for information purposes only and is not intended to be relied upon as a forecast, research or investment advice. The information on this blog does not constitute a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Although this material is based upon information that Equitable Investors considers reliable and endeavours to keep current, Equitable Investors does not assure that this material is accurate, current or complete, and it should not be relied upon as such. Any opinions expressed on this blog may change as subsequent conditions vary.

Equitable Investors does not warrant, either expressly or implied, the accuracy or completeness of the information, text, graphics, links or other items contained on this blog and does not warrant that the functions contained in this blog will be uninterrupted or error-free, that defects will be corrected, or that the blog will be free of viruses or other harmful components. Equitable Investors expressly disclaims all liability for errors and omissions in the materials on this blog and for the use or interpretation by others of information contained on the blog

Hedge Clippings | 10 February 2023

As expected, on Tuesday the RBA did what everyone expected, and what they had to, raising rates by 0.25% in the sharpest and fastest series of increases in recent (and probably longer) memory. Even though expected by 100% of market economists,  investors didn't take too kindly to it, with the ASX falling almost half a percent on the day, and after a brief rally on Wednesday, continuing to fall since. It wasn't what the RBA did that upset the market, but what RBA Governor Philip Lowe said - particularly, as we always point out - in the last paragraph (and in this case the last sentence) or so of their statement: "The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve this."

That's RBA speak for "expect more rates rises to come," so unless things on the inflation front change direction quickly, 3.85% seems a forgone conclusion, possibly by May or June, and with every chance of that tripping the 4% mark in the second half of the year.

Amid all the forecasts of widespread mortgage stress and damage to household budgets, the hard and nasty truth is that's what the RBA is aiming at - or at least to force consumers to rein in spending - to try to quell inflation. Unfortunately, it's not a level playing field in mortgage land, and to quote Bill Gates, "Life's not fair. Get used to it". Of course, Bill can afford to say that, but the RBA has a problem with the un-level field when using mortgage rates - as only one third of households have a mortgage - to tame inflation. The other two thirds are less, or not impacted, so they're probably still spending, even if their morning flat white is now costing them over $4 a pop.

But there's more to the un-level field: Amongst the one third of households with mortgages, there are those who are more stressed than others - either by virtue of being on lower incomes, having only recently taken out a mortgage thanks to the RBA's "no rate rise until 2024" prediction, those about to come off a low fixed rate onto a higher variable one, or those with smaller savings to dip into to buffer to rise. Assuming (this is a guess) 20% of all mortgages are in the above categories, that's less than 7% of the overall population. At 50%, it rises to just over 15% of the total.

This may sound as if we're being callous or uncaring.  Far from it. The point is that the RBA needs to change the spending habits of the majority, not just the minority, a point they acknowledge (along with the lagging effect of higher rates) in the penultimate paragraph of their February Statement on Monetary Policy. So while they may be mindful of the uneven pain they're causing on the un-level playing field of life, "The Board's priority is to return inflation to target." And that's not going to happen at least until Santa's been around again (if we have a recession) or possibly after he's been back twice (if there's a soft landing). So, as Bill said, "get used to it".

Over to markets and fund performance: As everyone knows, last year's outbreak of inflation was a shock to everyone, including the RBA, as was Ukraine, (except to Putin). The market tanked for the first nine months of the year and has since recovered strongly, such that the 12 month performance of the ASX200 Total Return to the end of January was +12.21%, significantly better than the S&P500 equivalent of -8.22% for an out-performance of over 20%.

AFM's Peer Group Comparison tables show a similar, although more variable pattern, such that over both three and six months to the end of January, ALL Peer Groups, with one exception (Alternatives, which includes Crypto funds) were in positive territory. The top performing Peer Group over 12 months was the Equity Long Large Cap group, which returned just over 8% on average, with 25% of those out-performing the ASX200 TR and the top performer, the Lazard Select Australian Fund returning 32%.

News & Insights

Market Commentary | Glenmore Asset Management

Cycle is not a dirty word | Airlie Funds Management

January 2023 Performance News

4D Global Infrastructure Fund (Unhedged)

Altor AltFi Income Fund

Bennelong Australian Equities Fund

L1 Capital Long Short Fund (Monthly Class)

Bennelong Kardinia Absolute Return Fund

ASCF High Yield Fund

Bennelong Twenty20 Australian Equities Fundy

If you'd like to receive Hedge Clippings direct to your inbox each Friday

JOIN OUR MAILING LIST