NEWS
10 Nov 2023 - Performance Report: Bennelong Concentrated Australian Equities Fund
[Current Manager Report if available]
10 Nov 2023 - Global Matters: Extreme weather risks and their impact on investors
9 Nov 2023 - Performance Report: 4D Global Infrastructure Fund (Unhedged)
[Current Manager Report if available]
9 Nov 2023 - Performance Report: Rixon Income Fund
[Current Manager Report if available]
9 Nov 2023 - Inflation is higher. But is it 'materially' higher? That's the big question
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Inflation is higher. But is it 'materially' higher? That's the big question Pendal October 2023 |
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AUSTRALIA'S latest inflation data was higher than expected. The September quarter inflation number came out at 1.2% for both headline and underlying (trimmed mean) measures. This was above expectations of 1.1% and 1% respectively. In terms of headline inflation, it's now fair to say the current pace is about 4% annually. Last quarter it was 0.8%, dragged 0.2% lower by fuel prices. This quarter was 1.2%, dragged 0.2% higher by fuel. The increase in underlying inflation would be of greater concern for the Reserve Bank. A quarterly rate of 1.2% would not have been welcomed. Under the hoodLooking under the hood would add to the RBA's concerns. Market services remain stubbornly high. Housing inflation remains at over 2% a quarter, driven in part by utilities. At least rents have now caught up with leading indicators at 8% annually. Anyone who recently received their council rates will not be surprised by the 4.4% increase there. At least it only happens annually. Government subsidies once again had an impact. The government is already suppressing utility prices and now also childcare prices - though the childcare changes are permanent. Childcare costs were down 13%, subtracting 0.1% from this quarter's CPI. Here you can see a breakdown of the ABS's latest inflation data: 
What's material? Focus now turns to the RBA's November 7 board meeting. We have two communications recent communications to consider. The RBA's latest minutes mentioned a "low tolerance" to upside inflation surprises. And in her maiden governor speech, Michelle Bullock mentioned "the board will not hesitate to raise the cash rate further if there is a material revision to the outlook for inflation". The question is - what is material? In August the RBA forecast year-end inflation to be 4.1% and 3.9% underlying. It's early days, but Q4 is expected to be around 0.9%. This would leave headline at 4.3% and underlying at 4.1%. The RBA will release updated forecasts in its next monetary policy statement on Friday November 10 (though it will reference them in their rate decision beforehand). Is 0.2% higher "material" or a breach of the "low tolerance"? That will be the big question come November 7. Markets have 60% chance of a hike in November and a cash rate 0.35% higher by early next year. At these levels there is no clear trade, since it will be line ball. If pushed, I think Michelle Bullock will be keen to show her inflation fighting credentials by putting in one hike, even though she was probably hoping today's number would let her off the hook. If the market gets close to pricing two hikes in the next few weeks we will go long duration. But until then today's reaction seems sensible and fair. Long bond yields largely ignored Wednesday's moves. Ten-year bonds remain around 4.75%. As always, they will rightly or wrongly be more captive to US bond moves and the latest iteration of oil prices. Author: Tim Hext, Portfolio Manager and Head of Government Bond Strategies |
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Funds operated by this manager: Pendal Focus Australian Share Fund, Pendal Global Select Fund - Class R, Pendal Horizon Sustainable Australian Share Fund, Pendal MicroCap Opportunities Fund, Pendal Sustainable Australian Fixed Interest Fund - Class R, Regnan Global Equity Impact Solutions Fund - Class R, Regnan Credit Impact Trust Fund |
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This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at December 8, 2021. PFSL is the responsible entity and issuer of units in the Pendal Multi-Asset Target Return Fund (Fund) ARSN: 623 987 968. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general 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 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 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 are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst 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. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com |
8 Nov 2023 - Performance Report: Altor AltFi Income Fund
[Current Manager Report if available]
8 Nov 2023 - Future Quality Insights: Focus on the knowns in an era of unknowns
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Future Quality Insights: Focus on the knowns in an era of unknowns Yarra Capital Management October 2023 The Future Quality approach to navigating uncertainty
The great quantitative easing experiment of the last decade set global markets on a course into unknown territory. The repercussions of this are only just starting to play out and are proving near-impossible to predict. Central banks contended a rise in inflation would be temporary until it proved to be persistent and sticky. At the start of this year, markets were collectively expecting the US Federal Reserve to start tapering monetary policy, but we cannot yet be certain that interest rate rises have peaked. Earlier in the year, America's banking sector was unexpectedly impaired by the impact of rapid monetary tightening, but could other sectors also be vulnerable to unforeseen shocks? And we are yet to truly see the impact that central bank actions will have on growth. The major economies have so far avoided falling into recession, but for how long? Market dynamics reflect this sense of uncertainty. US equity returns have largely been driven by a cohort of seven mega-cap stocks during the first half of the year, a narrow leadership anomaly that is crowding out good performance in other parts of the market. And anyone on the wrong side of this trade has felt the impact of underperformance. So how should investors be navigating this sea of uncertainty? Known knowns At a time when investors are facing many unknowns, it is almost impossible to accurately predict the future. Yet, despite this ambiguity, there are still knowable knowns to be found. Previous market cycles have taught us that major shifts in the economic landscape generally lead to changes in leadership. So, we must focus on what we know to help identify those sectors and industries capable of taking up the position of market leaders in the forthcoming cycle. Fortunately, there are several clear and indisputable trends. The path to clean energy An energy transition will be key to solving the major social and environmental problems caused by climate change. We know there is a need to reduce humankind's reliance on fossil fuels and create better alternatives through renewable sources of energy. Despite this knowledge, the journey is not straightforward. Paradoxically, given the time it will take to develop the necessary scale of new clean energy sources, we remain reliant on fossil fuel supplies; yet supply constraints have driven up prices, making the transition process even more costly. So, while the general sentiment is that we need to invest in renewable energy sources, continued investment in fossil fuels can be vital to enabling the energy transition. This creates a fruitful pool of investment opportunities where individual companies offer solutions to both sides of this equation. On the one hand, some services and providers can help sustain fossil fuel production more efficiently, while still considering lower carbon outputs. On the other, technology is emerging to deliver more renewable solutions, and innovations in both hardware and software are helping reduce energy usage, waste, and the scale of emissions. Market leaders in all these areas are likely to surprise in terms of margins and profitability, and therefore present classic future growth opportunities. Growing healthcare requirements Healthcare presents a second long-term, structural trend. An ageing global population will only result in greater demand for healthcare while, at the same time, the sector faces increasing challenges in terms of its affordability. In our view, this demographic test will present a great hunting ground for investment ideas as healthcare companies are forced to innovate to ensure more efficient delivery of healthcare services, both in the hospital environment and through consumer-led healthcare solutions. In the post-pandemic era, the healthcare sector has faced further volatility amid the disrupted labour market for staff, while inventories have needed to be replenished from the high demand necessitated by Covid-19. These challenges are starting to stabilise, and we are optimistic about the sector's ongoing potential due to the 3 • yarracm.com clear need for innovation in the provision of new and more efficient healthcare solutions. The resumption of travel Finally, travel is perhaps a less obvious trend, but it's one we believe is worth exploring. The pandemic was a huge challenge for the sector, with many people under-consuming travel services simply because they were not allowed to travel. In terms of supply, the lack of demand meant the availability of flights and the development of hotels completely dried up for a period. While many consumer activities have completely normalised, travel is very much still in the process of recovery. When you look at the core consumers of travel, demand remains robust. This is particularly true for younger generations, who are placing even greater value on 'experiences' during life after lockdown. Further, a new travel cohort is emerging from developing countries where rising gross domestic product (GDP) per capita means more people will be able to afford to travel in the future. This reflects the same growth trajectory that developed nations have already experienced in recent decades. In our view, there will be many direct beneficiaries of this significant return to global travel, from booking companies to manufacturers of luggage and travel accessories. Chart 1: Is there a China travel boom pending?
Addressing the known unknowns While the investment case for established trends is relatively straightforward, it can often be harder to assess when or if an emerging trend will become a longterm investible opportunity. AI presents an interesting example of this conundrum. While research in this area can be traced back to the 1950s, it has only recently become a commercial opportunity in the eyes of many investors. The market has quickly latched on to this development, and excitement over its potential has seen the limited number of direct AI players re-rate significantly - hence the dominance of the technology mega-caps so far this year. Although we have few doubts that the AI theme is both real and profound, there are still many unanswerable questions. The profits and cashflows from AI are yet to materialise, so it's hard to be certain that they will be strong enough to justify current valuations. The adoption of AI is likely to have a meaningful impact across multiple industries - just as the internet did in the early 2000s - but it is difficult to identify who the eventual winners and losers of this disruption will be. There will also be geopolitical implications - the need for specific policy and regulation is already being widely debated. While we can see the investment potential of having exposure to AI, it needs to be done in a way that's consistent with our Future Quality philosophy of focusing on the knowns rather than blindly following the hype. A raft of companies are benefitting from the rising tide of AI, but only hardware companies are currently seeing any tangible uplift in cash flow and profitability - which is what we are looking for. As more companies look to harness AI's potential, we expect to see strong long-term demand for the complex high-end semiconductors that underpin this technology. For example, Synopsys - a leader in design technology and services for the semiconductor market - could benefit strongly as companies' demand for exceptionally complicated design services grows. Similarly, Hoya is a leading supplier and manufacturer of high-tech components used by semiconductor manufacturers and should be a beneficiary of increased demand. Future Quality in the Year of AIWhile it's impossible to know the ultimate direction of travel, we do know that we are in the midst of a regime change to a world of slower growth that will endure bouts of persistently higher inflation. It is also a time of significant technological transformation that not only encompasses AI but will drive the energy transition and provide new healthcare solutions. History tells us that during such inflection points, companies delivering high growth and sustained high returns of basic capital - classic Future Quality companies - earn the right to be market leaders and that these companies may come from different areas of the market to the leaders of the previous cycle. As investors, we believe it's essential to stick to what we know, particularly during times of unpredictable change. Our investment approach is focused on identifying and investing solely in Future Quality companies, those with superior long-term returns on investment that have been shown to deliver better performance over time. In our view, it is these Future Quality companies, especially in sectors aligned with secure, long-term trends, that will be the market leaders of tomorrow. |
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Funds operated by this manager: Yarra Australian Equities Fund, Yarra Emerging Leaders Fund, Yarra Enhanced Income Fund, Yarra Income Plus Fund |
7 Nov 2023 - The Rise of Meta: AI, Innovation, and Sustainable Growth
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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 |
6 Nov 2023 - New Funds on Fundmonitors.com
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New Funds on FundMonitors.com |
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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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3 Nov 2023 - Hedge Clippings | 03 November 2023
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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 Events & Webinars |
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