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Hedge Clippings
03 Feb 2023 - Hedge Clippings |03 February 2023
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Hedge Clippings | 03 February 2023 This week Treasurer Jim Chalmers penned a 6,000 word essay in The Monthly entitled "Capitalism after the crises" in which he argued for "the place of values and optimism in how we rethink capitalism," which as you can imagine drew a variety of responses. Steven Hamilton in the Sydney Morning Herald described it (among other things) as "an incoherent assortment of kumbaya capitalist thought bubbles - the kinds of ideas you might expect from a bunch of virtue-signalling CEOs attending a wellness retreat." We're not quite sure who should be more offended, the Treasurer, or the CEO's, although we're also not sure if that's Steven's real life experience, or what he imagines such a group would conjure up if they made it to a wellness retreat. Graeme Samuel however, writing in the AFR, describes the essay as "deeply insightful" and urged anyone interested "to read the essay carefully and with an open mind" and concluded his opinion piece with "Chalmers has outlined an evolution of capitalism that is both necessary and inevitable." For convenience, and if you have both the interest (and the time) here's a link to the essay so you can judge for yourself. Meanwhile, Charlotte Mortlock on SkyNews admired Chalmers' commitment but suggested the essay was far too long, proposing that a couple of hundred words would have done the trick. (Hopefully, someone gives ex H.R.H. Harry the same advice when he sits down with his therapist (sorry, ghostwriter) to pen his sequel to Spare. Come to think of it, maybe someone should have done that before he wrote Spare?) Hedge Clippings did have a crack at reading the article, but time didn't permit a full analysis, and space doesn't permit a summary of it here. We did try asking ChatGPT for a 500-1000 word summary (we thought a couple of hundred was a little ambitious) but it seems they're on Charlotte's side, as we received the following response:
That suggests to us that Chalmers, who admitted to writing the essay over his Christmas break, could have cut out some of the waffle, but old habits die hard for politicians, just like the rest of us. Our view is that while capitalism is not perfect, neither is socialism, or communism - or as Churchill once famously said, "democracy" (with which capitalism co-exists) "is the worst form of government - except for all the others that have been tried." One of the keys is that capitalism works in a democratic system, and as such, when individual values change, governments change, and so do corporate values. Each constantly evolve. The capitalism of today, much like the social and political values of today, are different than they were before each of the economic crises that Chalmers writes about. Greed, for instance (while it will always exist) is not good - or at least not exalted as such. Corporations, more than ever before, are subject to shareholder and community values, and where, when (and sometimes when not) necessary. |
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News & Insights New Funds on FundMonitors.com Equities 2023 - What's the bigger risk? | Insync Fund Managers Global Matters: 2023 outlook | 4D Infrastructure December 2022 Performance News Bennelong Emerging Companies Fund |
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In determining monetary policy, the Bank has a duty to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.
03 Feb 2023 - 2023 Global macro outlook: Ten predictions
2023 Global macro outlook: Ten predictions Nikko Asset Management December 2022 No single catch-phrase epitomises the 2023 global macro outlook, but here are ten predictions: 1. 2023 will be a year like no other. Investors should not rely heavily on traditional models of previous economic and financial market recoveries, especially ones that worked best since the mid-1990s, as we are entering a unique era; rather, they should maintain a somewhat cautious and balanced perspective, with targeted risk-taking in select countries, sectors and stocks, as described in our other 2023 outlook pieces. Indeed, active stock selection, in particular, will be more important than ever in 2023, so special attention is required in selecting managers who have excelled in the last several challenging years. 2. Re-balancing and China's positive pivots: China, after a hesitant start, will likely see much improved economic growth in 2023 while most of the rest of the world will be sluggish. Its recent surge in the financing of property development was a major pivot in policy that will greatly support economic growth, although the previous mania for purchasing property and the economy's reliance on such will continue to be diminished. This should help keep global commodity prices fairly stable. Also, the sudden pivot towards détente in foreign policy in mid-November has considerably brightened the 2023 global outlook. There will be, however, many challenges to this détente, and as it is not firmly rooted yet. Especially with the likely visit to Taiwan by the new US House Republican leadership and continued trade restrictions, there is a chance that any rapprochement may prove short-lived. Clearly, both "sides" will benefit from a respite in economic and political tensions. For its part, China will likely resume purchases of US Treasuries after major sales in 2022. It also desires a more stable backdrop as it addresses the weakness in its housing sector and parts of its financial markets, while also improving the troubling situation for ordinary citizens and local governments. Meanwhile, US and other countries' corporations, especially Apple, hope that their factories there can keep producing despite various restrictions, that China will remain an important client and that the entire global supply chain will continue healing. 3. COVID will remain a factor, especially China's citizens' fear of such. We have predicted that China would open up the country sooner than expected, though gradually and somewhat furtively, but such has been accelerated by the recent protests and the increasing weakness in the economy. While cases and casualties will likely rise, the government clearly wishes to promote economic growth now and springtime will likely witness a near full opening in China, especially after the National People's Congress in March. We expect that the fears of such there, and globally, will abate in healthy, sustainable fashion. 4. Central banks, excluding that of Japan, will keep rates high to hamper "second-round effects." These "effects" will be the key factor in how inflation evolves. Labour's wage demands, coupled with the strikes and harmful supply shocks usually affiliated with such, obviously stand out, but the perceived "pricing power" of corporations and landlords will also be key, and they all will be watching how determined central banks will be to maintain high rates given the increasing political pressure as economies weaken further. This is most true in Europe, where inflation is the highest in the developed world and where labour is very powerful, especially in key political, infrastructure and economic channels. The media is not widely covering the strike actions, so investors should often screen the news themselves for such. Conversely, countries with low labour demands should have an advantage, especially Japan and much of Asia excluding Korea. 5. Countries with too much concentration in the tech hardware sector may not flourish, as industry fundamentals will remain challenged, including the upcoming oversupply of semiconductors over the intermediate term as countries around the world rush to build their own fabs for national security and other reasons. Due to this, semiconductor production equipment manufacturers, however, should see improved orders after their recent cutbacks. 6. For overall global risk markets, one should expect neither "Doom and Gloom" ahead, nor a Goldilocks scenario. The US equity market is not cheap, so a strong rally seems unjustified from December levels, but most other countries are quite inexpensive and could perform reasonably well. Europe, however, is suffering from unique difficulties, so it may remain inexpensive. Within this backdrop, stock and sector selection will clearly be the most important key to achieve positive returns. 7. Avoiding Short-term scares; many macro-economic, corporate earnings and credit shocks likely lie ahead in the short-term, as the global economy descends further into a semi-stagflationary period in which former excesses are "cured;" however, this is part of the healing process in which the intermediate-term outlook is actually improving, so investors should not panic in the short-term. Indeed, as for corporate earning shocks, as long as such are not far below analysts' estimates, investors may forgive such, especially if the outlook remains positive. 8. The global crypto infrastructure and some other ultra-growth industries are likely to continue to encounter troubles. The recently exposed lack of due diligence by many institutional investors is shockingly disappointing, as were the attitudes and practices of many industry leaders. Partly because of this, most "growth at any price" companies and industries will now be heavily scrutinized by venture capitalists, public-market investors, banks and regulators. This is bound to expose other problems that could spread. Indeed, ultra-growth companies will likely need to show a clear path to profitability on a GAAP basis in order to entice funding; however, such companies definitely exist and should benefit as they will likely attract much more investor interest. 9. Geopolitics will continue to be a factor: the "Clash of Systems and Philosophy" will clearly continue, especially with Russia, Iran and China pursuing their own path. The Russia-Ukraine war will continue through 2023, but possibly in much less bloody way, so this may calm risk markets. One also needs to keep a careful eye on the Middle East, especially Iran, as tensions remain greatly elevated given its internal problems and an even more assertive new Israeli government. As mentioned above, it will be important to watch Taiwan as well. One hesitates to mention North Korea, as it is a perennial, unpredictable worry, but hopefully China will restrain it from its increasingly provocative actions so that both "sides" can reduce the tension. 10. Troublesome domestic politics will be important; fiscal stimulus globally is already greatly constrained due to fears of its inflationary effects and as interest expenses surge, but even the normal functioning of fiscal affairs may encounter significant turbulence. In the US, the Republican control of the House of Representatives is bound to cause major disputes in 2023 and if a financial market or economic accident somehow occurs, action will need to be taken. If it is not taken, much like the initial stages of the Global Financial Crisis, financial markets could revolt. House investigations of various political matters are also likely to cause great discord in 2023, as well. In Europe, political dissent beyond strikes is likely to be intense especially as energy subsidies wane due to the need for fiscal restraint. Asia, however, looks much calmer on the political front. ConclusionWe greatly hope that these comments, as well as the other outlook pieces, will prove useful to our investors and we are always willing to address their thoughts and questions. We could all use a bit of good luck in the year ahead after the tumult of the last few years. Author: John Vail, Chief Global Strategist Funds operated by this manager: Nikko AM ARK Global Disruptive Innovation Fund, Nikko AM Global Share Fund, Nikko AM New Asia Fund, Disclaimer Please note that much of the content which appears on this page is intended for the use of professional investors only. This material has been prepared by Nikko Asset Management Europe Ltd (NAM Europe) which is authorised and regulated in the United Kingdom by the FCA. This material is issued in Australia by Yara Capital Management Limited (formerly Nikko AM Limited) ABN 99 003 376 252, AFSL 237563. To the extent that any statement in this material constitutes general advice under Australian law, the advice is provided by Yarra Capital Management Limited. NAM Europe does not hold an AFS Licence. Effective 12 April 2021, Yarra Capital Management Limited became part of the Yarra Capital Management Group. The information contained in this material is of a general nature only and does not constitute personal advice, nor does it constitute an offer of any financial product. It is for the use of researchers, licensed financial advisers and their authorised representatives, and does not take into account the objectives, financial situation or needs of any individual. For this reason, you should, before acting on this material, consider the appropriateness of the material, having regard to your objectives, financial situation and needs. The information in this material has been prepared from what is considered to be reliable information, but the accuracy and integrity of the information is not guaranteed. Figures, charts, opinions and other data, including statistics, in this material are current as at the date of publication, unless stated otherwise. The graphs and figures contained in this material include either past or backdated data and make no promise of future investment returns. Past performance is not an indicator of future performance. Any economic or market forecasts are not guaranteed. Any references to particular securities or sectors are for illustrative purposes only and are as at the date of publication of this material. This is not a recommendation in relation to any named securities or sectors and no warranty or guarantee is provided. Portfolio holdings may not be representative of current or future investments. The securities discussed may not represent all of the portfolio's holdings and may represent only a small percentage of the strategy's portfolio holdings. Future portfolio holdings may not be profitable. Any mention of an investment decision is intended only to illustrate our investment approach or strategy and is not indicative of the performance of our strategy as a whole. Any such illustration is not necessarily representative of other investment decisions. Portfolio holdings may change by the time you receive this. Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold, or directly invest in the company or its securities. The information set out has been prepared in good faith and while Yarra Capital Management Limited and its related bodies corporate (together, the "Yarra Capital Management Group") reasonably believe the information and opinions to be current, accurate, or reasonably held at the time of publication, to the maximum extent permitted by law, the Yarra Capital Management Group: (a) makes no warranty as to the content's accuracy or reliability; and (b) accepts no liability for any direct or indirect loss or damage arising from any errors, omissions, or information that is not up to date. Yarra Capital Management. Copyright 2022. |
02 Feb 2023 - Is private debt ready for recession?

01 Feb 2023 - Did Amazon cancel Christmas?
Did Amazon cancel Christmas? Alphinity Investment Management December 2022 Christmas fever was running high with beautifully decorated trees and colourful lights cheering us on every corner. The tone was however a lot less cheery when Amazon recently reported their 3Q22 results and downgraded their 4Q22 revenue guidance. Similar sentiments were reflected across a large range of consumer names noting pricing pressure and a lack of holiday shopping visibility. There is also clear evidence that inventories have been building across US retailers with supply chain constraints lifting and post covid "revenge spending" tapering off. We maintain our preference for companies with strong pricing power, exposure to the more resilient high-end consumer and companies with global reach that can also benefit from a China reopening. LVMH, MercadoLibre and Starbucks are three diverse consumer names that we believe can withstand a less cheery Festive Season. Why Amazon's revenue downgrade is a concernAmazon is a behemoth e-commerce platform with tentacles across most consumer channels and verticals. They have access to extensive supporting data that can paint a clear picture of the general consumer outlook. Historically we have seen Amazon downgrade earnings expectations, but this is the first time in many years that they've downgraded revenue expectations. The fourth quarter outlook is specifically prevalent given that it includes big spending days in the US, such as Black Friday, Cyber Monday, and Christmas. Amazon cited slowing consumer trends particularly in the US and Europe and a lack of holiday season visibility. Whilst there were several consumer companies that reported relatively good 3Q22 results, outlook statements echoed Amazon's concerns and remained cautious around peak season sales and beyond. Consumers are still nervous and hunting for bargainsSofter economic data points are now becoming more frequent following the flurry of central bank interest rate hikes year to date. The US composite PMI slipped to just 44.6 in December, US housing continues to cool down, layoffs are surging, and consumer sentiment remains at levels last seen in 2009 despite a recent recovery. US consumer spending has remained relatively resilient during 2022 as households continued to draw on excess savings accumulated during the pandemic. Post COVID pent up demand have been driving a revenge spending cycle focused on travel, leisure, occasion-based spending (for example weddings), beauty, entertainment and more. Recent data points however suggest a softening in these trends with consumer wallets facing more constraints (softer macro/inflationary pressures). According to Evercore ISI's December company surveys, current holiday sales remain focused on consumer staples products while discretionary category sales are slow, and consumers are focused on discounted goods. More broadly pricing power continues to soften across industries from elevated levels as global growth slows. Pricing power continues to soften across industries Source: Evercore ISI, December 2022 Signs of inventory build are intensifyingMany companies across a range of sectors reported higher inventory levels during the 3Q22 results season. A result of continued supply chain disruption improvement and softer demand. Target (US general merchandise discount store) and Nvidia (inventor of graphics processing units) were two examples of big bellwethers that guided to big inventory build, - adjustments, and/or write-offs. Our detailed analysis of inventory levels for a sample of 30 global consumer stocks across retailing, food, and apparel, suggest a sobering level of inventory build across the consumer landscape. We looked at the change in inventory as a % of sales and inventory days (average number of days a company holds its inventory before selling it) between the latest reported quarterly numbers (3Q22) and the same quarter last 2021 heading into the Festive Season (3Q21). The results showed that there are only 3 stocks with lower inventory days and only 5 stocks with lower inventory as a % of sales in our sample. There is specifically a clear inventory build in sportswear with Adidas, Puma, and Lululemon the worst offenders. For example, Adidas's inventory to sales is now almost 30% up from c17% at 3Q21 and Lululemon's inventory days are up from 126 days to 150 days (see chart below for the change in Inventory Days) over the same period. Increased inventories a concern across many consumer names Source: Alphinity, Bloomberg, December 2022 Positioning in companies with strong inventory management and pricing powerAlphinity invests in quality companies that are in an earnings upgrade cycle that trade at a reasonable valuation. In our view, excellent inventory management skills and strong pricing power will be critical in determining the winners vs losers in the 2023 consumer race. Companies that can withstand margin pressures in an environment where business offload excess inventory and consumers hunt for bargains. Investing in quality companies at the right time in their earnings cycles Source: Alphinity, December 2022. Note: Alphinity currently owns LVMH, MELI & SBUX, but not AMZN & TGT. Pricing power remains critical: LVMH, the world's largest luxury group, is currently our biggest position in our Global Equity Fund as we head into 2023. Demand for their luxury products have remained resilient despite slowing macro trends, with the company able to pass through inflation given their very price insensitive customer base. LVMH has been in an impressive earnings upgrade cycle since 2020, delivering earnings growth across sub-segments, brands and increasingly across geographies. Management also remains confident in a demand recovery in China once restrictions have lifted. Despite the relative strong performance of the last 12 months, the company still trades at an undemanding 22x 12-month forward Price to Earnings, which is at the bottom of its 5-year trading range (20-35x) LVMH - Strong pricing power & resilient demand drive an impressive earnings upgrade cycle Source: Alphinity, Bloomberg, December 2022 The US consumer is not the global consumer. Certain emerging market countries, such as Brazil, are ahead in the business cycle vs major developed markets, where inflation, interest rates and unemployment are already past peak levels. MercadoLibre (MELI), is the largest e-commerce and fintech company in Latin America, with over 88 million subscribers and exposure across 15 countries. MELI has a unique eco-system model with their marketplace, payments, credit, logistics and other services all reinforcing each other, driving strong top line growth. MELI's reported very strong 3Q22 results well above their peer group, with accelerating sales growth and margin expansion reflective of their core strengths, including their broad category base, continued logistics improvements and a step change in marketing. Management noted they continue to "manage for growth and market share leadership" MELI consistently delivering strong Revenue growth and Operating margin expansion Source: Bloomberg, December 2022 China reopening will be an important earnings driver of 2023 earnings for multi-national companies: Starbucks (SBUX), is the leading specialty coffee retailer in the world, operating across more than 80 markets through company-operated and franchised stores. SBUX experienced a tough time during COVID, with many store closures resulting in a big drop off in sales and margins across all markets. Looking ahead, we expect their new strategy to drive a strong recovering in same store sales growth across their international markets and a return to profitability. SBUX is also well positioned to benefit from a China reopening, where they continued to open new stores during the pandemic (going from 4123 stores at the end of 2019 to 6000), that can return to profitability. China Same Store Sales Growth - Potential to rebound on reopening Source: Bloomberg, December 2022 We will only know during the first quarter of 2023 if Amazon did indeed cancel Christmas and if general market jitters were justified. Regardless, good inventory management, strong pricing power and the right geographical exposures will remain critical elements for consumer companies as they navigate yet another tough macro year ahead. At Alphinity we will continue to do bottom-up analysis and global company visits to find the highest quality companies that have these attributes and can deliver higher than expected earnings. Author: Elfreda Jonker (Client Portfolio Manager) This information is for advisers & wholesale investors only. |
Funds operated by this manager: Alphinity Australian Share Fund, Alphinity Concentrated Australian Share Fund, Alphinity Global Equity Fund, Alphinity Sustainable Share Fund Disclaimer |
31 Jan 2023 - Performance Report: Delft Partners Global High Conviction Strategy
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Fund Overview | The quantitative model is proprietary and designed in-house. The critical elements are Valuation, Momentum, and Quality (VMQ) and every stock in the global universe is scored and ranked. Verification of the quant model scores is then cross checked by fundamental analysis in which a company's Accounting policies, Governance, and Strategic positioning is evaluated. The manager believes strategy is suited to investors seeking returns from investing in global companies, diversification away from Australia and a risk aware approach to global investing. It should be noted that this is a strategy in an IMA format and is not offered as a fund. An IMA solution can be a more cost and tax effective solution, for clients who wish to own fewer stocks in a long only strategy. |
Manager Comments | The Delft Partners Global High Conviction Strategy has a track record of 11 years and 5 months and has outperformed the All Countries World (AUD) benchmark since inception in August 2011, providing investors with an annualised return of 14.43% compared with the benchmark's return of 11.96% over the same period. On a calendar year basis, the fund has experienced a negative annual return on 3 occasions in the 11 years and 5 months since its inception. Over the past 12 months, the fund's largest drawdown was -9.14% vs the index's -14.06%, and since inception in August 2011 the fund's largest drawdown was -13.33% vs the index's maximum drawdown over the same period of -16.02%. The fund's maximum drawdown began in February 2020 and lasted 1 year, reaching its lowest point during July 2020. The fund had completely recovered its losses by February 2021. During this period, the index's maximum drawdown was -13.21%. The Manager has delivered these returns with 1.19% more volatility than the benchmark, contributing to a Sharpe ratio which has fallen below 1 four times over the past five years and which currently sits at 1.05 since inception. The fund has provided positive monthly returns 88% of the time in rising markets and 13% of the time during periods of market decline, contributing to an up-capture ratio since inception of 104% and a down-capture ratio of 89%. |
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31 Jan 2023 - Performance Report: PURE Resources Fund
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Manager Comments | The PURE Resources Fund has a track record of 1 year and 8 months and therefore comparison over all market conditions and against its peers is limited. However, the fund has outperformed the S&P/ASX Small Resources TR benchmark since inception in May 2021, providing investors with an annualised return of 9.09% compared with the benchmark's return of 7.88% over the same period. Over the past 12 months, the fund's largest drawdown was -3.9% vs the index's -26.79%, and since inception in May 2021 the fund's largest drawdown was -3.9% vs the index's maximum drawdown over the same period of -26.79%. The fund's maximum drawdown began in September 2022 and has so far lasted 3 months, reaching its lowest point during September 2022. During this period, the index's maximum drawdown was -26.1%. The Manager has delivered these returns with 22.4% less volatility than the benchmark, contributing to a Sharpe ratio for performance over the past 12 months of 1.14 and for performance since inception of 1.18. The fund has provided positive monthly returns 85% of the time in rising markets and 43% of the time during periods of market decline, contributing to an up-capture ratio since inception of 16% and a down-capture ratio of 4%. |
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31 Jan 2023 - Performance Report: Bennelong Twenty20 Australian Equities Fund
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Manager Comments | The Bennelong Twenty20 Australian Equities Fund has a track record of 13 years and 2 months and has outperformed the ASX 200 Total Return benchmark since inception in November 2009, providing investors with an annualised return of 9.12% compared with the benchmark's return of 7.67% over the same period. On a calendar year basis, the fund has experienced a negative annual return on 3 occasions in the 13 years and 2 months since its inception. Over the past 12 months, the fund's largest drawdown was -16.99% vs the index's -11.9%, and since inception in November 2009 the fund's largest drawdown was -26.09% vs the index's maximum drawdown over the same period of -26.75%. The fund's maximum drawdown began in February 2020 and lasted 9 months, reaching its lowest point during March 2020. The fund had completely recovered its losses by November 2020. The Manager has delivered these returns with 0.67% more volatility than the benchmark, contributing to a Sharpe ratio which has fallen below 1 five times over the past five years and which currently sits at 0.54 since inception. The fund has provided positive monthly returns 94% of the time in rising markets and 7% of the time during periods of market decline, contributing to an up-capture ratio since inception of 114% and a down-capture ratio of 99%. |
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31 Jan 2023 - Global Matters: 2023 outlook

30 Jan 2023 - Performance Report: Altor AltFi Income Fund
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Fund Overview | The fund is managed by Altor Credit Partners. The investment committee comprises Harley Dalton and Ben Harrison. |
Manager Comments | The Altor AltFi Income Fund has a track record of 4 years and 9 months and therefore comparison over all market conditions and against its peers is limited. However, the fund has outperformed the RBA Cash Rate + 5% benchmark since inception in April 2018, providing investors with an annualised return of 11.3% compared with the benchmark's return of 5.84% over the same period. On a calendar year basis, the fund hasn't experienced any negative annual returns in the 4 years and 9 months since its inception. Over the past 12 months, the fund hasn't had any negative monthly returns and therefore hasn't experienced a drawdown. Since inception in April 2018, the fund's largest drawdown was -0.03%. The fund's maximum drawdown began in March 2020 and lasted only 1 month, with the fund having completely recovered its losses by April 2020. The Manager has delivered these returns with 2.29% more volatility than the benchmark, contributing to a Sharpe ratio which has consistently remained above 1 over the past four years and which currently sits at 3.91 since inception. |
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30 Jan 2023 - 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 DS Capital Growth Fund has a track record of 10 years and has outperformed the ASX 200 Total Return benchmark since inception in January 2013, providing investors with an annualised return of 12.13% compared with the benchmark's return of 8.65% over the same period. On a calendar year basis, the fund has experienced a negative annual return on 2 occasions in the 10 years since its inception. Over the past 12 months, the fund's largest drawdown was -15.63% vs the index's -11.9%, and since inception in January 2013 the fund's largest drawdown was -22.53% vs the index's maximum drawdown over the same period of -26.75%. The fund's maximum drawdown began in February 2020 and lasted 6 months, reaching its lowest point during March 2020. The fund had completely recovered its losses by August 2020. The Manager has delivered these returns with 1.69% less volatility than the benchmark, contributing to a Sharpe ratio which has fallen below 1 five times over the past five years and which currently sits at 0.88 since inception. The fund has provided positive monthly returns 88% of the time in rising markets and 32% of the time during periods of market decline, contributing to an up-capture ratio since inception of 63% and a down-capture ratio of 68%. |
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30 Jan 2023 - Equities 2023 - What's the bigger risk?
Equities 2023 - What's the bigger risk? Insync Fund Managers January 2023 Insync Funds Management CEO, Monik Kotecha, says there's no denying that 2022 was a difficult year for equities - but as one US commentator recently pointed out, years in which the S&P was down more than 18%, as it was in 2022, have been followed by years of 20% plus returns, every single time for the past 90 years. This, plus a few other key factors identified by Insync suggest that standing on the sidelines may pose a bigger risk than investing. Equities 2023 - What's the bigger risk? As we enter 2023, Insync Funds Management CEO, Monik Kotecha says standing on the sidelines may pose a bigger risk than investing. Everybody, and their mother, brother, sister, cousin, and uncle, is negative on the first half of 2023. Wealth destruction was the dominant theme of 2022. The global equity market shrank US$15 trillion in market capitalization, while global bond markets saw US$30 trillion in value wiped out. Virtually every asset class declined. Oil held up better, rising strongly in the first half but correcting as global growth expectations faltered, ending the year flat. The US dollar was the big winner, which rose 9% year-to-date. Cash, which was considered 'trash', gained 1.8%. High inflation, slowing growth and monetary tightening largely characterized the global economy throughout 2022. Rising inflation and slowing growth created stagflation concerns. But we think the market may surprise on the upside in 2023. The impact of 2022 There's no denying that 2022 was a difficult year for equities - but as US senior investment analyst, Luke Lango, from InvestorPlace recently pointed out, years in which the S&P was down more than 18%, as it was in 2022, have been followed by years of 20% plus returns, every single time for the past 90 years. The sentiment at year-end was very negative, which is a good contrarian indicator. Typically, the average forecast from Wall Street's top strategists predicts the S&P 500 climbing by about 10%, which is in line with historical averages. This time around, the pros are unusually cautious, with most expecting the S&P to end 2023 lower. A Bank of America fund manager survey shows fund managers relative positioning of stocks versus bonds is the lowest level since 2009. Fund managers also hold the highest level of cash (5.9%) since the bursting of the technology bubble in 2000/01. The consensus view is that earnings have further to fall in 2023 and this remains a top investor concern. The market (buyside) tends to look out 6-12 months ahead of sell side analysts, and anticipates any earnings decline in advance of it actually happening. Earnings have historically bottomed after stocks bottomed. Since 1950, the trough in earnings growth lagged the bottom in the S&P 500 by about 6-7 months. Stock prices tend to inflect upwards before we see improvements in earnings, GDP, and employment. October 2022 may well have marked the lows in stock prices which has already discounted the fall in earnings ahead of sell side analysts. Looking ahead As we enter 2023, we think standing on the sidelines may pose a bigger risk than investing. Here's why. The US midterm elections The US midterm elections were held in November 2022. Historically, the S&P500 has outperformed the market in the 12-month period after a US midterm election with an average return of 16.3%, and not delivered a negative return during this period over the past 60 years. Inflation may still prove to be transitory Many argue that inflation will be much stickier than markets currently discount, and that it will take multiple years to restore price stability (2% inflation). However, we continue to believe that the outbreak of inflation is squarely the result of the pandemic shock. As the pandemic-related economic dislocation renormalizes and the Federal Reserve continues to tighten monetary policy, inflation may well eventually fall back to pre-pandemic norms. An area of additional concern, as a result of the pandemic, has been the reduction in the labour market participation rate. This has the potential to drive sustained increase in wages inflation and lower levels of productivity. We are today living in the golden age of technology and innovation which we continue to consider to be deflationary for two primary reasons: 1. Technology reduces the demand for labour, which puts downward pressure on wages and employment levels, which in turn reduces demand for goods and services because workers have less money to spend 2. Technological innovation also leads to automation, tools that make workers more efficient, and the elimination of some job roles So where are the opportunities? We have found that the long-term cash flows and valuation of companies exposed to megatrends do not change as a result of an increase in interest rates, or a slowdown in the global economy. Megatrends are unstoppable long-term growth trends with profitable industry structures. Here's just one example. The 60+ age cohort is set to more than double to 2.1 billion by 2050. This is what we call a demographics megatrend. The fastest ageing group within this cohort is those aged 70-75 and this is where we have identified prime investing opportunities. As the population ages, so does the incidence of chronic disease. Older people also often suffer from multiple chronic conditions at the same time. The second leading cause of death within those aged 70-75, after heart disease, is cancer. The demand for companies providing cancer drugs is not reduced by changes in interest rates, inflation, or recession. These factors also do not change the trajectory of ageing populations, nor the increasing demand for solutions for chronic diseases. Current volatile market conditions provide opportunities to invest in highly profitable businesses benefitting from megatrends at lower prices. Funds operated by this manager: Insync Global Capital Aware Fund, Insync Global Quality Equity Fund Disclaimer |
25 Jan 2023 - Cashflow pothole in energy transition journey
Cashflow pothole in energy transition journey Yarra Capital Management December 2022 By now, people whose eyes don't immediately glaze over once discussions of personal or national budget are broached are well aware of an upcoming spike in their electricity and gas bills. However, for the majority of the Australian citizenry the 'sticker shock' from the increase in utility bills will still be felt in real time. Tim Toohey, Head of Macro and Strategy, details why for many Australians this will merely compound an already dire cashflow situation. For context, the Australian Treasury has assumed that electricity prices will rise 20% (y/y) by late 2022 and a further 30% in 2022-23. This will take utilities to an unprecedented share of wallet in 2023, some 2.6% of household income by Dec 2023 (refer Chart 1). While that may not sound like a particularly scary figure, it's 25% above the 10-year average and 49% above the long run average dating back to 1960. It will also represent the biggest one year rise in utility bills in the post-War period. The cause for the spike has been well documented. A surge in global coal and energy prices in reflex to the invasion of the Ukraine was the dominate force, some unfortunate timing of coal-fired power station maintenance and some less than transparent behaviour by market participants all played a role. Yet the cause of the trend rise in utility costs is less well understood at the household level; the rapid transition to renewables is unravelling the economics of running coal and gas-fired generation at an even more rapid rate. This is not to say that decarbonising the grid in an expeditious manner is not necessary or desirable. It merely means that the cost of the transition will be felt well beyond well-heeled investors asked to dig deep into their pockets to finance the capital cost of the transition. Indeed, it is the consumer that will invariably be forced to pay for the potholes in the road to decarbonisation as firms seek to recover the cashflow hit from declining economics of traditional generation via higher power bills. Utility companies know this. Politicians should know this. Households largely have no idea that they are ultimately on the hook if best intentions of a smooth energy transition turn to custard somewhere along the journey. To overwork the analogy, we have barely gotten the car out of the driveway with a long journey ahead to a known destination but without a clear map of how to get there. We don't have enough cash in our wallet to complete the journey, some of the roads have not yet been built, and the kids who have been fighting politically for years before getting in the car are continuing to do battle in the backseat. For those of us scarred from family car trip holidays at this time of year, we are collectively at the point where optimism and excitement at the start of a trip are about to be overwhelmed by the reality of a long-haul car trip in the Australian heat. The feeling of sizzling hot car seats, the taste of Aerogard inadvertently sprayed into a protesting mouth and the injustice as youthful back seat rebellion is brutally supressed by the front seat elites. Yes, it's going to be a long and painful journey. But to get a sense of who will bear more of the cost, we can look at the average quarterly electricity bill across different dimensions. By household size (refer Table 2), the more children you have the greater the power bill increase (and the more time the parent spends wandering around the house turning off lights left on by their children). By age, it's the young that will feel the pain more acutely (refer Table 3). Indeed, Gen Z (18-24yo) power bills will swamp the bills of Baby boomers (60+) by $150 p.a. Yes, despite the moral superiority of youth, it seems it takes more power to fuel video gaming sessions in the wee hours and to charge the armoury of devices required to keep your social media presence tip top! From the perspective of a top-down economist, the addition increment to inflation from rising power and gas bills could add 1.75% to inflation by the end of 2023 in first round impacts and potentially a further 0.35% in second round effects (Refer Table 4). That's a lot, but that's an average estimate. From the perspective of young households with multiple children living in the Eastern States, the impact will be larger and more painful. Worst still, this is the slice of the population that are most at risk of rising education, health, insurance and housing costs. We all know that the interest payments on the stock of existing total household debt are set to rise incredibly sharply in 2023, compounded by the roll off of fixed rate mortgages (refer Chart 2). In conjunction with principal payments, debt servicing for the average household is set to breach the prior record during 2023 (refer Chart 3). Again, this is for the average household. The situation for young mortgaged households is far more dire, not to mention a rising proportion of the recent new homeowners who are now entering negative equity scenarios for their homes. This will place an enormous impost on a large section of society. Nobody likes having their discretionary income squeezed and nobody likes an unexpected spike in their gearing ratio via falling asset prices. Even if we assume the ongoing robust growth in wages and employment in 2023 the impost of higher interest costs, utility costs, insurance costs and rents will be sufficient to see average discretionary cashflow fall by 15% by mid-2023 (refer Chart 4), and much more for young households with large families and large mortgages. Given, retail sales growth normally closely tracks our measure of discretionary cashflow, we expect that retail sales will slow from the rapid rate of close to 20%(y/y) to zero growth by mid-2023. Note, this is likely the best-case scenario. It could easily be worse if sub-trend economic growth reveals labour market weakness with a lag, as observable in all prior downturns. The argument that Australians have accumulated 'buffers' via $260bn in 'excess savings' since the pandemic and via pre-payments on mortgages will exceed additional interest payments - for most borrowers at least - is illusionary. While this might be true in an accounting sense, the RBA is likely asking itself the wrong question. It is not a question of how big a 'buffer' is before tightening policy will hurt, it is why did households accumulate such a buffer in the first place? And is the economic outlook improving or deteriorating? Excess fiscal stimulus obviously contributed to the initial saving spike, but what if the ongoing accumulation of savings was more about de-risking asset exposure in an uncertain time or because a large cohort of the population is simultaneously entering retirement (COVID may have expedited this decision for many Baby Boomers). If this is the case, then the 'excess saving' is not suggestive that a consumption boom lies ahead that threatens future inflation. Quite the opposite: in times of rising economic uncertainty households tend to initially lift their saving rate. They do not decrease it. There has been ongoing debate whether the government has a role to play in capping utility costs. And, if so, whether that should be at the company level or the consumer level. Given the recent history of firms profiteering through the crisis by lifting prices rather than absorbing margin pressure and the impending cashflow hit for households, the answer should be obvious. More importantly, if the government wants to keep everyone in the car playing nicely during the initial phase of the energy transition, then the answer is very much yes: utility costs need to be controlled. Let's just hope that there are enough fiscal resources and goodwill to get us to that new energy destination as quickly and efficiently as possible. Author: Tim Toohey, Head of Macro and Strategy |
Funds operated by this manager: Yarra Australian Equities Fund, Yarra Emerging Leaders Fund, Yarra Enhanced Income Fund, Yarra Income Plus Fund |
20 Dec 2022 - The Rate Debate - 2023 predictions on the economy, inflation, and the fixed-rate mortgage cliff
The Rate Debate - Episode 34 2023 predictions on the economy, inflation, and the fixed-rate mortgage cliff Yarra Capital Management December 2022 The RBA delivered an eighth-straight rate hike to hit a 10-year high to round out a tumultuous 2022. Speakers: Darren Langer and Chris Rands, seasoned fixed-income specialists |
Funds operated by this manager: Yarra Australian Equities Fund, Yarra Emerging Leaders Fund, Yarra Enhanced Income Fund, Yarra Income Plus Fund |
19 Dec 2022 - Managers Insights | Glenmore Asset Management
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Damen Purcell, COO of FundMonitors.com, speaks with Robert Gregory, Founder and Portfolio Manager at Glenmore Asset Management. The Glenmore Australian Equities Fund has a track record of 5 years and 6 months and has outperformed the ASX 200 Total Return benchmark since inception in June 2017, providing investors with an annualised return of 21.78% compared with the benchmark's return of 8.69% over the same period.
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16 Dec 2022 - Insights from abroad
Insights from abroad WaveStone Capital October 2022 WaveStone Capital's Henry Hill and Kirsty Mackay-Fisher travelled to the Northern Hemisphere, visiting a large number of companies and gaining insights on the impacts of inflation and a slowing consumer. Hear their insights and observations of the outlook for the Australian share market. |
Funds operated by this manager: WaveStone Australian Share Fund, WaveStone Capital Absolute Return Fund, WaveStone Dynamic Australian Equity Fund |
05 Dec 2022 - Manager Insights | Collins St Asset Management
Chris Gosselin, CEO of FundMonitors.com, speaks with Rob Hay, Head of Distribution & Investor Relations at Collins St Asset Management. The Collins St Value Fund has a track record of 6 years and 9 months and has outperformed the ASX 200 Total Return Index since inception in February 2016, providing investors with an annualised return of 14.17% compared with the index's return of 9.16% over the same period. Rob also discussed Collins St Asset Management's new Fund, the Collins St Convertible Notes Fund.
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21 Nov 2022 - The Rate Debate: Storm clouds continue to gather in global markets
The Rate Debate - Episode 33 Storm clouds continue to gather in global markets Yarra Capital Management November 2022 The RBA hiked rates for the seventh consecutive month as it seeks to stifle inflation. Global central banks continue aggressive monetary tightening despite early signs of moderating inflation and weaker forward growth indicators. With the consumer bearing the brunt of high inflation and tighter financial conditions, the RBA has backed away from aggressive rate hikes for now. Will other central banks follow, or is this a temporary reprieve? Speakers: |
Funds operated by this manager: Yarra Australian Equities Fund, Yarra Emerging Leaders Fund, Yarra Enhanced Income Fund, Yarra Income Plus Fund |
15 Nov 2022 - Magellan Global Strategy Update
Magellan Global Strategy Update Magellan Asset Management October 2022 |
Nikki Thomas, CFA, Portfolio Manager, discusses the market's reaction to the volatile macro environment, how Magellan's Global Portfolios are positioned and which quality companies are well placed to deliver growth in the years ahead. Speaker: Nikki Thomas, CFA, Portfolio Manager |
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. |
07 Nov 2022 - Collins St Convertible Notes Webinar Recording - New Investment Opportunity & Fund Update
Collins St Convertible Notes Webinar Recording - New Investment Opportunity & Fund Update Collins St Asset Management Oct 2022 |
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The Co-Founders of Collins St Asset Management, Michael Goldberg and Vasilios Piperoglou, alongside Head of Distribution & Investor Relations, Rob Hay, hosted an interactive webinar where they announced - Announce the details of the October and November capital raisings and the way in which both existing and prospective clients can invest into the Fund. - Provide an update on the performance and positioning of the Fund, including some topical issues around increasing interest rates and the negotiation of conversion prices given recent market volatility. Speakers: Michael Goldberg, Co-Founder, Vasilios Piperoglou, Co-Founder, and Rob Hay, Distribution & Investor Relations
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03 Nov 2022 - Magellan Infrastructure Strategy Update
Magellan Infrastructure Strategy Update Magellan Asset Management October 2022 |
Gerald Stack and Ofer Karliner, CFA, discuss the recent reporting season, the European energy crisis and provide an outlook for companies in Magellan's Infrastructure Strategy. Speaker: Gerald Stack Deputy CIO, Head of Infrastructure and Portfolio Manager |
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. |
02 Nov 2022 - Around the world in 200 Meetings, Chris Willcocks: Management Teams
Around the world in 200 Meetings, Chris Willcocks: Management Teams Alphinity Investment Management October 2022 From Stockholm to Zurich, then a week in the UK at a European Industrials Conference. Chris Willcocks details his time spent overseas visiting companies, seeing their assets and operations and meeting management teams. Speakers: Chris Willcocks, Portfolio Manager & Elfreda Jonker, Client Portfolio Manager This information is for advisers & wholesale investors only. |
Funds operated by this manager: Alphinity Australian Share Fund, Alphinity Concentrated Australian Share Fund, Alphinity Global Equity Fund, Alphinity Sustainable Share Fund Disclaimer |
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