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Printed: 07 July 2022 8:27 PM

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02 Jul 2021 - Hedge Clippings | 02 July 2021
By: Australian Fund Monitors

    

Hedge Clippings | Friday, 02 July 2021

 

Approximately eighteen months since it first emerged (depending on when you started the clock ticking) COVID has dominated and changed the world forever. With the occasional exception, such as the outbreak we're currently experiencing, Australia has fared better than most other countries.

Our borders were closed early - which certainly saved widespread infections, and all subsequent outbreaks have, one way or another, been triggered by missteps relating to returning travellers. As such our borders have been - and continue to be - closed but somewhat porous, and there's a strong case for arguing they should be tightened, in spite of the personal cost for the minority unable to enter, or the inconvenience to those who'd like to travel overseas.

Australia has low vaccination rates - as does New Zealand - in large part because we had low, and for long periods, no community transmission. Complacency took over, coupled with unforeseeable issues relating to the AZ vaccine - chosen as it could be manufactured locally, ensuring security of supply - and we're paying a price for that. Yet it seems in some quarters it is fashionable to say, "I'd be (or am) better off in New York or London".

According to https://www.worldometers.info/coronavirus/, US deaths from Covid to date are 620,645, and in the UK deaths have reached 128,162. On 30th of June alone, there were 392,008 new cases and 8,505 deaths worldwide, and at current levels, deaths will reach 4 million before this time next week.

Australia, which sits in 124th place globally, with just over 30,684 cases to date (including 40 yesterday) and sadly 910 deaths, is in a much better place, even if the vaccination rate is lagging as frustration rises.

With the exception of the occasional, temporary, and generally localised City or State based lockdowns, the majority of Australians are the envy of most other countries.

Meanwhile, to markets:

In spite of, and paradoxically partly because of, COVID, the ASX200 Accumulation Index has risen just under 28% over the 12 months to the end of June, in line with Global Equities, and has only had one negative month in that time. The S&P500 Total Return performed even better - up 40% over 12 months, in spite of 3 of those months being negative.

While too early for meaningful data from most fund managers in June, the clear winners to the end of May 2021 were those investing in Australian Small to Mid Cap stocks (+38% over 12 months vs. 28% for the ASX200), and Global Small to Mid Cap funds, (up 35% over 12 months vs 40%  for the S&P500, and 22% for Global Equities).

Given the outperformance of the Small and Mid Cap sector, which in AFM's database covers 71 funds, with 12 month performances to May ranging from 19% through to 112%, we spoke (via Zoom) with Dean Fergie from Cyan Investment Management, whose Cyan C3G Fund returned almost 47% over 12 months, to discuss the sector. Given the number of IPOs that have and are yet to come to the market, we asked him how they manage to pick the winners from the losers, when meaningful and accurate information can be difficult to find before the listing.

His answers, as always, were illuminating: The benefits of experience coupled with a wide network of brokers mean they see most, if not all, potential IPOs coming to market, in turn allowing the professional manager to be selective, a luxury or opportunity the individual investor doesn't have.

You can see the full video here.

On a similar theme, next Tuesday at 4:00 PM Michael Tobin from Vantage Asset Management will be our guest for a Webinar to discuss the Private Equity sector. Traditionally the best Private Equity or PE opportunities are reserved for the institutional markets. This leaves smaller investors to choose between early stage "angel" investing, or trying their luck in the IPO market - both of which can generate good returns, but with a high potential failure rate.

You can register for the webinar here.

And on that note enjoy the weekend, and stay safe, locked down or otherwise.


News & Insights


Webinar - Private Equity with Chris Gosselin and Michael Tobin

Video Interview with Dean Fergie of Cyan Investment Management

Does Higher Volatility Translate into a Higher Return? by Australian Fund Monitors


May 2021 Performance News


Bennelong Twenty20 Australian Equities Fund

Insync Global Quality Equity Fund

Longlead Pan-Asian Absolute Return Fund

Quay Global Real Estate Fund

Surrey Australian Equities Fund


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