Hyperion Australian Growth Companies Fund seeks to achieve medium to long-term capital growth and income by investing primarily in high calibre Australian companies listed within the S&P/ASX 300 Index, at the time of investment.
The Hyperion Australian Growth Companies Fund returned -7.9% for September, underperforming its benchmark (S&P/ASX 300 Accumulation Index) by 5.0%. Nanosonics Limited, HUB24 Limited, and Technology One Limited saw the largest positive share price movements, while Block Inc., IDP Education Ltd., and James Hardie Industries PLC saw the largest share price declines.
The domestic strategy produced mixed returns over the September quarter. The quarter started strongly following an encouraging full year financial reporting season in July and August. However, macroeconomic uncertainty centred around further interest rate rises in the U.S. dampened returns into September. This short-term uncertainty and volatility in global bond markets, which we believe is neither fundamental nor entrenched, has been a headwind for longer duration assets such as those held in the portfolio. Short-term volatility often provides a brief opportunity for investors with a long-term mindset.
Our long-term view remains unchanged that we will revert to a lower growth, lower inflation, and lower interest rate world and in fact we are starting to see that in some parts of Asia. A lower growth environment is much more favourable for growth investing.
Although we have seen strong performance for the calendar year-to-date, we believe the long-term return outlook for our portfolio remains attractive, with forecast internal rates of return above their long-run averages.
What is Hyperion Australian Growth Companies Hyperion Australian Growth Companies is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Large Growth Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Hyperion Australian Growth Companies has Assets Under Management of 1.97 BN with a management fee of 0.95%, a performance fee of 0.00% and a buy/sell spread fee of 0.6%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Hyperion Australian Growth Companies has returned 9.26% in the last month. The previous three years have returned 1.69% annualised and 16.02% each year since inception, which is when the Hyperion Australian Growth Companies first started.
How is risk measured in this investment product? There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Hyperion Australian Growth Companies first started, the Sharpe ratio is 0.44 with an annualised volatility of 16.02%. The maximum drawdown of the investment product in the last 12 months is -17.6% and -45.62% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product? Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Hyperion Australian Growth Companies has a 12-month excess return when compared to the Domestic Equity - Large Growth Index of 9.21% and 0.77% since inception.
Does the investment product produce Alpha over its Peers? Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Hyperion Australian Growth Companies has produced Alpha over the Domestic Equity - Large Growth Index of 0.27% in the last 12 months and 0.06% since inception.
What are similar investment products? For a full list of investment products in the Domestic Equity - Large Growth Index category, you can click here for the Peer Investment Report.
What level of diversification will Hyperion Australian Growth Companies provide? Hyperion Australian Growth Companies has a correlation coefficient of 0.88 and a beta of 1.59 when compared to the Domestic Equity - Large Growth Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers? For a full quantitative report on Hyperion Australian Growth Companies and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Hyperion Australian Growth Companies with the ASX Index 200 Index? For a full quantitative report on Hyperion Australian Growth Companies compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the Hyperion Australian Growth Companies to do my own analysis? To sort and compare the Hyperion Australian Growth Companies financial metrics, please refer to the table above.
Has the Hyperion Australian Growth Companies been independently verified by SMSF Mate? This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
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Comments from SMSF Mates SMSF Mate does not receive commissions or kickbacks from the Hyperion Australian Growth Companies. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - August 31, 2023 The Hyperion Australian Growth Companies Fund returned -4.2% for August, underperforming its benchmark (S&P/ASX 300 Accumulation Index) by 3.4%. Altium, Carsales.Com Limited, and HUB24 Limited saw the largest positive share price movements, while Iress Limited, Resmed Inc. (Resmed), and Block Inc. saw the largest share price declines.
Our domestic strategy produced mixed results in the month of August as reporting season came to a close. While many of our portfolio companies produced encouraging results in line with our long-term forecasts, there were several companies that saw share price declines as the market focused on short-term noise. WiseTech Global Ltd., which is continuing to reinvest in its business, saw share price weakness on the day it reported having rallied strongly into its result.
Economic data continues to show that the economic jolt from the pandemic is subsiding and stability in bond yields is being maintained. Stability is important as it allows confidence to come back into markets. Short-term valuations from higher bond yields look to have rebased and we are now importantly seeing our companies’ underlying fundamentals and earnings be the basis for market valuations. Hyperion still believes that we will revert to a lower growth, lower inflation, and lower interest rate world and in fact we are starting to see that in some parts of Europe and Asia. A lower growth environment is much more favourable for growth investing.
Although we have seen strong performance for the year to date, we believe the long-term return outlook for our portfolio continues to look attractive with forecast internal rates of return above their long-run averages.
Performance Commentary - July 31, 2023 The Hyperion Australian Growth Companies Fund returned 5.5% for July, outperforming its benchmark (S&P/ASX 300 Accumulation Index) by 2.6%. Block Inc., GQG Partners, and Seek Ltd., saw the most positive share price movements, and CSL Ltd., Brambles Ltd. and Macquarie Group Ltd saw the largest share price declines.
Our domestic strategy saw ongoing strength in July. With our companies reporting their full year financial results in August, we believe the moderating macroeconomic conditions will see a more favourable environment for our investment style. We believe several positive emerging themes will continue during the year and beyond. The first is a shift in corporations focusing more on efficiencies within their businesses, particularly at the bottom line (earnings). We believe the ability for companies to run their businesses harder by being more astute with their spending and sizing their workforce appropriately can help them achieve earnings leverage; this may produce considerable upside to margins.
Performance Commentary - June 30, 2023 The Hyperion Australian Growth Companies Fund returned 1.5% for June, underperforming its benchmark (S&P/ASX 300 Accumulation Index) by 0.3%. Netwealth Group Ltd., Xero Limited, and Block, Inc. saw the largest positive share price movements, while CSL Limited, Seek Limited, and Cochlear Limited saw the largest share price declines.
The month of June closed off a strong financial year for the domestic strategy, and investors with long-term mindsets are being rewarded for their patience as a more stable macroeconomic environment has helped the attractive economics of our portfolio produce positive results.
Hyperion has always believed that our portfolio would recover from what we viewed as a non-fundamental drawdown period and the negative duration impact from higher bond yields continues to provide an opportunity for long-term investors to increase exposure to some of the best listed businesses in Australia at attractive prices. The domestic strategies continue to offer above average forecast 10-year returns at current prices. Our portfolios have robust fundamentals with high and sustainable returns on capital, low financial gearing and the ability to produce positive free cash flows.
Our portfolio’s ability to take market share tends to increase during economic downturns when weaker competitors are suffering. This ability to grow by taking market share enables our stocks to handle cyclical earnings downturns relatively better than most listed companies.
Performance Commentary - May 31, 2023 The Hyperion Australian Growth Companies Fund returned -0.7% for May, outperforming its benchmark (S&P/ASX 300 Accumulation Index) by 1.8%. Xero Ltd., James Hardie Industries PLC, and Wisetech Global Ltd. saw the largest positive share price movements, while IDP Education Ltd., Fisher & Paykel Healthcare, and Nanosonics Limited saw the largest share price declines.
As we look forward, there are several positive emerging themes that we believe will continue throughout the year and beyond. The first of which is a shift in corporations focusing more on efficiencies within their businesses, particularly at the bottom line (earnings). The ability to run these businesses harder and achieve earnings leverage may produce considerable upside to margins over the medium term. The second positive has been around artificial intelligence (AI) and machine learning (ML), where we are starting to see inflection points. A key structural theme that Hyperion identified approximately 10 years ago was AI and ML, however the potential upgrades to revenue streams, efficiencies in productivity and eventually earnings are only now starting to be recognised by market participants. We believe the domestic portfolios are well placed to ride this thematic over time through software platforms such as Xero and WiseTech, or online classified portals such as REA Group and Carsales.
In our most recent webinar (watch the replay here), we reminded our investors why we believe investing in high quality structural growth companies is important and discussed why we remain confident in our portfolio companies and their ability to produce excess returns. We believe the long-term return outlook for our portfolios continues to look attractive with robust fundamentals, high and sustainable returns on capital, low financial gearing and the ability to produce positive free cash flows.
Performance Commentary - April 30, 2023 The Hyperion Australian Growth Companies Fund returned 2.2% for April, outperforming its benchmark (S&P/ASX 300 Accumulation Index) by 0.3%. Xero Ltd., Nanosonics Limited, Carsales.com Limited, and Brambles Limited saw the largest positive share price movements while Block, Inc. was the only company to see its share price decline over the month.
April was another solid month for the Australian Growth Companies Fund with all bar one holding company producing positive returns during the month. The Fund appears to be benefitting from a less volatile macroeconomic environment, with inflation domestically and abroad likely to have peaked. In a stable environment, high quality businesses that can continue their growth and profitability by taking market share will become more valuable and should be in a better position to produce attractive returns over the long term.
Performance Commentary - March 31, 2023 The Hyperion Australian Growth Companies Fund returned 1.1% for March, outperforming its benchmark (S&P/ASX 300 Accumulation Index) by 1.3%. Xero Ltd., REA Group Ltd., and Nanosonics Ltd. saw the largest positive share price performance for the month while GQG Partners, Inc., Block Inc. (Block), and Macquarie Group Ltd. saw the largest share price declines.
It has been a very encouraging start to the year for our domestic strategy which has pleasingly responded well to several factors, including a strong reporting season and a continued decline in inflation which has seen a stabilisation in 10-year US Treasury yields. While many of Hyperion’s portfolio companies have risen strongly since the start of the year, Block has underperformed recently after being the target of a short seller’s report. Overall, it is not unusual for Hyperion’s portfolio companies to face short sellers; this has occurred numerous times in the past. It is a function of our holdings being highly innovative businesses that are often difficult to assess. Our ability to deeply analyse businesses is a key driver of our long-term success. We are however humble and cognisant that ‘short’ reports can in certain instances present information that may not be known to the market and/or ourselves. Following our initial review, we believe the evidence provided by Hindenburg’s short report is largely anecdotal and subjective and in our view is sensationalised.
Furthermore, the recent volatility in the highly leveraged banking sector is a good reminder of the high barriers to entry for Hyperion’s portfolios. Our companies are structurally resilient, highly profitable and produce positive free cash flows, with most having net cash. Over time, these characteristics have proven to be highly valuable. We believe the recent developments in the banking system may result in slowing credit growth and should be a net positive for long duration and higher quality assets
Performance Commentary - February 28, 2023 The Hyperion Australian Growth Companies Fund returned -1.0% for February, outperforming its benchmark (S&P/ASX 300 Accumulation Index) by 1.6%. HUB24 Ltd., Brambles Ltd. and Cochlear Ltd. saw the strongest share price performance for the month while Domino’s Pizza Enterprises Ltd., IDP Education Ltd. and Nanosonics Ltd. saw the largest share price declines.
As we progress through the year, Hyperion has been pleased with a number of our domestic companies’ half-year financial reports. Share prices have responded positively to favourable financial reports in general. However, one company that missed guidance was Domino’s who reported weaker-than-expected first-half revenue and profits. Domino’s has spent decades training their customers to be value-focused and the result was driven by the mishandling of price rises, especially in delivery, which was implemented to offset inflation but led to a stronger-thanexpected drop off in customer volume. Domino’s management sound confident that they can fix this quite quickly with their new ‘Flex Vouchers’ which provide customers with a low headline price and the option to pay extra for upgrades. Pleasingly, the roll out of Flex Vouchers has already begun and anecdotally has been well received by customers. In our view, this is a rare misstep from Domino’s and we believe they have the management team to execute on their long-term strategies. Domino’s is well positioned globally across ANZ, Asia and Europe, and they should be able to increase their store footprint over the next decade .
As we discussed in our most recent webinar, Hyperion believes that macroeconomic factors are still relevant, but the period of higher-than-expected inflation and bond yields that had such a negative influence on our portfolio returns may have come to an end. We believe we are slowly returning to an environment of low, but positive economic growth, lower inflation, and eventually low bond yields. To that end, it is likely that we are in the process of returning to a macro environment that rewards investing in high quality structural growth stocks (read more on our view in our latest whitepaper).
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