The investment objective of the Altrinsic Global Equity strategy is long-term growth of capital. Altrinsic’s investment philosophy is based upon time-tested principles of fundamental, bottom-up investment management.
Our relative performance suffered from growth stock market dominance, a few disappointing investments (discussed below), and no specific holdings that kept up with the surging tech leaders. Putting this surge into perspective, the NASDAQ gained 12.8% during the quarter and had its second strongest first half in history. The greatest sources of negative attribution in our portfolio came from the technology, consumer discretionary, communication services, and financials sectors.
Technology (-232 bps) was the greatest detractor, primarily because of what we did not own; Nvidia (+52%), Apple (+18%), and Microsoft (+18%) combined for over 150bps of negative attribution. Consumer discretionary (-115 bps) suffered by not owning Amazon and Tesla (each +26%) and poor performance by holdings Advance Auto Parts and Alibaba. Advance Auto Parts, an auto aftermarket retailer, is well positioned to capitalize on an aging car fleet and robust miles driven. Poor inventory management and a botched direct sourcing initiative caused margins to plummet. We sold our position, as we lost conviction in management’s ability to close the margin gap to peers. Alibaba continues to improve profitability but has struggled to grow sales amid an uncertain Chinese economy and increased competition. Management is taking steps to drive sales growth while improving shareholder value via increased returns and monetizing non-retail assets.
In communication services, not owning Meta (+35%) and Alphabet (+16%) detracted 76 bps from performance. Additionally, Baidu was adversely affected by the slow Chinese recovery, and Liberty Global faced slowing cash flow growth amid delayed pricing initiatives, contributing to our underperformance.
Several of our financials (-72 bps) stocks performed well, but some insurance holdings (Hanover Insurance, Everest RE, Chubb) were weak on fears of peaking profitability. We remain confident in the underlying fundamentals and expect rising demand, continued price hikes, and higher interest rates to generate resilient returns for investors in the medium term.
What is Altrinsic Global Equities Trust Altrinsic Global Equities Trust is an Managed Funds investment product that is benchmarked against Developed -World Index and sits inside the Foreign Equity - Large Value 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 Altrinsic Global Equities Trust has Assets Under Management of 229.88 M with a management fee of 0.99%, a performance fee of 0.00% and a buy/sell spread fee of 0.4%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Altrinsic Global Equities Trust has returned 1.24% in the last month. The previous three years have returned 10.49% annualised and 9.94% each year since inception, which is when the Altrinsic Global Equities Trust 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 Altrinsic Global Equities Trust first started, the Sharpe ratio is 0.91 with an annualised volatility of 9.94%. The maximum drawdown of the investment product in the last 12 months is -4% and -14.98% 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 Altrinsic Global Equities Trust has a 12-month excess return when compared to the Foreign Equity - Large Value Index of -4.15% and -1.27% 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. Altrinsic Global Equities Trust has produced Alpha over the Foreign Equity - Large Value Index of -0.24% in the last 12 months and 0% since inception.
What are similar investment products? For a full list of investment products in the Foreign Equity - Large Value Index category, you can click here for the Peer Investment Report.
What level of diversification will Altrinsic Global Equities Trust provide? Altrinsic Global Equities Trust has a correlation coefficient of 0.94 and a beta of 0.89 when compared to the Foreign Equity - Large Value 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 Altrinsic Global Equities Trust and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Altrinsic Global Equities Trust with the Developed -World Index? For a full quantitative report on Altrinsic Global Equities Trust compared to the Developed -World Index, you can click here.
Can I sort and compare the Altrinsic Global Equities Trust to do my own analysis? To sort and compare the Altrinsic Global Equities Trust financial metrics, please refer to the table above.
Has the Altrinsic Global Equities Trust 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.
How can I invest in Altrinsic Global Equities Trust? If you or your self managed super fund would like to invest in the Altrinsic Global Equities Trust please contact 105-153 Miller Street North Sydney, NSW 2060 Australia via phone +61 03 8634 4721 or via email -.
How do I get in contact with the Altrinsic Global Equities Trust? If you would like to get in contact with the Altrinsic Global Equities Trust manager, please call +61 03 8634 4721.
Comments from SMSF Mates SMSF Mate does not receive commissions or kickbacks from the Altrinsic Global Equities Trust. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - March 31, 2023 Global equities delivered strong gains during the first quarter as investors shrugged off two of the three largest bank failures in US history and the collapse of once venerable Credit Suisse. The proximate cause for the rally is a belief that inflation risk is vanquished, interest rates have peaked, years of extraordinary financial stimulus can be normalized painlessly, and the global economy will not experience a downturn. This implies a tremendous amount of confidence in policymakers.
The Altrinsic Global Equity portfolio gained 4.3% (4.1% net), lagging the MSCI World Index’s 7.7% gain, as measured in US dollars. i Headline index gains masked significant underlying volatility in sector and style performance (Chart 1), as market leadership came from an unlikely combination of the longest duration growth stocks (a proxy for lower rates) and nonfinancial cyclicals (a proxy for economic growth – or at least a soft economic landing). Traditionally defensive sectors including utilities, health care, and consumer staples lagged. Growth indices far outpaced value indices, and high beta was the best performing factor.
The primary source of our relative underperformance was our lack of growth stocks, an underweight exposure to high beta non-financial cyclicals, and poor performance by our financials investments. Probing deeper into growth stocks’ role in performance this quarter, the three best performing sectors were information technology (led by Apple, NVIDIA, Microsoft), communication services (Meta, Alphabet), and consumer discretionary (Tesla, Amazon). In fact, those seven stocks contributed to over half the MSCI World Index’s gain and almost all of our relative underperformance (~300bps).
Some of our investments in these industries lagged as well – notably Gen Digital (IT) and Advance Auto Parts (consumer discretionary). Gen Digital declined on fears of a revenue slowdown despite improving profitability and cash flow generation following its acquisition of cybersecurity firm Avast. The temporary revenue slowdown is an unhelpful consequence of the merger that will improve over time. Until then, expenses remain in check and cash flow is increasing. Advance Auto Parts declined as company initiatives to
improve customer service will lead to temporarily heightened inventory levels and lower cash flow. We look favorably on the inventory investments, as improved availability should drive sales growth closer to peer levels in the structurally sound auto parts aftermarket.
The greatest sources of positive attribution came from investments in the consumer staples (Heineken, Danone) and materials (CRH, Akzo Nobel) sectors. Heineken announced results showing continued growth in volume, sales, and profits through their ongoing premiumization strategy. Additionally, FEMSA (an economic owner of 15% of Heineken) announced their intention to sell 40% of their position, with Heineken buying back a quarter of that stake. This decision removes an overhang and highlights management’s (and investors’) confidence in the company. Danone results were better than feared, demonstrating that the new management team has regained investor trust to embark on their growth and efficiency efforts. Akzo and CRH benefitted from declining input costs while maintaining pricing power and improved return potential.
CRH was further aided by the announcement about moving their listing from the UK to the US, which will highlight the valuation disconnect from its closest peers.
Performance Commentary - January 31, 2023 Our investment activity leading up to 2022 largely involved companies whose future growth was not highly dependent upon the broad economy and/or companies with idiosyncratic drivers of value creation that were within their control. There was dangerous crowding in the popular “growth” stocks and extreme valuations for the large index constituents. These conditions, coupled with our investment discipline, led to a materially different portfolio than benchmark indices, including below-market risk (beta), and was the primary source of our relative outperformance in 2022.
At a more granular level, the most significant sources of positive attribution in the quarter were our investments in the financials, consumer discretionary, and information technology sectors, offset partially by our investments in the traditionally defensive health care and consumer staples sectors.
In the financials sector, our insurance-focused holdings rallied due to continued positive competitive momentum, particularly in reinsurance. Insurance broker Willis Towers Watson (WTW) continued to improve operational performance following its failed merger attempt with Aon. With that distraction removed, WTW is focused on employee recruitment and retention as well as increased efficiency. Insurers Everest Re and Chubb were strong performers as the dynamics within the insurance industry continued to improve. Rising rates are forcing competitive discipline and weeding out weaker underwriters, while Chubb’s and Everest Re’s efficiency and scale are accruing to the benefit of customers and shareholders.
In the consumer discretionary sector, our performance was positively impacted by China’s move away from zero-COVID restrictions. The abrupt turnaround buoyed travel and leisure businesses Trip.com and Las Vegas Sands. Although a return to normalcy will not follow a straight line, with the worst-case scenario eliminated for each company, we expect vastly improved 2023 operational performance. Not owning highly valued market darlings Amazon and Tesla also benefited performance. We greatly admire their products and services, but valuations were – and remain – impediments.
Performance Commentary - December 31, 2022 Our investment activity leading up to 2022 largely involved companies whose future growth was not highly dependent upon the broad economy and/or companies with idiosyncratic drivers of value creation that were within their control. There was dangerous crowding in the popular “growth” stocks and extreme valuations for the large index constituents. These conditions, coupled with our investment discipline, led to a materially different portfolio than benchmark indices, including below-market risk (beta), and was the primary source of our relative outperformance in 2022.
At a more granular level, the greatest sources of positive attribution were investments in the financials, consumer discretionary, and energy industries, offset partially by our investments in the materials and real estate sectors.
In the financials sector, Julius Baer and KB Financial benefitted from improving economic sentiment and insurers Everest Re and SCOR provided evidence of improving industry discipline through better pricing.
In the consumer discretionary sector, our performance was positively impacted by China’s move away from zero-COVID restrictions. The abrupt turnaround buoyed travel and leisure businesses Trip.com and Sands China. Although a return to normalcy will not follow a straight line, with the worst-case scenario eliminated for each company, we expect vastly improved 2023 operational performance.
Within the energy sector, TotalEnergies continued to deliver steadfast cost control in a difficult operating environment and laid out a roadmap to deliver higher cash returns to shareholders without its Russian assets. This strategy was well received by investors.
Performance Commentary - September 30, 2022 The downturn in markets continued during the third quarter as concerns over tightening monetary policy, inflationary pressures, weakening economic growth, and geopolitical risks intensified. Despite strong gains early in the quarter, the MSCI World Index declined 6.2% (as measured in US dollars), ending approximately 22% below peak levels reached in September 2021. The Altrinsic Global Equity portfolio declined 8.2% over the same period.i
Greed has given way to fear. We have not reached a stage of extreme capitulation, liquidity unwinds, or distress, but fear emanating from headlines and market declines is reflected in poor investor sentiment and the growing presence of value.
Risk factors could certainly deteriorate, with the greatest ones emanating from 1) geopolitical developments (Russia/Ukraine, China/Taiwan) and 2) deteriorating confidence in policymakers as they attempt to juggle both inflationary and recessionary pressures amidst a surging US dollar. While headline valuations look very enticing, we expect many companies to revise earnings downward – quite meaningfully in some cases.
Performance Commentary - July 31, 2022 The Altrinsic Global Equity portfolio’s outperformance was broad-based with positive attribution derived from our differentiated positioning in the consumer discretionary, information technology, and communication services industries.
Positive attribution in the consumer discretionary sector was driven by our Chinese investments (Trip.com, Alibaba), which recovered from depressed levels on easing COVID-19 restrictions and an improving regulatory outlook. Outperformance within technology was due to a stock-specific story (Check Point, which operates with more defensive revenue characteristics) and our underweight allocation to expensive high-growth technology stocks. Our holdings in communication services outperformed, led by Baidu and Vodafone, which reported better than expected results and stand to benefit from potential easing of regulatory pressures. Materials and utilities were modest sources of negative attribution. Within materials, negative attribution was the result of Kinross, a Canadianbased gold miner, which faced Russian mine-related losses and is experiencing continued cost inflation. Utilities were a source of negative attribution due to our underweight exposure to the defensive sector.
New investment activity was modest during the quarter, as we initiated one new position – Deutsche Post AG (Germany) – and eliminated Siemens Energy (Germany).
Deutsche Post, commonly known as DHL, is a European logistics company previously prone to execution missteps. Management has transformed the company by improving its business mix and increasing cost efficiencies. No longer reliant on German post, express shipping is DHL’s key profit driver (50% of profits), and the company occupies the leading position in a three-player oligopoly with high barriers to entry. The current valuation assumes an excessive decline in DHL’s profitability once global freight capacity and rates normalize, and it undervalues DHL’s secular growth opportunities from increasing e-commerce penetration and supply chain complexity.
Siemens Energy was sold as we lost confidence in the company’s ability to offset significant cost inflation despite compelling opportunities in wind and other forms of low-carbon energy. 0% 20% 40% 60% 80% Price to Book Price to Earnings Price to Sales Chart 9. % of Global Stocks Trading Below 10-year Average Valuations Jun-22 Dec-21 As of 06/30/22; Source: FactSet; Based on 1,450+ global stocks 10 11 12 13 14 15 16 17 18 19 Sep-01 Dec-03 Apr-06 Aug-08 Nov-10 Mar-13 Jul-15 Oct-17 Feb-20 Jun-22 Chart 10. Altrinsic Global Portfolio Price/Earnings (FY1) As of 06/30/22; Source: FactSet, Company data We took advantage of the equity market weakness to add to select cyclical businesses within our existing portfolio that offer a combination of structural integrity and improving business models: HDFC Bank (India), CRH (Ireland), Medtronic (Ireland), Siemens (Germany), Makita (Japan), and Akzo Nobel (Netherlands).
Performance Commentary - March 31, 2022 The Altrinsic Global Equity portfolio declined 0.1% during the first quarter, outperforming the MSCI World Index’s 5.2% decline, as measured in US dollars. Just as most nations began lifting COVID-related restrictions and returning to normal, tensions intensified amidst surging inflationary pressures, tightening policy measures in the US, lockdowns in China, and Russia’s invasion of Ukraine. Corporate earnings have been robust, but we expect these to come under pressure as the year progresses owing to slowing revenue growth, increasing cost pressures, and lofty embedded expectations. Tightening financial conditions and downward earnings revisions could also contribute to growing market volatility. We continue to see the most compelling investment propositions among attractively valued and well capitalized businesses with durable and achievable earnings prospects and among those going through underappreciated efforts to further strengthen their financial productivity.
Performance Commentary - December 31, 2021 Beginning with the January insurrection at the US Capitol and ending with the rapidly spreading Omicron COVID-19 variant, 2021 provided much for markets to digest. Nonetheless, equity markets continued their rise with support from re-opening economies, strong corporate earnings growth, and stimulative monetary and fiscal policies. US equities and “growth” stocks continued to lead markets during the fourth quarter, but important transitions are underway that are supportive of a long overdue broadening away from this leadership in markets.
The Altrinsic International Equity portfolio gained 1.7% during the fourth quarter, as measured in US dollars. By comparison, the MSCI EAFE and MSCI All Country World ex-US indices gained 2.7% and 1.8%, respectively1. Weakness among companies exposed to China and COVID-related slowdowns weighed on relative performance. These same companies have significant long-term upside potential and began to recover late in the quarter. Both popular growth stocks and deep cyclical businesses remain highly valued and most vulnerable, with the greatest opportunity among durable businesses that are less driven by the broad economy and among well-capitalized companies executing on underappreciated initiatives to further strengthen their quality.
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