BMO Pyrford Global Absolute Return aims to provide a total return, before costs and tax, 4% or higher than the Fund’s benchmark of the Australian Consumer Price Index. The Fund seeks to provide a stable stream of real returns over the long term with low absolute volatility and significant downside protection. To achieve this, the Fund employs a global multi-asset absolute return investment strategy. This means that the Fund has the ability to move flexibly as determined by the investment manager between three asset classes globally – equities, cash and government bonds.
Recession fears continued this month as investors grapple with the effects of aggressive monetary tightening into a slowing global economy, hampered by war in Europe and lockdown in China. Starting with the US, the resilience of the consumer in the face of falling real incomes has been a positive surprise over the last year. Average weekly earnings, adjusted for inflation, have fallen for 13 consecutive months and are more than 6% off the highs reached in April 2020. It is the roughly $2.5 trillion in excess savings built up during the pandemic that has kept the spending party going, whilst also fueling the highest rate of inflation since the 1980’s. In April, real US personal consumption expenditures continued to grow at a healthy clip of 0.65% over the last month. However, the party appears to be coming to an end. The personal savings rate, which reached an all-time high of 33% at the height of the pandemic, has now fallen to its lowest level since August 2008 at just 4.4%.
Earnings for major US retailers are often seen as a bellwether of the strength of the consumer and thus the state of the US economy. Many were therefore taken aback this month when the likes of Target, Walmart and Kohls issued profit warnings on the back of both rising costs as well as a slowdown in consumer spending. The recessionary fears have been accompanied by growing calls of a ‘peak’ rate in inflation. Indeed, the latest year-on-year US CPI data showed prices grew by 8.3% in April versus 8.5% in March. However, the lower CPI number offered little relief to investors or the Fed as core inflation measures (exfood and energy) continued to accelerate. Shelter CPI, which includes rental prices and makes up roughly 30% of the CPI basket, has grown at a faster rate for 15 consecutive months. The latest data show growth of 5.1% in April 2022. In the Euro Area and the UK, ‘peak’ inflation is likely to occur much later than in the US. The UK reported inflation of 9% in April, versus 7% in March. German HICP grew by 8.7% in May versus 7.8% in April. The overall Euro Area HICP grew by 8.1% in May. The faster inflation of Germany and Britain relative to the US is of course due to a much larger energy shock. Energy prices have contributed roughly 4 percentage points to inflation in Europe versus 2 percentage points in the US.
What is BMO Pyrford Global Absolute Return BMO Pyrford Global Absolute Return is an Managed Funds investment product that is benchmarked against Multi-Asset Growth Investor Index and sits inside the Multi-Asset - Real Return 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 BMO Pyrford Global Absolute Return has Assets Under Management of 338.49 M with a management fee of 0.8%, 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 BMO Pyrford Global Absolute Return has returned 2.3% in the last month. The previous three years have returned 6.28% annualised and 4.51% each year since inception, which is when the BMO Pyrford Global Absolute Return 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 BMO Pyrford Global Absolute Return first started, the Sharpe ratio is 0.76 with an annualised volatility of 4.51%. The maximum drawdown of the investment product in the last 12 months is -2.78% and -4.42% 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 BMO Pyrford Global Absolute Return has a 12-month excess return when compared to the Multi-Asset - Real Return Index of 1.98% and 0.57% 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. BMO Pyrford Global Absolute Return has produced Alpha over the Multi-Asset - Real Return Index of 0.22% in the last 12 months and 0.12% since inception.
What are similar investment products? For a full list of investment products in the Multi-Asset - Real Return Index category, you can click here for the Peer Investment Report.
What level of diversification will BMO Pyrford Global Absolute Return provide? BMO Pyrford Global Absolute Return has a correlation coefficient of 0.75 and a beta of 0.8 when compared to the Multi-Asset - Real Return 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 BMO Pyrford Global Absolute Return and its peer investments, you can click here for the Peer Investment Report.
How do I compare the BMO Pyrford Global Absolute Return with the Multi-Asset Growth Investor Index? For a full quantitative report on BMO Pyrford Global Absolute Return compared to the Multi-Asset Growth Investor Index, you can click here.
Can I sort and compare the BMO Pyrford Global Absolute Return to do my own analysis? To sort and compare the BMO Pyrford Global Absolute Return financial metrics, please refer to the table above.
Has the BMO Pyrford Global Absolute Return 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 BMO Pyrford Global Absolute Return? If you or your self managed super fund would like to invest in the BMO Pyrford Global Absolute Return please contact LGM Investments Limited 95 Wigmore Street London W1U 1FD via phone +44 (0) 207 628 8000 or via email info@lgminvestments.com.
How do I get in contact with the BMO Pyrford Global Absolute Return? If you would like to get in contact with the BMO Pyrford Global Absolute Return manager, please call +44 (0) 207 628 8000.
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Performance Commentary - April 30, 2022 Investors continue to assess the devastating impact of war on the global economy. Inflation is at levels last seen in October 1988 (source: OECD) driven by rising energy prices and supply chain issues, prompting a costof-living crisis for households and limiting production for many businesses. Focus is now increasingly being shifted to the ‘stag’ component of stagflation. The IMF sharply repriced their growth forecasts in the latest WEO this month and project a fall in global growth from 6.1% in 2021 to 3.6% in 2022 and 2023. The 2022 forecast was a 0.8% downgrade from their January update and 1.3% lower than initially projected in October. This comes alongside increases in inflation forecasts for almost every economy. The risks are firmly to the downside and the probability of a global recession this year, although unlikely, has dramatically increased in the span of a couple months.
Among the major economies, Germany is likely to be most affected by the war in Ukraine. The IMF cut their German growth forecasts by 1.7 percentage points to 2.1% growth this year. An indication of the potential damage to the economy can be seen in the staggering increases in German producer prices. For the month of March, annual growth in the producer price index (PPI) was at a 73 year high of 30.9%, up from 25.9% in February. The fact that consumer prices have increased by ‘only’ 7.4% over the last year indicates that profit margins are under serious pressure. Consumers will eventually have to take on more of the burden, with CPI likely to hit double-digits this year. Underneath the headline PPI figures, the German Federal Statistics Office said the price of gas paid by domestic manufacturers increased 144% in March. Fertilizers increased 87.2%, wood containers 68.8% and metals 39.7%
Performance Commentary - March 31, 2022 The fund returned 0.31% over the quarter. Since inception in June 2014, the fund has delivered 4.72% per annum. The aim of the fund is to provide a stable stream of real total returns over the long term with low absolute volatility and significant downside protection.
Positive returns were led by both our domestic equity allocation with our overseas bonds the notable detractor over the quarter. Domestic equities contributed 2.13% with our overseas equities detracting -0.67%. Whilst the Australian bonds contribution was broadly flat, overseas bonds generated a negative contribution of -1.51%. Within the domestic equity allocation Woodside Petroleum performed strongly assisted by a higher oil price, improved efficiency, and cost savings. Woodside’s production is linked to the oil price, whether through direct sales of liquid products or liquified natural gas contract prices based on the oil price.
In addition, shortages in Europe and Asia have highlighted that demand for gas will be robust for many years to come, despite the energy transition, and that is not currently reflected in the levels of investment in an industry whose assets deplete through natural operations. Computershare added following a strong performance last year. Earnings will benefit from interest rate rises globally. Computershare earns “margin” income on the flow of funds between its clients and their various counterparties. This income has been suppressed in recent years but now looks set to recover. Rio Tinto also added due to a strong recovery in the iron ore price and as progress has been made in negotiations with the Mongolian government on a copper mine.
Performance Commentary - January 31, 2022 Global equity markets started the year with a sharp selloff led by US tech stocks. The Nasdaq 100 closed down 9.7% almost beating the worst January on record, the 9.9% fall in January 2008. The correction was likely driven by a surge in real yields as investors recalibrated expectations on the pace of monetary tightening from the Federal Reserve. Looking at the prospects ahead for 2022, we know economic growth will decelerate as fiscal and monetary support is withdrawn. The extent and pace of the drop however is highly uncertain and dependent upon several factors. The IMF highlights at least three risks in their updated World Economic Outlook (WEO), including the persistence of supply chain disruptions, higher than expected inflation and the emergence of new variants prolonging the pandemic. We can also add a spike in geopolitical risk to that list as tensions build up between Russia and Ukraine.
Performance Commentary - December 31, 2021 The fund returned 0.09% over the quarter. Since inception in June 2014, the fund has delivered 4.84% per annum. The aim of the fund is to provide a stable stream of real total returns over the long term with low absolute volatility and significant downside protection.
Strong returns were led by both our overseas equity allocations. Overseas equities contributed 0.53% though our domestic equities detracted, contributing -0.14%. Whilst the Australian bonds contribution was broadly flat, overseas bonds generated a negative contribution of -0.19%.
Performance Commentary - October 31, 2021 In October, international and Australian equities performed positively, delivering +5.5% and +0.1%, respectively. The outperformance in international equities was largely driven by strong earnings results, particularly in the US. For Q3 2021, the blended earnings growth rate for the S&P was 39.1%. If 39.1% eventuates as the actual growth rate for the quarter, it will mark the third highest year-over-year earnings growth rate reported by the index since 2010. With regard to fixed interest, the sector delivered a negative result, returning -3.6% domestically and -0.1% offshore. The sell-off in fixed income markets was initially triggered by a globally led shift in sentiment around inflation and more hawkish central banks offshore, Australian rates materially underperformed other regions given the lack of liquidity and dysfunction in the market.
We continue to view growth assets as our preferred asset class, in an environment where monetary and fiscal policies remain accommodative, and inflation is rising. As such, we maintain an overall overweight bias to growth assets. We view contagion risk from the Chinese property sector as low and view the market reaction as overdone. With this in mind, we have continued to utilise a put option structure for our equity exposures in the Fund, to provide a capital buffer and manage the increased market volatility. Within the Fund’s fixed income exposure, the core allocation in investment grade credit has continued to benefit from the supportive policy environment and has delivered cash-plus returns for the Fund. In interest rate duration positioning, we took the recent increase in interest rates as an opportunity to increase the Fund’s overall interest rate duration exposure particularly in Australia
Performance Commentary - September 30, 2021 The fund returned 1.80% over the quarter. Since inception in June 2014, the fund has delivered 4.99% per annum. The aim of the fund is to provide a stable stream of real total returns over the long term with low absolute volatility and significant downside protection
Key Drivers & Detractors Strong returns were dominated by both our overseas bond and equity allocations with our domestic equities adding further. Overseas equities contributed 1.02% with domestic equities contributing 0.51%. Whilst the Australian bonds contribution was flat, overseas bonds generated a positive contribution of 1.07%, helped by a strengthening of the British Pound, Euro and Canadian Dollar. Overseas equities added led by Telkom Indonesia and Legal & General. Telkom Indonesia saw sequential growth across all segments in the second quarter with non-mobile growing faster than mobile. They continue to see strong traction in it fibre broadband business with steady increase in subscribers and higher revenues per subscriber as they take on dual or triple play services. Competition in mobile also eased too and is likely to remain so given the announced consolidation amongst the smaller operators. The company is also in advanced stage to list their tower subsidiary Mitratel by year end which will lead to a sizable valuation gain. Legal & General added as bond yields rose over the quarter which is seen as beneficial for insurers as investment income is enhanced.
Performance Commentary - August 31, 2021 Global equity markets rose over the month despite a sharp sell off over the middle of August led by growth and momentum. From the 19th August onwards, markets rebounded strongly with growth and quality leading the rebound. As we’ve highlighted previously, these equity market moves mirror the change in yield of the US 10-year which tightened over the middle of the month, supporting a rebound in growth and momentum. Over the month the US 10-year troughed at 1.19% and peaked at 1.36%, ending the period broadly unchanged to 1.29%. Despite the remarkable move higher in equity markets, not all is rosy. Investors have ridden the recovery from the pandemic, but clouds continue to gather on the horizon.
Key amongst concerns is the rampant nature of the Delta variant and the disparate rollout of vaccine programs with emerging and low-income economies lagging developed economies. The reopening trade that has seen the hospitality, travel, hotel and energy industries recover would suffer heavily should restrictions be reintroduced. Should global growth continue to recover, the prospect of central bank stimulus being withdrawn becomes ever more likely. Risk assets have benefitted significantly from ultra-low borrowing costs that have helped equities, and other risk assets, perform strongly. Higher rates would hit the most expensive pockets of the equity markets and long duration fixed income the hardest.
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