DNR Capital Australian Equities Income’s investment objective is to invest in a portfolio of Australian equities that aims to outperform the Benchmark (net of fees) and deliver higher levels of income relative to the Benchmark over a rolling three-year period. The investment objective is not a forecast of the Fund’s performance. The Fund seeks to identify quality medium to long-term investments delivering sustainable, growing income. The Fund seeks to invest in a selection of securities that have high and sustainable dividend capability, strong profit-to-cash conversion, and relatively assured earnings growth.
The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Total Return Index by 0.79% in September. The Portfolio’s dividend yield expectation for 2023 is currently 5.10% (6.60% grossed up for franking credits).
Contributors
• QBE Insurance Group (QBE): outperformed as rising bond yields supported expectations for return on shareholder funds, and broader insurance industry dynamics.
• Beach Energy (BPT): outperformed during the period, with oil and gas prices rallying on tight markets. OPEC+ continue their restricted output settings through voluntary quota cuts, and Russian supply appear to be tapering off, at a time when Chinese demand proving stronger than feared.
• Computershare (CPU): outperformed as rising bond yields supported margin income expectations on the group’s rate sensitive cash balances.
Detractors
• Tabcorp Holdings (TAH): underperformed over the month despite delivering continued progress post demerger. Competitors’ trading results did highlight moderation in wagering demand.
• Scentre (SCG): underperformed during the period, following a strong move higher in bond rates. As a result of REITs’ high correlation with bonds due to their duration and pricing, the entire sector finished lower.
• Commonwealth Bank of Australia (CBA, no holding): outperformed in line with global banking exposures as steeping yield curves supported the outlook for financial stocks.
The S&P/ASX 200 Total Industrial Return Index was down 3.63% during the period. Financials (-1.7%) was the best performing sector, as a shifting outlook towards higher rates could see benefits to margins in the near term (ANZ Group Holdings (ANZ +1.3%), QBE Insurance Group (QBE +4.9%). Consumer Staples (-2.2%) also outperformed, as investors sought safety in defensive earnings streams (Woolworths Group (WOW -2.1%), Coles Group (COL -2.5%)). A-REIT’s (-8.7%) were the worst performing sector, with a strong move higher in bond yields leading to a broad-based sell off in duration assets (Goodman (GMG -8.2%), Scentre (SCG -10.6%)). Information Technology (-8.0%) also underperformed, similarly impacted by the moves in the bond market which impacts the present value of their growing, future cash flows (Wisetech Global (WTC -6.3%), Xero (XRO -10.1%)).
The DNR Capital Australian Equities Income Portfolio outperformed its benchmark for the period. Key stock contributors were QBE, Beach Energy (BPT) and Computershare (CPU). Key stock detractors were Tabcorp Holdings (TAH), Scentre (SCG) and Commonwealth Bank of Australia (CBA, no holding). The Portfolio’s dividend yield expectation for CY2023 is currently 5.10% (6.60% grossed up for franking credits)
What is DNR Capital Australian Equities Income DNR Capital Australian Equities Income is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic 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 DNR Capital Australian Equities Income has Assets Under Management of 1.48 M with a management fee of 0.9%, a performance fee of 0.00% and a buy/sell spread fee of 0.5%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the DNR Capital Australian Equities Income has returned 6.57% in the last month. The previous three years have returned 9.96% annualised and 14.73% each year since inception, which is when the DNR Capital Australian Equities Income 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 DNR Capital Australian Equities Income first started, the Sharpe ratio is 1.14 with an annualised volatility of 14.73%. The maximum drawdown of the investment product in the last 12 months is -8.2% and -8.2% 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 DNR Capital Australian Equities Income has a 12-month excess return when compared to the Domestic Equity - Large Value Index of -2.41% and 1.65% 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. DNR Capital Australian Equities Income has produced Alpha over the Domestic Equity - Large Value Index of -0.22% in the last 12 months and 0.09% since inception.
What are similar investment products?
For a full list of investment products in the Domestic Equity - Large Value Index category, you can click here for the Peer Investment Report.
What level of diversification will DNR Capital Australian Equities Income provide?
DNR Capital Australian Equities Income has a correlation coefficient of 0.94 and a beta of 1.05 when compared to the Domestic 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 DNR Capital Australian Equities Income and its peer investments, you can click here for the Peer Investment Report.
How do I compare the DNR Capital Australian Equities Income with the ASX Index 200 Index?
For a full quantitative report on DNR Capital Australian Equities Income compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the DNR Capital Australian Equities Income to do my own analysis?
To sort and compare the DNR Capital Australian Equities Income financial metrics, please refer to the table above.
Has the DNR Capital Australian Equities Income 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 DNR Capital Australian Equities Income?
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Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the DNR Capital Australian Equities Income. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - August 31, 2023 The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Total Return Index by 0.24% in August. The Portfolio’s dividend yield expectation for 2023 is currently 4.99% (6.60% grossed up for franking credits).
Performance Commentary - July 31, 2023 The DNR Capital Australian Equities Income Portfolio underperformed the S&P/ASX 200 Industrials Total Return Index by 0.12% in July. The Portfolio’s dividend yield expectation for 2023 is currently 4.98% (6.60% grossed up for franking credits).
Contributors
• Beach Energy (BPT): outperformed during the period as global energy prices rose and the company reported a strong quarter of price realisation, beating estimates. Energy prices have recovered from recent lows as recent OPEC+ cuts begin to bite and Russian over-production slows from historic levels.
• SEEK (SEK): with softer-than-expected inflation prints in the USA and Australia, investors are more hopeful of a soft landing and this supported the outperformance of cyclicals.
• Lendlease (LLC): outperformed on no stock specific news. Management continues to make incremental progress towards its stated 2024 return targets with a sharpened focus on executing the existing development backlog of over $100bn.
Detractors
• Commonwealth Bank of Australia (CBA, no holding): banks bounced in July as the outlook for bad debts improved and some signs of easing competition.
• Aurizon Holdings (AZJ): released a new strategy of pursuing a land-bridge operation at Darwin Port to capture a portion of the container freight market (currently primarily delivered to the east coast ports), which will result in upfront capex, however with limited visibility on earnings profile.
• Tabcorp Holdings (TAH): underperformed over the month despite delivering continued progress post The Lottery Corporation demerger. Competitors’ trading results did highlight a normalisation in digital wagering turnover post the easing of lock downs.
Performance Commentary - June 30, 2023 The DNR Capital Australian Equities Income Portfolio underperformed the S&P/ASX 200 Industrials Total Return Index by -1.60% in June. The Portfolio’s dividend yield expectation for 2023 is currently 0.06% (0.00% grossed up for franking credits).
The S&P/ASX 200 Industrials Total Return Index was up 0.73% during the period. Information Technology (+3.5%) was the best performing sector, following the lead of US peers who continued the AI-optimism-led run (Wisetech Global (WTC) +6.7%, Xero (XRO) +8.2%).
Financials (+3.1%) also outperformed, with insurers and market-beta exposed companies leading the sector (QBE Insurance (QBE) +7.2%, Macquarie Group (MQG) +4.0%). Health Care was the worst performing sector (-6.6%), primarily due to a slower-than-expected recovery in FY24 margins for sector heavyweight CSL -9.5%. A-REITs also underperformed (-1.6%), with their bond-proxy nature seeing them trade lower as a more hawkish US Federal Reserve (Fed) pushed rates higher (Scentre (SCG) -2.2%, Stockland (SGP) -2.0%).
Performance Commentary - May 31, 2023 The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Total Return Index by 0.77% in May. The Portfolio’s dividend yield expectation for 2023 is currently 4.9% (6.5% grossed up for franking credits).
The S&P/ASX 200 Industrials Total Return Index was down 2.01% during the period. Information Technology (+11.6%) was the best performing sector, following the lead of US peers who rallied significantly due to hype surrounding Artificial Intelligence (AI) advances (WiseTech Global (WTC) +9.2%, Xero (XRO) +17.8%).
Utilities (+1.1%) also outperformed, with AGL Energy (AGL) (+13.1%) benefitting from increasing electricity prices and implicit earnings upgrades. Consumer Discretionary (-6.2%) was the worst performing sector as cracks in spending finally started to appear following a tightening of financial conditions. Financials (-4.8%) also underperformed, with mounting economic pressures weighing on the banks (Commonwealth Bank of Australia (CBA) -2.6%, Westpac Banking Corporation (WBC) -4.9%), who are vulnerable to earnings shocks after operating with record-low bad debts.
Macro volatility and commentary continues to be a significant driver of equity markets as concerns lingered around US lawmaker’s intentions on the country’s debt ceiling during May.
The hallmarks of equities in 2023, i.e., growth over value and concentration of mega-cap tech, were on show again with the NASDAQ up +5.8%, while the equalweighted S&P 500 fell -4.0%. The key driver is optimism about the earnings potential of Artificial Intelligence (AI).
Performance Commentary - April 30, 2023 The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Total Return Index by 0.29% in April. The Portfolio’s dividend yield expectation for 2023 is currently 4.2% (5.5% grossed up for franking credits).
Contributors
• Commonwealth Bank of Australia (CBA, no holding): has modestly underperformed on no news but following a period of outperformance.
• TPG Telecom (TPG): Telstra put through large price increases on its prepaid plans during the month, giving the market increased confidence that it will also raise prices on its post-paid plans in line with recent inflation, indicating the mobile industry remains rational and open to future price increases.
• IPH (IPH): the company updated the market about its recent cyber-breach, indicating minimal client impact and that no data from IPH’s document management system was compromised (where sensitive pre-filing patent information lies). Market sentiment lifted on the news of the minimal effects on client losses..
Detractors
• The Lottery Corporation (TLC): underperformed over the month following concerns around a lack of large jackpots resulting in lower revenue. Revenue will fluctuate with jackpot sequences however, underlying trends should support continued solid growth.
• Amcor PLC (AMC): destocking trends and demand deterioration continue to be flagged by management, customers and competitors leading, to concerns about volume weakness.
• Endeavor Group (EDV): underperformed as regulatory uncertainty lingers, and Star Casino’s Gold Coast operations highlighted slowing gaming earnings in Southeast Queensland. Subsequent quarterly releases highlighted normalising gaming revenue and a return to positive retail liquor comparable sales growth.
Performance Commentary - March 31, 2023 The DNR Capital Australian Equities Income Portfolio underperformed the S&P/ASX 200 Industrials Total Return Index by 0.86% in March. The Portfolio’s dividend yield expectation for 2023 is currently 4.2% (5.5% grossed up for franking credits).
The S&P/ASX 200 Industrials Total Return Index was down 2.13% during the period. Communication Services (+1.6%) was the best performing sector. A flight to defensives saw Telstra Group (TLS +3.5%) trade higher, while REA Group (REA +13.0%) saw some support as domestic house pricing appeared to stabilise. Utilities also outperformed, with the gentailers seen as a defensive option that can grow earnings in a higher wholesale electricity price environment (AGL Energy, AGL +16.7%, Origin Energy, ORG +3.5%). A-REIT’s (-6.9%) were the worst performers as commercial real estate funding concerns surfaced following regional bank stress in the US (Goodman, GMG -5.4%, Dexus, DXS -10.9%). Financials (-5.1%) also underperformed, with banks sold off globally. Increasing bad debts, falling asset prices and a more expensive, less sticky deposit base paint a poor outlook for the sector (Commonwealth Bank of Australia, CBA -2.4%, National Australia Bank, NAB -7.6%).
Despite moderating inflation, strengthening the case for a pause in interest rate hikes, Australian equities lagged global peers. US equities were up 3.6% despite the failure of multiple US banks and concerns this could lead to weaker credit growth and bring forward the timing of a possible US recession. Offsetting these concerns was an expansion of the Federal Reserve (Fed) balance sheet as it provided liquidity support for banks. The DNR Capital Australian Equities Income strategy underperformed its benchmark over the month.
Performance Commentary - February 28, 2023 The DNR Capital Australian Equities Income Portfolio outperformed the S&P/ASX 200 Industrials Total Return Index by 0.44% in February. The Portfolio’s dividend yield expectation for 2023 is currently 3.5% (4.5% grossed up for franking credits).
The S&P/ASX 200 Industrials Total Return Index was down 0.97% during the period. As central banks continue their attempt to curb inflation, stronger than expected economic data led to expectations of higher interest rates. This led to an increase in real bond yields, which in turn, led to a decline in valuations.
Utilities (+2.3%) was the best performing sector, following an improved takeover offer presented to Origin Energy (ORG +9.4%), allaying fears that the deal would fall through. Information Technology also outperformed (+2.2%), with key constituents Computershare (CPU +5.7%) and WiseTech Global (WTC +4.1%) benefitting from higher cash rates and reporting a key customer contract, respectively. Financials (-3.8%) was the worst performing sector, with the banks reporting a weaker outlook for loan growth as well as increasing signs of stress in their loan books. Consumer Discretionary also underperformed, following some disappointing results from retailers (Harvey Norman Holdings, HVN -13.9% and JB Hi-Fi, JBH -9.5%) which highlighted a faltering consumer in housing-related categories.
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