K2 Select International Absolute Return (ETL0046AU) Report & Performance

What is the K2 Select International Absolute Return fund?

K2 Select International Absolute Return aims to deliver superior risk adjusted returns through the investment cycle. Our target return is 10+% p.a. over the long term. The company actively invest in equities when growth opportunities exist to generate positive returns for our clients, and aim to protect these gains when market conditions change.

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For K2 Select International Absolute Return

K2 Select International Absolute Return Fund Commentary December 31, 2022

The          K2         Select         International         Fund         returned         -4.06%         for         the         month outperforming the index by +0.8% in December. Markets      were      broadly     weaker     in     December     following     strong     gains     from the      one-year      lows      in      October.      A      combination      of      compelling     valuations combined      with      the      prospect      cash      rates      will     not     rise     as     high     as     initially anticipated    by    bond    markets    were    key    drivers    for    the    risk   on   sentiment   to help       drive       equity       markets      higher      from      September      to      early      December.

Further,     consistent     early    signs    of    lower    inflation    inputs    from    PMI    surveys indicated that the worst of inflation is now behind us. We      view      2023      as      a      less      volatile      year      compared      to      the     previous     year. There      appears      to     be     more     predictability     with     regard     to     monetary     policy and     the     slowdown    in    economic    conditions    and    earnings    has    been    priced in.     There     will     be     challenges     however     the    US    labour    market,    households and     corporates     remain     in     reasonable     condition     despite     the     rapid     rise    of the Fed Funds target rate to 4.25%-4.5%. There     is     a    degree    of    resilience    to    the    world’s    largest    economy    which    will position       their       economy       well       to       deal       with       the       earnings       and      economic downgrades       later       this       year.      Looking      through      2023      we      believe      current valuations     remain     reasonable.    

A     Fed     Funds     target     rate     of     5%-5.25%     is our     core     view     with    a    low    in    the    earnings    cycle    in    the    September    quarter. The       opening       up       of       the       China       economy       following       years       of      persistent lockdowns will be a net positive for global growth this year. New Investment Manager appointment: On        9        January        2023        the        board        of        K2        Asset        Management        Ltd       (K2) announced      a      partnership     with     GAM     International     Ltd     (GAM)     to     take     on the      role     of     investment     manager     of     the     K2     Select     International     Absolute Return         Fund.         With         over         35         years’         experience         GAM         is         an        active, independent     global     manager     that     is    headquartered    in    Zurich    with    offices across       14       countries       and      collectively      manage      over      AUD      100      billion      in assets. This     is     an     exciting    opportunity,    and    we    are    pleased    to    be    able    to    partner with     such     a     large     global     and     high-quality     manager     that     has     delivered     a strong    track    record.    Facilitating   successful   best-of-breed   global   managers for this fund ultimately benefits Australian investors.


Product Snapshot

  • Product Overview
  • Performance Review
  • Peer Comparison
  • Product Details

Product Overview

Fund Name APIR Code
? A Product Code is unique a identifier code issued by a group or governing body, to reference products in a large group. For an example, APIR codes are commonly used for Funds and Ticker codes are commonly used for Securities such as ETFs and Stocks.
Asset Class
? An Asset Class breakdown provides the percentages of core asset classes found within a mutual fund, exchange-traded fund, or another portfolio. Asset classes (in microeconomics and beyond) generally refer to broad categories such as equities, fixed income, and commodities.
Asset Category
? An Asset Category is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset categories (or a sub-asset class) are made up of instruments which often behave similarly to one another in the marketplace, looking down to the Asset Category level is important if looking to build a diversified portfolio.
Peer Benchmark Name
? A Peer Index (benchmark) refers to a peer group of investment managers who have the same investment style or category. It is used to compare the performance of one manager to their peer group, which makes it simpler for investors to choose between the vast number of investment managers.
Broad Market Index
? A Market Index (benchmark) refers to a hypothetical portfolio of investments that represents a segment, asset or category of an investable market. Market Indices are used to benchmark managers performance, to assist their style reliability and ability to provide excess returns.
? Funds/Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company.
Management Fee
? A management fee is a charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise for selecting finanical products and managing the portfolio.
Performance Fee
? A performance fee is a payment made to an investment manager for generating positive returns. This is as opposed to a management fee, which is charged without regard to returns. A performance fee can be calculated many ways. Most common is as a percentage of investment profits, often both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.
? A spread can have several meanings in finance. Basically, however, they all refer to the difference between two prices, rates or yields. In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity. This is known as a bid-ask spread.
K2 Select International Absolute ReturnETL0046AUManaged FundsForeign EquityLong ShortForeign Equity - Long Short IndexDeveloped -World Index15.86 M1.36%0.68%0.5%

Performance Review

Fund Name Last Month
? Returns after fees in the most recent (last) month).
3 Months Return
? Returns after fees in the most recent 3 months.
1 Year Return
? Trailing 12 month returns.
3 Years Average Return
? Average Annual returns from the last 3 years.
Since Inc. Average Return
? Average (annualised) returns since inception
1 Year Std. Dev. (Annual)
? The standard deviation (or annual volatility) of the last 12 months.
3 Years Std. Dev. (Annual)
? The average standard deviation (or annual volatility) from the last 3 years.
Since Inc. Std. Dev. (Annual)
? The average standard deviation (or annual volatility) since the fund inception.
1 Year Max Drawdown
? The maximum drawdown in the last 12 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
3 Year Max Drawdown
? The maximum drawdown in the last 36 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Since Inc. Max Drawdown
? The maximum drawdown since inception - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
K2 Select International Absolute Return4.81%5.2%19.16%3.8%8.05%9.72%14.25%12.32%-4.06%-29.62%-30.44%

Peer Comparison

Fund Name Peer Index Name
? A group of individuals who share similar characteristics and interests are called peer groups. Peer group analysis is an essential part of assessing a price for a particular stock in investment research. The emphasis here is on making a comparison, meaning that the peer group constituents should be more or less identical to the company being examined, especially in terms of their main business and market capitalization areas.
12 Months Excess Return
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
Excess Return Annualised Since Inception
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
12 Months Alpha
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over 12 months. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
Alpha Annualised Since Inception
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market annualized since inception. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
12 Months Beta
? Rolling 12Month Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
Beta Annualised Since Inception
? Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
12 Months Tracking Error
? 12Month Tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark over the last 12 months. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
Tracking Error Since Inception
? Since Inception tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark since inception. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
12 Months Correlation
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Correlation Since Inception
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
K2 Select International Absolute ReturnForeign Equity - Long Short Index9.34%-1.03%0.7%-0.07%-0.07%1.156.54%7.52%0.770.79

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
K2 Select International Absolute ReturnYes-https://www.k2am.com.au/-

Product Due Diligence

What is K2 Select International Absolute Return

K2 Select International Absolute Return is an Managed Funds investment product that is benchmarked against Developed -World Index and sits inside the Foreign Equity - Long Short 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 K2 Select International Absolute Return has Assets Under Management of 15.86 M with a management fee of 1.36%, a performance fee of 0.68% 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 K2 Select International Absolute Return has returned 4.81% in the last month. The previous three years have returned 3.8% annualised and 12.32% each year since inception, which is when the K2 Select International 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 K2 Select International Absolute Return first started, the Sharpe ratio is 0.44 with an annualised volatility of 12.32%. The maximum drawdown of the investment product in the last 12 months is -4.06% and -30.44% 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 K2 Select International Absolute Return has a 12-month excess return when compared to the Foreign Equity - Long Short Index of 9.34% and -1.03% 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. K2 Select International Absolute Return has produced Alpha over the Foreign Equity - Long Short Index of 0.7% in the last 12 months and -0.07% since inception.

What are similar investment products?

For a full list of investment products in the Foreign Equity - Long Short Index category, you can click here for the Peer Investment Report.

What level of diversification will K2 Select International Absolute Return provide?

K2 Select International Absolute Return has a correlation coefficient of 0.79 and a beta of 1.15 when compared to the Foreign Equity - Long Short 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 K2 Select International Absolute Return and its peer investments, you can click here for the Peer Investment Report.

How do I compare the K2 Select International Absolute Return with the Developed -World Index?

For a full quantitative report on K2 Select International Absolute Return compared to the Developed -World Index, you can click here.

Can I sort and compare the K2 Select International Absolute Return to do my own analysis?

To sort and compare the K2 Select International Absolute Return financial metrics, please refer to the table above.

Has the K2 Select International 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 K2 Select International Absolute Return?

If you or your self managed super fund would like to invest in the K2 Select International Absolute Return please contact via phone or via email .

How do I get in contact with the K2 Select International Absolute Return?

If you would like to get in contact with the K2 Select International Absolute Return manager, please call .

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the K2 Select International Absolute Return. All data and commentary for this fund is provided free of charge for our readers general information.

Historical Performance Commentary

Performance Commentary - November 30, 2022

The         K2         Select         International         Fund         returned         +6.86%         for        the        month outperforming    the    index    by    4.0%    in    November.    The    strong   risk   on   market sentiment     that     began     in     early     October     continued     through     to    month-end. There         have         been         a         number         of         leading         indicators        that        have        been supportive     for     markets     which     have     rallied     strongly     from    the    recent    lows. Peaking    US    bond    yields    combined    with    some   lower   partial   inflation   inputs have generally been positive for risk assets. The    recent    market    rally    needs    to   be   put   in   context   as   performance   year   to date    has    been    very    volatile   following   the   most   aggressive   US   Fed   interest rate    hike    cycle    since    the    early    1980’s.    Further,    there    will    be    some   lagged effects     impacting     the     economy     well     into    next    year.    The    tighter    monetary policy        has        been        effective.        There        have       been       clear       signs       of       demand destruction     in     the     US     economy     following     the     aggressive     rate     hike    cycle combined          with          Quantitative          Tightening          (QT).          

Earnings          have         been downgraded      over      the      year     in     line     with     lower     growth     pulse.     Despite     the earning         pressure        some        sectors        have        performed        well.        This        includes energy,    financials    and    industrials.    For    the    year   ahead   it   is   anticipated   that the     pace     of     aggregate     earnings     downgrades     will     slow.    Looking    forward, signs     of    economic    slowdown    will    continue    to    be    viewed    as    positive    news for markets as this suggests cash rate reaching their peak for the cycle. The     Fed     commentary     however     will     remain    hawkish.    This    will    be    at    odds with      softening      signs      of      economic      activity.     The     Fed     simply     needs     to     be convinced       the       inflation      threat      is      addressed.      Despite      their      commentary bond     markets     are     beginning     to     price     in     a     5.25%-5.5%     Fed     Funds     Rate and    the    long    bond    yields   are   already   starting   to   fall   from   their   highs   earlier this     year.     The     cure     inversion     is     currently     suggesting     that     the    tough    Fed narrative of further rate hikes may not eventuate. The     slow     opening     of     the    economy    in    China    will    be    a    key    contribution    for global       growth       in       2023.      

The       best       form       of       stimulus       is       simply      allowing economies    to    reopen.    This    should    lead    to   the   long   repair   in   the   very   weak consumer      and      business      sentiment      in      China      following      such      aggressive lock down polices. In Europe, the economic challenges remain amplified. The     portfolio     cash     position     is     3%     at    month-end    compared    to    15%    in    the June      quarter.     We     continue     maintain     underweights     to     emerging     markets and    the    EU    region.    Some    of    the    best    performing    holdings    for    the    Fund   in November include BHP, Rio, Judo Capital, Macquarie and Glencore.

Performance Commentary - October 31, 2022

The     K2     Select     International     Fund    returned    +3.56%    for    the    month.   

Some risk        appetite        began        to        re        surface        in        October       from       global       investors. However,    it    has    been    undeniably    a    volatile    year    to    date    as    markets    have continued       to       adjust       to       the       persistent      robust      pace      of      tighter      monetary policy. The    recent    US    quarterly   reporting   period   illustrated   that   US   earnings   have been      resilient      but      slowing.      Further,      various      partial      economic     indicators have    clearly    exhibited    a    slower    economic   pulse   compared   to   the   previous quarter      and      earlier      this      year      when      the      US     economy     was     growing     at     a rapid     pace     following     two    years    of    stimulus.    The    notable    spike    in    inflation data over the past year has reinforced the dilemma central banks face. The       momentum       of       Fed       Rate       hikes       has       been       the      quickest      in      over      a generation.       

 The         current         US         rate         hike         pace         is         well         ahead         of        the comparable     inflation     risk    periods    of    1994    and    1983,    which    reinforces    the inflation       concern       from       the       Fed       Chair       Powell.       The       jumbo       0.75%       rate increases     have     continued     this    year    taking    the    Fed    Funds    Rate    to    3.25% (upper       band)       from       near       zero       earlier       this       year.       In       the      early      Nov      Fed Meeting     rates     are     expected    to    move    another    0.75%    to    take    the    effective Fed    Funds    Rate    to    4%.    We    view    that   a   4.75%-5%   Fed   Funds   Rate   would be an appropriate pause level and this would be positive for markets. Combined     with    the    Quantitative    Tightening    (QT)    the    Fed    has    engineered a      very      aggressive      restrictive      monetary      policy      to      address      inflation.     The demand      destruction      in      the      most      robust      global      economy     has     started     to show.     At     the     margin,     this    adds    some    more    predictability    that    we    may    be approaching     a     pause     in     rate     hikes     soon.         

This     should     lead     to     the     USD strength pausing which will be a relief for many emerging economies. The     portfolio     cash     position     is     4%     at    month-end    compared    to    15%    in    the June      quarter.     We     continue     maintain     underweights     to     emerging     markets and    the    EU    region.    Some    of    the    best    performing    holdings    for    the    Fund   in October         include         Stanmore         Resources,         Netflix,         Macquarie        and        Kina Securities.

Performance Commentary - September 30, 2022

The        K2        Select        International       Fund       returned       -8.79%       for       the       month       in another     volatile     month.     Global     equity     markets     have     had     a     difficult     year.

Markets remain volatile and the uncertainty persists. The    US    Fed    increased    the    Fed    Funds    rate    by    a    further   75   basis   points   at the       FOMC       Meeting       in       late       September.       This      now      takes      the      rate      to      a restrictive       3%-3.25%       target       (lower       and       upper       band).       Interestingly      the pace    of    US    rate    hikes    in    the    current    cycle    have    now   increased   at   a   faster pace       compared       to       the      previous      aggressive      rate      hike      periods      of      1994 (Greenspan)     and     1983     (Volker)     periods.     The     commentary     from     the    Fed Chair     have    continued    to    reinforce    their    hawkish    comments.    This    remains a           challenge           for           investor           sentiment.           The          pace          of          the          slowdown year-to-date      to      address      inflation      risks      has      been     painful     and     felt     by     the market       performance       including       defensive       asset       classes       such       as       fixed income. In     addition     to     the     US     interest    rate    hike,    restrictive    quantitative    tightening (QT)      is     also     underway     effectively     slowing     credit     growth     and     contracting the       money       supply.      

Further,       the       strength       of       the       USD      this      year      vs      all currencies    assists    the    Fed    as    a   strengthening   currency   is   less   inflationary for       the       economy.       However,       the       strength      of      the      USD      has      acted      as      a wrecking      ball      delivering      plenty      of      economic      pain      for      many     economies, including emerging economies with USD liabilities. Inflation      risks      look      set      to      persist     despite     the     view     that     peak     inflation     is behind    us    Getting    core    inflation    back    towards    the    2%-3%   targets   in   many western       economies      remains      a      challenge.      Pricing      in      rate      cuts      remains pre-mature    and    the    record    low    ”near    zero”    rate   settings   of   the   recent   past will       not       return       anytime      soon.     

Despite      the      many      challenges,      there      are some         positives         that         indicate         the         economy         can         absorb         the        painful monetary    setting    although    some    sectors   and   households   will   be   impacted more      than      others.      Aggregate      corporate      earnings      and      credit      conditions remain       positive,       household       savings       remain       high       (but       falling)       and      the labour    market    remains    robust.    The   outlook   will   however   remain   uncertain. Hence valuations remain compelling. The    portfolio    cash    position    is    lower   at   around   2%   at   month-end   compared to    15%    last    quarter.    Some    of    the    best    performing   holdings   for   the   Fund   in the    September    quarter    include    Netflix,    Summerset,   Stanmore   Resources, Cohen & Steers and US Bancorp.

Performance Commentary - August 31, 2022

The    K2    Select    International    Fund    returned    -2.2%    for   the   month.   Financial markets         continue         to         exhibit        ongoing        volatility        due        in        part        to        some uncertainty with monetary policy settings going forward.

The         direction        of        interest        rate        settings        and        the        ongoing        quantitative tightening      (QT)     in     the     US     has     some     obvious     implications     for     valuations and        investor        sentiment.        Markets       are       always       searching       for       additional clarity.     The     commentary     and     guidance     from     the    Federal    Reserve    needs to     be     reconciled     with     the    underlying    economic    data    to    better    understand future       policy       settings       and      risks.      As      inflation      pressures      persist,      market expectations    are    for    the    Fed    to    raise    rates    by    a    further    75    basis    points   at the     upcoming     FOMC     Meeting     in     late     September.     This     will     take     the    Fed Funds     Rate     to     restrictive     range     at     3.25%     (upper     bound     target)    from    the current 2.5%. While     it     is     reasonable    to    suggest    that    peak    inflation    is    behind    us,    getting core          inflation          back          towards          the          2%-3%         targets         in         many         western economies    looks    some    way    off.    Inflation    may    be    falling    in   the   year   ahead however       it       looks       likely       it       will       remain       elevated       compared       to       long       run averages.       This      suggests      that      cash      rates      will      be      restrictive      for      a      short period     ahead     and     investors    will    need    to    be    comfortable    that    markets    will not     see     sub     2%     cash     rates     anytime     soon.    

The     ultra-low     near     zero     rate settings     of     the     recent     past     will     be     viewed     going     forward     as     sub-optimal policy with the benefit of hindsight. Despite     the    higher    rate    outlook,    aggregate    corporate    earnings    and    credit conditions     remain     positive     (but     slowing),    household    savings    remain    high (however    falling    from    cycle    highs)    and    the    labour    market    remains    strong. The    uncertainty    remains    going    forward    however    we    anticipate    cash   rates to      peak      by      year-end.      This      should      be      supportive      for      the      economy     and earnings      outlook.      Further,      valuations      remain     compelling     and     are     set     to remain so until there is further clarity on the interest rate front. The      K2      Select      International      Fund      continues      to      have      a      USD      exposure currency        hedge        in        place        which       will       benefit       from       a       rising       AUD.       The portfolio    cash    position    is    lower    at    6.3%    at    month-end    compared   to   15%   a month    earlier    as    we    take    advantage    of   compelling   valuations   in   August   to reinvest      additional      cash.      Some      of      the     best     performing     holdings     for     the Fund     this     month     were     PeopleIn,     Macquarie     Group,     News     Corp,     Ryman Health and Netflix

Performance Commentary - July 31, 2022

The K2 Select International Fund returned +5.0% for the month. The market recovery was a function of a number of different factors. The additional confirmation of good US earnings, reasonable underlying economic conditions combined with cheap valuations, all helped improve investor sentiment. Looking forward, there will continue to be some ongoing uncertainty with regard to the pace of tighter monetary policy. The monthly flow of economic data will help markets build a better picture of the economic and therefore earnings momentum. Despite the tighter monetary policy by developed market central banks globally, the pace of earnings growth and the tight labour market remain robust.

They do not exhibit recessionary levels as some other indicators suggest. The ongoing uncertainty for markets regarding the pace of US rate hikes will remain as markets look for some confirmation on lower inflation expectations. It would be reasonable to conclude that we are close to peak inflation. This is a positive for market sentiment going forward. The pace of rate hikes from the US Fed has been robust year to date as they have signalled to the market the need to address inflation expectations and slow down the robust momentum of the US economy. The Fed Funds rate is anticipated to approach 3.5% by year-end and each Fed Fund move will be data dependent. The Fed is no longer behind the curve and price stability is their primary focus. There are a number of underlying positives. Credit conditions, corporate balance sheets, tight labour market, lower energy prices and household savings in the key developed economies remain in good aggregate condition. This was confirmed with some recent economic data and quarterly earnings. Some key risks are the elevated geo-political concerns between China and the west, uncertainty of peak inflation, ongoing supply chain disruptions and corporate costs.

The K2 Select International Fund continues to have a USD exposure currency hedge in place which will benefit from a rising AUD. We view the peak USD strength in the June quarter is the peak in the cycle. The portfolio cash position was 15% reflecting a cautiously optimistic outlook. Some of our largest weightings include Microsoft, VISA, Macquarie, Rio, Toronto Dominion Bank and JP Morgan. Some of the best performing holdings for the Fund this month were MA Financial, Microsoft, Macquarie, VISA, Summerset Group and Netflix

Performance Commentary - June 30, 2022

In a volatile global equity market in June, the K2 Select International Fund returned -11.91% for the month. The first half 2022 performance in global equities was one of the worse in many decades as markets continued to adjust to the uncertainty with regard to the pace of tighter monetary policy combined with slowing economic momentum.

The US Fed has increasingly signalled to the market the need to increase rates rapidly from the historical lows seen in 2021. The aim for the Fed is to create the required capacity within the economy to address inflation concerns without going into recession. Price stability is their primary focus as the alternative is sub-optimal. The heightened uncertainty for markets year-to-date remains primarily with the slowing economic pulse, rising inflation expectations and the aggressive forecasts of higher US cash rates. The subsequent increase in market volatility and the prospect of a US recession has weighed on sentiment whereby valuations have now become very compelling compared to long-run historical benchmarks. The discount to the price of future earnings has been very aggressive this year and we believe this is overdone. Going forward, we look for the upcoming US quarterly reporting season in July to confirm the pace of the earnings slowdown.

Performance Commentary - April 30, 2022

The K2 Select International Fund returned -3.0% for the month. April was a volatile month for global equity markets.

The increased currency volatility and fall in the AUD late April reinforced market uncertainty with US policy settings. We continue to take the view that support for commodities will remain into year end and subsequent strength in commodity currencies will result. The Fund maintains a hedging strategy that provides some capital protection against a rising AUD.

Uncertainty for markets continued due to ongoing concerns with rising inflation expectations and the implications for US rates. Central bank communication is important for markets and the US Fed has continued to reinforce tighter monetary policy settings ahead from the recent historical lows in rates. This follows their policy pivot in late 2021 as inflation risks continued to build.

The Fed increased rates by 50 basis points to 1.0% (upper band) at their May meeting and flagged to the market that additional 50 basis point rates hikes at their upcoming June and July meetings should be anticipated. A 2.5% Fed Funds rate is the neutral long-term target and would be conducive for stable markets going forward. Getting there within a year will create some pain for markets. In addition to higher US rates, the Quantitative Tightening (QT) will also have an impact for global markets. While addressing inflation risks the US Fed ultimately aims to engineer a soft economic landing.

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