Katana Australian Equity Fund aims to maximise risk adjusted returns to investors. The Fund is an All Opportunities, benchmark unaware, long only Australian Equity portfolio. The Katana Australian Equity fund employs a benchmark unaware, long only, Australian equity investment strategy.
Key contributors:
1. Coronado Global traded higher on the back of stronger met coal prices now back above US$320/t
2. Boss Energy rallied as uranium prices climbed to its highest level in over a decade on supply fears
3. Seven Group Holdings continued last months momentum following strong FY23 results
Key detractors:
1. CSL Ltd moved lower with the Health Care sector as surging yields put high PE stocks under pressure
2. Tietto Minerals announced a material downgrade to guided gold production following drilling results
3. Allkem Ltd provided a business update which included materially higher operating and capital costs than expected
Each month, the team tracks noteworthy macro news items. During September, there were 16 such ‘significant’ items that came across our desk; 15 of them were negative. And that in a nutshell is the story of September: the narrative (finally) turned negative.
Clearly the main driver was the breakout in US 10- year bond yields. Despite no action on the part of the US Fed (or RBA more locally), the market increased its expectations of further rate rises. And we would hasten to add that the cumulative effects of the inflation induced rate rises over the past 2 years look to be finally biting. Covid savings buffers have been eroded. Household spending is beginning to rebase. Corporate sales and earnings are coming under pressure.
Of course, all of this has taken 9 months longer to occur than we would have expected, given that markets are supposedly ‘forward looking’. The strength in the US indices (especially NASDAQ) has had us on the cusp of deploying meaningful capital in order to remain true to process. However, with the change in technical indicators, this pressure has abated for the time being. In fact, the market now looks to be oversold, and additionally October usually signals the beginning of the strongest period each year. So we would not be surprised to see a relief rally in the coming weeks.
But when we step back from the short-term machinations, there is a large headwind facing markets: the yield on bank deposits now presents a genuine alternative to stocks. This is likely to reduce the marginal flow of funds into equities and accelerate outflows, should fear take hold.
The fund is finally receiving some reward for its cash sleeve and remains well positioned with 30% in reserve. We shall endeavour to remain faithful to both patience and process. At this juncture we would expect to exit October with similar weightings to September
What is Katana Australian Equity Fund Katana Australian Equity Fund is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Absolute 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 Katana Australian Equity Fund has Assets Under Management of 0.00 M with a management fee of 1.64%, a performance fee of 0.00% and a buy/sell spread fee of 0%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the Katana Australian Equity Fund has returned 4.77% in the last month. The previous three years have returned 9.28% annualised and 13.74% each year since inception, which is when the Katana Australian Equity Fund 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 Katana Australian Equity Fund first started, the Sharpe ratio is 0.56 with an annualised volatility of 13.74%. The maximum drawdown of the investment product in the last 12 months is -6.89% and -26.64% 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 Katana Australian Equity Fund has a 12-month excess return when compared to the Domestic Equity - Absolute Return Index of -1.58% and 1.25% 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. Katana Australian Equity Fund has produced Alpha over the Domestic Equity - Absolute Return Index of -0.38% in the last 12 months and -0.12% since inception.
What are similar investment products?
For a full list of investment products in the Domestic Equity - Absolute Return Index category, you can click here for the Peer Investment Report.
What level of diversification will Katana Australian Equity Fund provide?
Katana Australian Equity Fund has a correlation coefficient of 0.94 and a beta of 1.62 when compared to the Domestic Equity - Absolute 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 Katana Australian Equity Fund and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Katana Australian Equity Fund with the ASX Index 200 Index?
For a full quantitative report on Katana Australian Equity Fund compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the Katana Australian Equity Fund to do my own analysis?
To sort and compare the Katana Australian Equity Fund financial metrics, please refer to the table above.
Has the Katana Australian Equity Fund 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 Katana Australian Equity Fund?
How do I get in contact with the Katana Australian Equity Fund?
Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the Katana Australian Equity Fund. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - August 31, 2023 Key contributors:
1. Megaport Ltd provided FY24 EBITDA guidance which beat analyst expectations and increased confidence in the product proposition
2. Wesfarmers Ltd released FY23 results which reaffirmed the resilience of Bunnings and Kmart
3. Altium Ltd FY23 results came in slightly ahead of expectations on customer wins and revenue guidance
Key detractors:
1. ResMed missed on FY23 earnings with gross margin recovery now expected to be a multi-year process
2. Elders Ltd lowered their full year EBIT guidance following weaker sales and product margins
3. Ramsay Health disappointed on FY23 earnings driven by high interest rates and inflationary cost pressure
August was a strong month for the fund on a relative basis, reporting a positive return despite the market declining -0.74%. The overweight cash position together with some excellent stock selection generated both top down and bottom up alpha. This was despite the strong performance in the consumer discretionary sector, in which the fund continues to hold a pronounced underweight position.
Whilst the index declined in August and may also in September, the reality is that we are heading into the seasonally strong period of the year. And reality is the key word here. Because this market has not acted as the vast majority of professional investors forecast. And some of the recent headwinds will soon reverse. For example China – which arguably generated, or at the very least accentuated, the current bout of inflation due to Covid lockdowns – is on the cusp of exporting deflation. In all reality, we are on the cusp of peak inflation and hence peak interest rates.
Yes, the laggard effect of monetary policy is yet to bite. But if it doesn’t impact share prices soon, then by the time it is actually being felt in the real world, the market may already be looking through the earnings abyss to the recovery on the other side.
Performance Commentary - July 31, 2023 Key contributors:
1. Megaport Ltd upgraded their EBITDA guidance for both FY23 and FY24, and confirmed they’re now cash flow positive
2. Beach Energy Ltd beat production expectations in Q4 and is a beneficiary of rising east coast gas prices
3. Mach7 Technology announced a major contract win which includes expansion into the US Veterans Affairs contract – the largest in the US
Key detractors:
1. CSL Ltd failed to bounce from last months disappointing update. Health Care was also the weakest sector for the month of July
2. IGO Ltd announced a A$880-980m impairment to the valuation of the Western Areas assets driven by rising costs
3. Allkem Ltd released good production figures for Q4 but disappointed on sales as realised prices were below guided levels
Performance Commentary - June 30, 2023 Key contributors:
1. Delta Lithium announced positive drilling results at their Yinnetharra and Mt Ida Lithium Projects
2. Coronado Global bounced from an oversold position as the decline in Met coal prices found support
3. Allkem Ltd provided an update on their Ore Reserve confirming a 34% increase to 7.8Mt
Key detractors:
1. CSL Ltd provided a trading update which included underwhelming FY24 guidance pointing to tougher conditions
2. Regis Resources followed the Gold price lower and announced a 13% decline in their Reserves
3. Beach Energy abandoned their plans for drilling the Trigg 1 and 2 Projects following weak test results
Performance Commentary - May 31, 2023 Key contributors:
1. Allkem Ltd entered a merger agreement with Livent Corp valuing the combined company at over $10bn
2. Delta Lithium announced thick, high grade lithium results from their Yinnetharra project
3. Megaport Ltd rose as investors scramble to find ASX exposure for the growing AI thematic
Key detractors:
1. Coronado Global followed coal prices lower, Coking coal prices have more than halved over the past year
2. Mineral Resources continued last month’s selling following a disappointing Q3 result and investor concern on the direction of lithium prices
3. Mach7 Technologies followed the downward move of other small cap healthcare companies
Performance Commentary - April 30, 2023 Key contributors:
1. Genesis Minerals announced the acquisition of St Barbara’s Leonora assets neighbouring their current assets in Western Australia
2. Megaport Ltd announced they expect EBITDA in FY23 and FY24 to be materially above market expectations driven by various initiatives
3. CSL Ltd bounced with the broader healthcare sector and also ran a European investor tour
Key detractors:
1. Mineral Resources delivered a below consensus March quarterly & lithium prices also continued to decline throughout the month
2. Elders Ltd earnings expectations likely to come under pressure from lower livestock and fertilizer prices
3. Seven West Media downgraded their outlook for the TV and advertising market
The market continued its upward trajectory in April, with all sectors rising except Materials (down 2.6%). Interest rate sensitive stocks in sectors such as AREITS and Technology were the best performers. Most likely predicated on the belief that rate rises have largely run their course. KAEF’s high cash balance and overweight Materials exposure provided a drag on performance. However strong stock selection once again enabled the fund to all but match its benchmark net of fees.
For near on 9 months, we have seen liquidity and the economic fundamentals continue to deteriorate, whilst at the same time, sentiment has improved. Clearly this dichotomy cannot persist indefinitely. One of the 2 opposing positions must yield.
During this period, the fund has adopted a cautious stance. Whilst the fund has still out-performed during this period, it has not out-performed by as much, given the high cash weighting.
Performance Commentary - March 31, 2023 Key contributors:
1. Liontown Resources received a takeover offer from Albemarle valuing the shares at more than a 60% premium
2. Resolute Mining benefitted from a record gold price reaching just shy of A$3,000/oz
3. Regis Resources received final approval from the planning commission for McPhillamys and also benefitted from a strong gold price
Key detractors:
1. Megaport Limited saw selling following the surprise resignation of its CEO Vincent English
2. Coronado Global traded lower with softer met coal prices
3. Macquarie Group followed the rest of the banking sector lower as the Silicon Valley Bank collapse sparked concerns on the health of the sector.
For much of March, the market was moving according to our base case as it plunged nearly 4% on the back of the Silicon Valley Bank panic. However, as the regulatory response came riding to the rescue, the market rapidly rebounded to close out the month almost square.
This of course is the danger in the current market. The positioning is universally bearish. For example, a report last week by Bank of America showed that 40% of US Fund Managers are overweight cash and an even higher 50% are underweight US equities. So the price swings lower do not have strong momentum, as investors are already positioned to the downside.
Performance Commentary - February 28, 2023 Key contributors:
1. Aristocrat Leisure rallied on news NSW pokies might go cashless, they also completed their acquisition of Roxor Gaming and increased their buyback.
2. Seven Group Holdings beat expectations in their 1H23 results driven by WesTrac and Coates, full year guidance was also upgraded
3. Bank Of Queensland – rose on rumours of a potential merger with Bendigo Bank
Key detractors:
1. Mineral Resources fell on weaker than expected 1H23 results and softening spot lithium prices, the outlook remains strong
2. Domino’s Pizza disappointed in their 1H23 result with sales falling short of expectations, they also reduced full year guidance
3. Allkem Ltd downgraded their full year production guidance as they continue grade control drilling at Mt Catt.
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