The objective of the Fund is to outperform the benchmark by 3% p.a. net of fees and expenses over rolling 5 year periods. L1 Capital uses a fundamental, bottom-up research process to identify securities with the potential to provide attractive risk adjusted returns. While this involves many stages of analysis which can occur concurrently, below is an outline of the process from stock specific research to the formation and maintenance of a portfolio.
Global equity markets had another difficult month with sharp falls driven by the rapid escalation of geopolitical tensions culminating in Russia’s attack on Ukraine as well as ongoing concerns over tighter monetary policy from central banks (NASDAQ -3.4%, S&P500 -3.1%, MSCI World -2.8%). Commodity prices saw strong upward moves as markets reacted to the potential disruption of key Russian exports.
The S&P/ASX 200 Accumulation Index rose 2.1% in February, outperforming most major developed markets, largely due to a greater weighting to energy and commodities. The strongest sectors were Energy (+8.6%), Consumer Staples (+5.6%) and Materials (+5.2%), while Information Technology (-6.6%), Consumer Discretionary (-5.0%) and Communications Services (-2.2%) were particularly hard hit.The Fund performed well over the month through broad-based stock gains primarily driven by a strong reporting season along with tailwinds from our exposure to resources.
What is L1 Capital Australian Equities Fund L1 Capital Australian Equities Fund is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Large Cap Neutral 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 L1 Capital Australian Equities Fund has Assets Under Management of 0.00 M with a management fee of 0.95%, 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 L1 Capital Australian Equities Fund has returned -1.78% in the last month. The previous three years have returned 10.14% annualised and 18.12% each year since inception, which is when the L1 Capital Australian Equities 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 L1 Capital Australian Equities Fund first started, the Sharpe ratio is 0.48 with an annualised volatility of 18.12%. The maximum drawdown of the investment product in the last 12 months is -5% and -29.34% 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 L1 Capital Australian Equities Fund has a 12-month excess return when compared to the Domestic Equity - Large Cap Neutral Index of 6.29% and -0.52% 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. L1 Capital Australian Equities Fund has produced Alpha over the Domestic Equity - Large Cap Neutral Index of 0.62% in the last 12 months and -0.11% since inception.
What are similar investment products?
For a full list of investment products in the Domestic Equity - Large Cap Neutral Index category, you can click here for the Peer Investment Report.
What level of diversification will L1 Capital Australian Equities Fund provide?
L1 Capital Australian Equities Fund has a correlation coefficient of 0.94 and a beta of 0.81 when compared to the Domestic Equity - Large Cap Neutral 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 L1 Capital Australian Equities Fund and its peer investments, you can click here for the Peer Investment Report.
How do I compare the L1 Capital Australian Equities Fund with the ASX Index 200 Index?
For a full quantitative report on L1 Capital Australian Equities Fund compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the L1 Capital Australian Equities Fund to do my own analysis?
To sort and compare the L1 Capital Australian Equities Fund financial metrics, please refer to the table above.
Has the L1 Capital Australian Equities 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 L1 Capital Australian Equities Fund?
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Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the L1 Capital Australian Equities Fund. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - December 31, 2021 Despite significant volatility within the quarter, global markets were generally positive overall, supported by corporate earnings upgrades and reduced contagion risk on the Chinese property sector from a potential default by Evergrande. These more than offset the emergence of the Omicron variant of the COVID-19 virus and more hawkish comments from the U.S. Federal Reserve (‘Fed’) on the tapering of bond purchases.
The ASX200 had a small gain (+2.1% over the quarter) with the strongest sectors comprising Materials (+12.7%), Utilities (+11.4%) and Property (+10.1%), while Energy (-8.8%), Information Technology (-6.1%) and Financials ex property (-2.2%) lagged. The portfolio was impacted by our positioning in reopening beneficiaries and sectors such as travel and energy which were aggressively sold off in November due to market concerns around the spread of the Omicron variant and more hawkish comments from U.S. Federal Reserve Chair Jerome Powell on the pace of tapering bond purchases. Equity markets partially recovered in December as Omicron concerns moderated and investors adjusted to the more hawkish pivot from the Fed.
Performance Commentary - November 30, 2021 Global equity markets declined over the month driven by the emergence of the Omicron variant of the COVID-19 virus and by more hawkish comments from U.S. Federal Reserve Chair Jerome Powell on the pace of tapering bond purchases. Concerns over the variant led to an 11.6% drop in the oil price, the biggest one day drop since April 2020, and a 2.3% fall in the S&P500, its worst day since February 2021.
The Fund performed below index, as market concerns regarding the spread of the Omicron variant impacted our positioning in reopening beneficiaries and in sectors such as travel and energy, which were aggressively sold off.
Performance Commentary - October 31, 2021 The Fund returned -1.4% (net) in October, compared to the S&P/ASX 200 Accumulation Index which returned -0.1%. Over the past 12 months, the Fund returned 34.1% (net), outperforming the index by 2.8%. Since inception, the Fund has outperformed the index by 2.9% p.a. (net).
Global equity markets rebounded strongly in October following a strong start to the U.S. corporate earnings season and reduced risk that Evergrande’s potential default would result in wider contagion across the Chinese property sector. The S&P/ASX 200 Accumulation Index returned -0.1% in October, underperforming most global markets, largely due to higherthan-expected inflation data and sharply higher Australian bond yields. The Australian 10-year bond rate rose by 59bps to 2.08%, the highest level since March 2019. The strongest sectors were Information Technology (+2.1%), Health Care (+1.0%) and Financials (+0.8%), while Industrials (-3.2%), Energy (-2.7%) and Consumer Staples (-2.3%) lagged
Performance Commentary - September 30, 2021 Global equity markets fell in September (NASDAQ -5.7%, S&P500 -4.7%, MSCI World -4.2%), with investor sentiment impacted by ongoing fears around high inflation, the potential default of Evergrande (one of China’s largest property developers) and more hawkish commentary from the U.S. Federal Reserve. These factors contributed to a sharp rise in bond yields with the US 10-year rising 24bps to 1.52% and the Australian 10-year rising 33bps to 1.49%.
The S&P/ASX 200 Accumulation Index returned -1.9% in September. The strongest sectors were Energy (+16.7%), Utilities (+2.5%), Financials (+1.6%), while Materials (-9.3%), Health Care (-4.9%) and Information Technology (-3.9%) lagged.
The portfolio performed strongly over the month due to numerous positive company updates, along with portfolio positioning designed to benefit from the reopening trade and higher inflation.
Performance Commentary - August 31, 2021 The Fund returned 5.4% (net) in August, outperforming the S&P/ASX 200 Accumulation Index by 2.8%. Over the past 12 months, the Fund returned 28.8% (net), outperforming the index by 0.6%. Since inception, the Fund has outperformed the index by 2.7% p.a
Global equity markets rallied in August with investors reassured after U.S. Federal Reserve Chair Jerome Powell’s dovish Jackson Hole address where he emphasised that the Federal Reserve would remain cautious in raising interest rates as it tries to ensure the economy reaches full employment.
The S&P/ASX 200 Accumulation Index returned 2.5% in August. The strongest sectors were Information Technology (+17.0%), Consumer Staples (+6.9%) and Healthcare (+6.8%), while Materials (-7.3%), Energy (-3.9%) and Utilities (+1.0%) lagged. The portfolio performed strongly in August with a number of our holdings delivering better results and outlooks than consensus expectations over reporting season. Performance was broad based, with 8 stock positions delivering portfolio alpha of more than 0.3% each.
Performance Commentary - July 31, 2021 The Fund returned -0.1% (net) in July, underperforming the S&P/ASX 200 Accumulation Index by 1.2%. Over the past 12 months, the Fund returned 30.3% (net), outperforming the index by 1.7%. Since inception, the Fund has outperformed the index by 2.5% p.a. (net).
Global equity markets were mixed in July with concerns over the aggressive spread of the COVID-19 Delta variant leading to a downward revision of global growth estimates due to increased restrictions in many countries (including Australia) and delayed reopening timelines. Despite inflation running higher than market expectations, continued dovish Central Bank commentary and ‘risk-off’ market sentiment contributed to yields on 10-year treasuries in both the U.S. and Australia falling to their lowest levels in more than five months.
The S&P/ASX 200 Accumulation Index returned 1.1% in July. The strongest sectors in Australia were Materials (+7.1%), Industrials (+4.3%) and Utilities (+1.6%), while Information Technology (-6.9%), Energy (-2.5%) and Financials (-1.4%) lagged.
Performance Commentary - June 30, 2021 The Fund returned 0.3% (net) in June, underperforming the S&P/ASX 200 Accumulation Index by 1.9%.
– Over the past year, the Fund returned 28.0% (net), outperforming the index by 0.2%. – Since inception, the Fund has outperformed the index by 2.6% p.a. (net)
Global equity markets rose modestly in June led by the continued improvement in economic data and a strong recovery in growth names. The US Federal Reserve turned more hawkish in June, accelerating the pace of expected policy tightening amid optimism about the rate of the economic recovery. This led to a flattening of the yield curve causing growth and defensive stocks to strongly outperform value and cyclical stocks.
The S&P/ASX 200 Accumulation Index returned 2.3% in June. The strongest sectors in Australia were Information Technology (+13.4%), Communication Services (+5.5%) and Property (+5.5%) while Financials (-0.2%), Materials (+0.3%) and Healthcare (+2.2%)
Some of the key contributors to portfolio performance in June were:
Worley shares rallied 13% after its investor day where the company confirmed it was on track to deliver an improved second half performance and also further outlined the significant energy transition related opportunities available and Worley’s unique positioning to capture this growth. The oil and gas market has been impacted by two major downturns in the last five years and a number of Worley’s major competitors are facing bankruptcy or scaling back their operations. This has allowed Worley to become the clear global leader in engineering consultancy in its key segments and has contributed to incremental market share gains as a greater proportion of work moves to a lower risk, reimbursable cost model. We believe FY21 will be the trough in earnings for Worley due to the transitory impact of the pandemic, with a slow but steady recovery in conventional oil and gas capex supporting earnings growth going forward. On a medium term basis, we expect “green” energy opportunities to become a much greater proportion of Worley’s sales mix as the energy transition accelerates.
Telstra shares rose 7% during June after the company announced the sale of a 49% stake in its Tower portfolio for $2.8b to a consortium of infrastructure investors including the Future Fund, CSC and Sunsuper. The transaction multiple of 28x EV/EBITDA was materially higher than analyst expectations and recent comparable transactions, reflecting the quality of the Telstra portfolio and the ongoing demand for high quality telecommunications infrastructure assets. While the sell-down had been flagged as part of the company’s T22 strategy, the timing of the sale was a surprise with Telstra previously flagging a process that would complete in early 2022. Telstra expects to return 50% of net proceeds to shareholders, which will make the transaction modestly earnings accretive. The outcome of this sale is likely to increase the market’s focus on the much larger opportunity for value realisation from Telstra’s other infrastructure assets, including its ducts, fibre and NBN recurring revenue streams (in aggregate these assets generate around 7x the earnings of the tower portfolio). From an operational perspective, another positive for Telstra during the month was further improvement in competitive dynamics with Optus and Vodafone both lifting pricing on key post-paid plans. This highlights the continuation of mobile market ‘repair’, which bodes well for future Mobile segment ARPU and EBITDA growth. Some of the key detractors to portfolio performance in June were:
Resolute Mining shares declined 17% in June primarily due to an ~8% decline in the gold price leading to the general underperformance of small-cap gold equities over the month. The company continued to bolster their balance sheet with the voluntary early repayment of ~US$20m in debt in early June. Resolute also recently announced the appointment of a new, wellregarded CFO – Doug Warden to strengthen the senior management team. We believe Resolute remains dramatically undervalued and the shares should begin performing as it delivers on its 2021 outlook, with further benefits from any potential stabilisation or recovery in the gold price.
Star Entertainment shares declined 9% with the announcement of new COVID-related restrictions at its NSW casino. We continue to believe Star has an attractive outlook given the scarcity value of its casino licenses and the transformative impact of the Queen’s Wharf development in Brisbane. In our view, Star’s market cap of ~$3.6b hugely undervalues the asset base, licenses and likely cashflow generation of the company. While the market is very focused on the short-term risks around COVID-19 disruption, we believe the medium-term outlook for Star looks very attractive lagged.
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