MLC Wholesale Global Share Fund aims to outperform the MSCI ACWI Net Index ($A), before fees and tax, over 5 year periods by using investment managers who invest and diversify across many companies listed (or expected to be listed) on share markets anywhere around the world.
The Australian share market posted relatively flat returns over the June 2023 quarter. The S&P/ASX200 Total Return Index (‘market benchmark’) returned 1.01% and the MLC Australian Share Fund returned 1.03% (before fees and tax) outperforming the market benchmark by 0.02%.
The fund over one year returned 15.71% (before fees and tax) to 30 June 2023. This was 0.93% better than the market benchmark’s 14.78% return and was due to the strong outperformance from two of our appointed managers, Northcape and Antares.
The ASX 200 lagged global markets over the quarter as the strong lead from overseas was tempered by somewhat unexpected Reserve Bank of Australia (RBA) interest rate hikes which made investors more cautious. The drivers in the June quarter were similar to those which have played out for most of this year, with Technology and Consumer stocks doing much of the heavy lifting as investors attempt to put a value on ‘Artificial Intelligence’ (AI) and assess any productivity gains this technology might produce. Materials were weaker in line with lower commodity prices and consumer facing sectors also struggled as interest rates continue to bite.
China’s disappointing economic performance continued to weigh on emerging markets and contributed to relative weakness in here given the exposure of our mining sector to China’s tepid growth. There was little joy for the miners, as commodity prices were generally lower over the period. Oil was down 6%, Coal -27%, Iron Ore -11%, Zinc -19%, Nickel -14%, Aluminium -11%.
From a sector perspective, there are few clear winners in the current environment. Consumer-exposed sectors, other than perhaps supermarkets, are seeing broad-based weakening. Banks are facing higher funding costs, slower credit growth and potentially higher credit losses while, for Resources to perform, China would likely need to meaningfully step up its stimulus measures – something its government to date has been unwilling to do.
The upcoming August reporting season should provide further insights into the extent of the economic slowdown the RBA has tried to orchestrate since the current interest rate tightening cycle started in May last year.
What is MLC Wholesale Global Share MLC Wholesale Global Share is an Managed Funds investment product that is benchmarked against Developed -World Index and sits inside the Foreign Equity - Large Multi-Manager 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 MLC Wholesale Global Share has Assets Under Management of 86.41 M with a management fee of 0.9%, a performance fee of 0.00% and a buy/sell spread fee of 0.25%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the MLC Wholesale Global Share has returned 1.41% in the last month. The previous three years have returned 10% annualised and 11.92% each year since inception, which is when the MLC Wholesale Global Share 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 MLC Wholesale Global Share first started, the Sharpe ratio is 0.14 with an annualised volatility of 11.92%. The maximum drawdown of the investment product in the last 12 months is -5.32% and -45.3% 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 MLC Wholesale Global Share has a 12-month excess return when compared to the Foreign Equity - Large Multi-Manager Index of 0.94% and 0.31% 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. MLC Wholesale Global Share has produced Alpha over the Foreign Equity - Large Multi-Manager Index of 0.07% in the last 12 months and 0.03% since inception.
What are similar investment products?
For a full list of investment products in the Foreign Equity - Large Multi-Manager Index category, you can click here for the Peer Investment Report.
What level of diversification will MLC Wholesale Global Share provide?
MLC Wholesale Global Share has a correlation coefficient of 0.96 and a beta of 1.01 when compared to the Foreign Equity - Large Multi-Manager 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 MLC Wholesale Global Share and its peer investments, you can click here for the Peer Investment Report.
How do I compare the MLC Wholesale Global Share with the Developed -World Index?
For a full quantitative report on MLC Wholesale Global Share compared to the Developed -World Index, you can click here.
Can I sort and compare the MLC Wholesale Global Share to do my own analysis?
To sort and compare the MLC Wholesale Global Share financial metrics, please refer to the table above.
Has the MLC Wholesale Global Share 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 MLC Wholesale Global Share?
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Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the MLC Wholesale Global Share. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - March 31, 2023 The Australian share market posted reasonable returns over the March 2023 quarter. The S&P/ASX200 Total Return Index (market benchmark) returned 3.5% and the MLC Australian Share Fund returned 5.2% (before fees and tax) outperforming the market benchmark by 1.7%.
The fund over one year returned 1.7% (before fees and tax) to 31 March 2023. This was 1.6% better than the market benchmark’s 0.1% return and was due to the strong outperformance from two of our appointed managers, Northcape and Antares.
As mentioned earlier, the Australian share market delivered positive returns, rising alongside both its developed and emerging markets peers. The quarter had a particularly strong start in January as investors focused on easing inflationary fears and hopes that central banks could start slowing their pace of interest rate hikes. Iron ore prices also rebounded in January, rising on the expectation of an improving Chinese economy in 2023 following the removal of COVID restrictions in December, but paused for breath towards the end of the quarter as investors looked for evidence of the strength of China’s economy following its re-opening.
Most sectors were positive with Consumer Discretionary performing strongly, up 11.4%, driven by investors’ willingness to take on more risk and some strong individual performances followed by Communication Services (9.4%) off the back of Telstra’s strong performance. Financial Services was the weakest, down 2.7%, on worries about the unfolding banking crisis and mortgage competition. The real estate sector was one of the weaker performing sectors over the quarter. This mirrored the sell-off in property names in other markets including the US and Europe as investors worried that the turmoil in the US banking sector could tighten access to credit and put property prices under further pressure.
Please refer to the ‘Market commentary’ for an overview of what happened in other domestic and global markets over the quarter.
Performance Commentary - December 31, 2022 Over the three months to 31 December 2022, the fund generated a very strong return of 5.7% (before fees and tax). This return was 1.6% above the benchmark MSCI All Country World Index ($A). Over the year, the fund delivered a disappointing return of -11.9%.
2022 was a year dominated by large scale events and trends, from the invasion of Ukraine in February to sharp interest rate increases and inflation across major economies, Chinese-US tensions, unrest in Iran and pivotal elections in the US and elsewhere. In the final quarter of the year, financial markets were becoming more resilient to inflation and interest rate risks with strong returns in global shares.
The Australian dollar increased relative to the US dollar over the quarter. As a result, not being hedged to the Australian dollar detracted for global share investors over this period.
Of the four managers in the fund, for the full quarter, three managers outperformed over the quarter, with positive stock selection being the predominant driver of relative outperformance. During the quarter, Tweedy Browne and Kiltearn were replaced by Royal London and Pzena.
Performance Commentary - September 30, 2022 The fund returned -2.2% for the quarter and -11.7% in the year to 30 September 2022 (before fees and tax). The fund performed in line with the benchmark return for the quarter and outperformed by 0.3% over the past year.
Global government bond yields continue to rise sharply given inflation concerns. High commodity prices, persistent supply disruptions and increasing wage pressures have been the key drivers for rising bond yields. The Russian-Ukraine conflict since February 2022 has only intensified these inflation concerns.
Corporate bonds have also proven sensitive to expectations for higher interest rates in coming years, as well as the potential for slower economic activity and reduced corporate profitability. Credit spreads have accordingly widened significantly in response to these negative expectations.
Performance Commentary - June 30, 2022 Over the three months to 30 June 2022, the fund generated a weak return of -7.2% (before fees and tax). This return was 0.7% above the benchmark MSCI All Country World Index ($A). Over the year, the fund delivered a weak return of -9.6%.
June concluded the worst first-half year for share markets in decades, with the US share market, as measured by the S&P 500 index, declining by 20.1% in local currency terms. Rising inflation and interest rates, supply chain woes intensified by ongoing zero-Covid measures in China, and the Russian invasion of Ukraine have sent a wave of uncertainty across the global economy.
The Australian dollar decreased relative to the US dollar, euro and pound sterling over the quarter. As a result, not being hedged to the Australian dollar was beneficial for global share investors over this period.
Of the six managers in the strategy, four managers outperformed over the quarter, with positive stock selection being the predominant driver of relative outperformance.
Performance Commentary - March 31, 2022 Over the three months to 31 March 2022, the fund generated a weak return of -9.3% (before fees and tax). This return was 0.9% below the benchmark MSCI All Country World Index ($A). Over the year, the fund delivered a solid return of 5.9%.
The Russian invasion of Ukraine raised geopolitical uncertainties leading to volatility in global share markets and added to fears of persistently higher inflation. Despite rising interest rates globally, initially helping value stocks, investor focus shifted from valuation to potential demand destruction. Meanwhile, Germany, heavily dependent on Russian oil and gas, reported inflation numbers greater than 7%. Despite this, there have been relatively few profit warnings ahead of the upcoming earnings season, and global share markets rose at the end of the quarter.
The Australian dollar increased relative to the major currencies over the quarter. As a result, not being hedged to the Australian dollar detracted for global share investors over this period.
Of the six managers in the strategy, three managers outperformed over the quarter, with positive stock selection being the predominant driver of relative outperformance.
Performance Commentary - December 31, 2020 The fund’s return (before deducting fees and taxes) turned sharply upwards, delivering 16.3% in the December quarter. The one year return is still weak, largely due to the significant falls earlier in the year during the “COVID crash” in March.
The exceptional December quarter performance was due largely to positive news that a number of COVID-19 vaccines had been developed. Expectations that the rollout of the vaccine in 2021 would lessen the economic impact of COVID-19 raised company earnings forecasts and led to improved performance by industries and companies closely exposed to the anticipated economic recovery. The more positive market tone was also helped by improved local economic data and a further loosening of monetary policy with the cash rate reduced to 0.1% by the Reserve Bank of Australia. Strength in commodity prices also helped the local share market, with the iron ore price pushing above US$150/t and the price of oil rising sharply.
Even the Financial sector joined in as confidence that Australia’s economic recovery would reduce loan repayment deferrals led to rises in the fund’s holdings in banks.
Performance Commentary - September 30, 2020 Over the three months to 30 September 2020, the fund generated a return of 2.5% (before fees and tax). This return was -1.4% behind the benchmark MSCI All Country World Index ($A). Over the year, the fund returned 1.5%.
In the March quarter share markets sold off on concerns regarding the spread of the COVID-19 virus. Since then we have seen a recovery in global share markets. While Wall Street surged to record highs in early September given vaccine hopes, various factors weighed on global shares later in September. Firstly and primarily, the virus remains a troubling global threat with new infection cases rising towards 300,000 per day. Secondly, political risk is becoming more prominent, in particular the US Presidential election.
The Australian dollar strengthened relative to the US dollar over the quarter and against trade-weighted currencies. As a result, not being hedged to the Australian dollar detracted for global share investors.
Global share markets continue to be narrowly led, with those companies delivering on earnings growth being handsomely rewarded, while those stocks with any economic sensitivity are being punished.
Of the six managers in the strategy, three outperformed over the quarter, with positive stock selection being the predominant driver of relative outperformance.
A final word on the fund’s positioning as we reflect on the last quarter. We remain comfortable with our positioning. Our growth managers continue to deliver strong excess performance. For our value managers, history suggests that when they own decent businesses so lowly valued, with valuation spreads at extremes, an investment style that is so out of favour and recent performance that has been so unsatisfactory relative to history; the odds are much more in favour of these managers. We are therefore maintaining exposure to value managers.
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