Paradice Australian Mid Cap Fund B is an Managed Funds investment product that is benchmarked against ASX Index Small Ordinaries Index and sits inside the Domestic Equity - Small Cap 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 Paradice Australian Mid Cap Fund B has Assets Under Management of 77.00 M with a management fee of 1.1%, a performance fee of 0.09% and a buy/sell spread fee of 0.5%.
The recent investment performance of the investment product shows that the Paradice Australian Mid Cap Fund B has returned 0.8% in the last month. The previous three years have returned 4.4% annualised and 16.27% each year since inception, which is when the Paradice Australian Mid Cap Fund B first started.
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 Paradice Australian Mid Cap Fund B first started, the Sharpe ratio is NA with an annualised volatility of 16.27%. The maximum drawdown of the investment product in the last 12 months is -10.36% and -27.69% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
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 Paradice Australian Mid Cap Fund B has a 12-month excess return when compared to the Domestic Equity - Small Cap Index of -2.27% and -1.18% since inception.
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. Paradice Australian Mid Cap Fund B has produced Alpha over the Domestic Equity - Small Cap Index of NA% in the last 12 months and NA% since inception.
For a full list of investment products in the Domestic Equity - Small Cap Index category, you can click here for the Peer Investment Report.
Paradice Australian Mid Cap Fund B has a correlation coefficient of 0.95 and a beta of 1.05 when compared to the Domestic Equity - Small Cap 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.
For a full quantitative report on Paradice Australian Mid Cap Fund B and its peer investments, you can click here for the Peer Investment Report.
For a full quantitative report on Paradice Australian Mid Cap Fund B compared to the ASX Index Small Ordinaries Index, you can click here.
To sort and compare the Paradice Australian Mid Cap Fund B financial metrics, please refer to the table above.
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SMSF Mate does not receive commissions or kickbacks from the Paradice Australian Mid Cap Fund B. All data and commentary for this fund is provided free of charge for our readers general information.
The Paradice Australian Mid Cap Fund (the Fund) delivered a positive return for the quarter of 2.07%, which was 0.96% below the Mid Cap Composite Benchmark. The main contributor to this was more stock specific than from a sector perspective which is evident in the positives and negatives from an attribution perspective in the next section of this quarterly update.
Corporate activity was fairly muted. BHP’s takeover of OZ Minerals was completed and a proposed merger between USA listed Livent and Allkem was put to the market.
Positives
Bank of Queensland (BOQ) – Underweight Management changes and question marks over integration of ME Bank.
Vicinity Centres (VCX) – Underweight Retail shopping centre owner: raising cap rates and a consumer under pressure.
AUB Group Ltd (AUB) – Overweight Insurance Industry doing very well in current environment and optimism over Tysers acquisition.
Negatives
EBOS Group (EBO) – Overweight EBO lost the Chemist Warehouse contract to Sigma.
Champion Iron (CIA) – Overweight Iron ore price weakness on the back of Chinese growth slowdown.
ALS Limited (ALQ) – Overweight ALS has been sold off on the back of concerns that resource mineral exploration is cooling off, leading to less samples being processed by ALS.
The Fund delivered a positive absolute return for the quarter of 0.80%, which was 2.68% below the index. Main contributors to this were being underweight coal, and a number of the strong performers from the June quarter giving up some of their gains. With higher bond yields and concerns about economic growth driven by rampant inflation and higher interest rates, it would seem odd that the top 7 performing Mid Cap holdings over the quarter were a mix of tech and resource stocks. There were no broad discernible trends outside of lithium and coal. Performance was very much stock specific and driven predominantly by results and management commentary. There was continued volatility in global equity markets during the June quarter with the MSCI World Net Total Return Index falling 6.19%, the S&P 500 Total Return Index falling 4.9% and the tech heavy NASDAQ 100 Total Return Index falling 4.42% (all in US Dollar terms). The Australian market outperformed these indices, with the S&P ASX 200 Total Return Index rising by 0.4%. A number of stocks generated in-line results but after strong runs into reporting season, were sold off if there was no quantifiable upgrade to expectations (e.g. Orora, Qube). The market also marked down stocks that made poor acquisitions and / or over-raised (e.g. Atlas Arteria, Orica).
The Paradice Mid Cap portfolio delivered a positive relative return for the quarter, generating -1.89% as compared to the Mid Cap composite index return of -3.03%, outperforming by 1.14%. The March quarter opening and closing months were polar opposites, highlighting the volatility of markets: the benchmark was down 8.77% in January and up 6.52% in March, following what was an overall very positive reporting season. The Australian market outperformed all major global indices given our weighting to Resources and Banks, with the NASDAQ Composite Index, for example, down 9.1% (in US Dollar terms) and the Dow Jones Industrial Average down 4.6% (in US Dollar terms).
The February reporting season was strong from a results perspective and the portfolio was generally favourably positioned. Overall “value” stocks outperformed relative to consensus and “expensive” stocks underperformed. Approximately 36% of companies saw consensus upgrades which is well above the long-term average. The Mid Cap composite index performance was driven predominantly by strong returns across the Materials sector and, to a lesser extent, Regional Banks. Standout from an unexpected perspective was a very strong result from JB HiFi which continued its strong run despite coming up against a comparatives historic period that was positively impacted by lockdown buying. Offsetting this strength were sell-offs in IT names and other areas such as stocks exposed to interest rate hikes. USA exposed stocks such as Reliance Worldwide and Reece were sold off on expectations that the rates cycle will have a significant negative impact on housing facing earners.
The Fund aims to outperform the composite benchmark of 70% of the S&P/ASX Mid Cap 50 Total Return Index and 30% of the S&P/ASX Small Ordinaries Total Return Index over a three to five year period
The Paradice Mid Cap portfolio performed broadly in line with the index. The Australian market performance was driven by strong performances in technology and discretionary. Strength in the USA was driven by the Nasdaq Composite Index returning +9.7% and the S&P500 returning +8.5% (in US Dollar terms). Bond yields drifted lower over the period (AU 10 years yield -14% and USA -16%) after a rapid rise in the March quarter. This apparent disconnect with inflation can be put down to a mix of factors including excess liquidity, Fed bond issuance weaker than normal and / or a sense that inflation pressures might be transitory. In Australia thematically the market was more mixed with standout under and over performance largely being driven by stock specific news flow.
The Paradice Mid Cap portfolio had a difficult quarter relative to its index. We suffered from being underweight the strong reflation sectors such as Energy, Financials and non-gold resources. We were also overweight more defensive sectors such as Healthcare. We were underweight technology stocks which (as mentioned in the previous section) counter intuitively outperformed in the quarter despite their “long tail” valuations. From a stock point of view the attribution indicated a few “mistakes” (in terms of companies within the portfolio not hitting their financial targets) but was more a reflection of the macro rotation we have described, with a number of the stocks that served us well during the earlier stages of COVID, underperforming.
The top relative contributors to performance for the quarter are as follows:
Evolution Mining (EVN) – Underweight Weak performance of gold stocks in general during the quarter in a risk on environment.
Mesoblast (MSG) – Underweight/Not held Biotech that failed in multiple clinical trials of its products during the quarter.
Nuix (NXL) – Overweight Strongly performing IPO that the portfolio participated in during the quarter. Nuix offers a platform for searching, analysing and extracting knowledge from unstructured data for use in such industries as the legal and law enforcement professions as well as forensic accounting.
The top relative detractors from performance for the quarter are as follows:
Ansell (ANN) – Overweight The stock underperformed despite upgrading F21 guidance during the period. This would seem to relate to USD weakness (ANN’s functional currency) and its perception as having been a COVID beneficiary in its Healthcare division, noting that the company is also exposed to rising industrial production through its Industrial division.
Chorus (CNU) – Overweight Yield sensitive stocks underperformed in the quarter.
Saracen (SAR) – Overweight Weak performance of gold stocks in general during the quarter in a risk on environment.
PORTFOLIO CHANGES
The December quarter saw one of the most significant index changes we have seen in a number of years with both Afterpay (APT) and Xero (XRO) exiting into the ASX 50 Leaders to be replaced by Oil Search (OSH) and Vicinity Centres (VCX). The sheer size of APT and XRO saw a significant change in the relative weights of all stocks in the index and, as they were both in the Information Technology Sector, also saw a significant change in the sector weightings of the portfolio’s benchmark. The majority of the proceeds from selling holdings in APT and XRO have now been reinvested.
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