Australian long-short equities absolute return fund, focusing on core competencies in the resource and industrial sectors. The Fund deploys a high conviction, long bias strategy, focusing on proprietary, fact based research. This fundamental bottom up stock selection, coupled with a global macro perspective to actively manage market risk, places capital preservation as a key objective of the Fund. The Fund aims to deliver a capital growth over a 3-5yr time horizon.
The Fund returned -0.5% after fees in September. Global Indices were down: Nasdaq – 5.8%, S&P500 -5.0%, Russell2000 -7.1% and the Global Lithium Index fell -7%. Local Indices were also down: All Ords AI -2.8% and Small Ords AI -4.0%. Spartan, Surge, Lithium Power and Chalice (short; took profits) performed well for the Fund, but were offset by declines in Leo Lithium, Bravo and Lindian.
The Fed kept the cash rate unchanged in September, but ongoing hawkish rhetoric has markets pricing in one more hike. Yields continue to be the story, with the US 10-year rising to 4.8% (16-yr highs). Oil rose 6% whilst Uranium prices rallied +23%, breaking 12-yr highs. A strengthening US$, up +2.5%, drove falls in Gold -4.7% and Silver -9.3%. Lithium prices declined -23% to US$20,000/t (inventory destocking), now cutting into the cost curve of high-cost producers. Rare Earth prices were up +4% as China kept domestic mining and separation quotas for 2H-CY23 unchanged.
What is Paragon Australian Long Short Fund Paragon Australian Long Short Fund is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic 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 Paragon Australian Long Short Fund has Assets Under Management of 34.70 M with a management fee of 1.46%, a performance fee of 0.00% and a buy/sell spread fee of 0.3%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Paragon Australian Long Short Fund has returned 2.63% in the last month. The previous three years have returned NaN% annualised and 23.9% each year since inception, which is when the Paragon Australian Long Short 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 Paragon Australian Long Short Fund first started, the Sharpe ratio is -0.82 with an annualised volatility of 23.9%. The maximum drawdown of the investment product in the last 12 months is -11.11% and -37.84% 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 Paragon Australian Long Short Fund has a 12-month excess return when compared to the Domestic Equity - Long Short Index of 2.35% and -19.47% 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. Paragon Australian Long Short Fund has produced Alpha over the Domestic Equity - Long Short Index of 0.36% in the last 12 months and -1.66% since inception.
What are similar investment products? For a full list of investment products in the Domestic Equity - Long Short Index category, you can click here for the Peer Investment Report.
What level of diversification will Paragon Australian Long Short Fund provide? Paragon Australian Long Short Fund has a correlation coefficient of 0.68 and a beta of 1.23 when compared to the Domestic 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 Paragon Australian Long Short Fund and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Paragon Australian Long Short Fund with the ASX Index 200 Index? For a full quantitative report on Paragon Australian Long Short Fund compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the Paragon Australian Long Short Fund to do my own analysis? To sort and compare the Paragon Australian Long Short Fund financial metrics, please refer to the table above.
Has the Paragon Australian Long Short 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.
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Comments from SMSF Mates SMSF Mate does not receive commissions or kickbacks from the Paragon Australian Long Short Fund. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - August 31, 2023 The Fund returned -1.1% after fees in August. Global Indices were down: Nasdaq -1.6%, S&P500 -1.8% & Russell2000 -5.2%. Local Indices were also down: All Ords AI -0.7%, Small Ords AI -1.3% and ASX300 Resources AI -1.8%. Azure, Wildcat (took profits) and Adriatic performed well for the Fund, however were more than offset by declines in Patriot, WR1, WA1 and Alvo. Lithium prices declined -25% with the Global Lithium Index at -11%.
Despite China’s growth concerns, its EV sales are expected to grow ~37% in CY23, representing ~36% market penetration. Leaders BYD Auto and Tesla are >55% of the EV market. BYD sold a record 274.4k EV’s in August, have been delivering on growth expectations, and are now guiding for 60% EV penetration in China in CY25, implying 30% yoy growth.
Performance Commentary - July 31, 2023 The Fund returned -3.8% after fees in July. Global Indices were up: Nasdaq +3.8% & S&P500 +3.1%. Local Indices were also up: All Ords AI +3.0%, Small Ords AI +3.5% and Small Resources AI +0.1%. Azure, Snowline Gold and Wildcat performed well for the Fund, however were more than offset by declines in Patriot, Solis and Berkeley. The Fed raised the cash rate by 25bps. Inflation continues to roll over, down to 2.9% from 9.1% a year ago. Gold rose +2.4% and Silver +8.7%. Lithium prices corrected -7% to -17%. Pleasingly the Fund has had a strong start to August.
Performance Commentary - June 30, 2023 The Fund returned an estimated +4.7% after fees in June and +5.2% for FY23. Global Indices were up: Nasdaq +6.5%, S&P500 +6.5% and Russell2000 +8.0%. Local Indices were mixed: All Ords AI +1.9%, Small Ords AI 0% and Small Resources AI -1.2%. Azure, WA1 and Greentech performed well for the Fund, partially offset by declines in our precious metals holdings. The Fed paused at the June FOMC, keeping the cash rate unchanged. We suspect their hiking cycle is done. The US$ fell -1.4%. Gold fell -2.2% and Silver -3.3% on hawkish Fed rhetoric of two more 25bps rate rises this year. Oil was up +3.1%, as was Copper +2.9%. Lithium prices were unchanged.
Performance Commentary - May 31, 2023 The Fund returned +5.7% after fees in May. Global Indices were mixed: Nasdaq +7.6%, S&P500 +0.3% and Russell2000 -1.1%. Local Indices all fell: All Ords AI -2.6%, Small Ords AI -3.3% and Small Resources AI -7.1%. WA1, Leo Lithium, Patriot and Meteoric performed well for the Fund, partially offset by declines in PointsBet and our precious metals holdings. The US$ rose +2.6%, with falls in Gold -1.4%, Silver -6.3%, Oil -8.7% and Copper -6.0%. Chinese Lithium prices continued their strong bounce, with futures +110% off their mid-April lows to ~US$40,000/t. China’s EV ownership is now 15m+ units, 4.7% of 319m vehicles in China, and growing rapidly.
Performance Commentary - April 30, 2023 The Fund returned an estimated +2.0% after fees in April. Global Indices were up: Nasdaq +0.5% and S&P500 +1.5%. Local Indices were up: All Ords AI +1.8%, Small Ords AI +2.8%. ASX300 Resources AI was down -2.2% and Global Resources SPDR ETF was down -7.1%. Meteoric and our gold stocks performed well, offset by declines in Winsome, Sierra Rutile and Hartshead. The US$ fell -1% with Gold +1% higher and Silver +4% higher. Oil was flat and Copper -5.5% lower. After significant falls off November highs, Chinese Lithium prices look to have bottomed, with futures +40% off their lows to US$30,600/t – almost twice what the equities are discounting.
Performance Commentary - March 31, 2023 The Fund returned 1.1% after fees in March. Global Indices were up: Nasdaq +9.5% and S&P500 +3.5%. Local Indices were down: All Ords AI -0.2%, Small Ords AI -0.7%. Resolute Gold and Adriatic performed well for the Fund, offset by a decline in Patriot.
Global markets were volatile in March as a result of two sizeable US bank failures. Fear of contagion saw a run on some regional US banks. Credit Suisse, which has been in trouble for the last decade, had a forced takeover for a nominal amount by UBS. The escalating banking crises saw the US and Suisse Central Banks respond by securing deposits, providing guarantees and ample liquidity. This saw the US 2yr bond rate (which leads the cash rate) fall 80bps to 4.1%. The Fed raised rates by 25bps to 5% at its March FOMC, with the market rapidly moving to price in 100bps of rate cuts in 2H-CY23. The US$ fell, sending gold higher. Lithium prices continued their correction off November highs, with majors using the short-term weakness to pursue M&A.
This month we discuss the recent M&A interest in Lithium developers and what it may mean for Patriot Battery Metals.
Performance Commentary - February 28, 2023 The Fund returned -11.1% after fees in February. Global Indices were down: Nasdaq -0.5% and S&P500 -2.6%. Local Indices were also down: All Ords AI -2.5%, Small Ords AI -3.7% and Small Resources -9.1%. It was a very tough month for Resources with average equity declines in precious metals -18%, Copper -15%, Nickel -13%, EV -12%, Uranium -12% and bulk commodities -8%. The Fund had declines in its Lithium, precious metals and base metals stocks, and Platinum AM was also sold off on its 1H23 result.
Global markets were sold off on tight labour markets and high inflation, as well as a hawkish Fed calling for more cash rate rises and remaining higher for longer. The USD bounced, sending commodity prices lower. Commodity markets remain constrained from a supply perspective and coupled with a golden age for demand = a Supercycle is coming.
This month we discuss Lithium’s short-term headwinds and its 2023 supply, demand and price dynamics.
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