Realindex Global Share Hedged-Class A (FSF0975AU) Report & Performance

What is the Realindex Global Share Hedged-Class A fund?

Realindex Global Share Hedged Fund aimes to provide capital and income growth by investing in global shares and outperforming the MSCI All Country World (ex Australia) Index, hedged to Australian dollars over rolling five-year periods before fees and taxes.

  • Realindex forms a universe of global companies based on accounting measures, which gives the portfolio a value tilt. Factors such as quality, near-term value and momentum are applied to form a final portfolio of companies.
  • The resulting portfolio has a value tilt relative to the benchmark and provides the benefits of being lower in cost, lower turnover and highly diversified compared to traditional active investment strategies.
  • By weighting the portfolio based on accounting measures and factors such as quality, value and momentum, Realindex aims to generate higher returns versus the benchmark over the long term.

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For Realindex Global Share Hedged-Class A

Realindex Global Share Hedged-Class A Fund Commentary August 31, 2023

Realindex Global Share Value (Hedged) returned -1.60% (net of fees) during August, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned -2.19% (in AUD). The AUD fell 3.9% against the USD over the month.

Global markets had a volatile start to August with the release of sticky inflation readings, surging bond yields and mixed economic data which included a downgrade in US Government credit. However, sentiment improved and the soft-landing narrative took over mid-month recovering some of the losses earlier in the month. US stocks performed poorly, resulting in the S&P 500 dropping by 1.7% in local currency terms, bringing its year-to-date gains down to +15.4%.

Investor sentiment was hindered by discouraging commentary from the Federal Reserve Chair who alluded to further monetary policy tightening. Developed Markets performed poorly in local currency terms, however due to the weakness in the Australian dollar the MSCI World Index posted +1.56% (AUD terms). In comparison, Emerging Markets were weak with the MSCI EM index posting -2.36% (AUD terms). This mainly stemmed from the downtown in economic indicators in China and its debt levels, which are creating challenges within the property sector. Poor performance was also seen in Asian markets with the Hong Kong’s Hang Seng and China’s CSI 300 falling by 8.5% and 6.2%, respectively. Overall, within the MSCI All Country World Index, Energy (+5.3%) and Health Care (+3.0%) led the market, while Utilities (-1.9%) and Materials (-1.2%) lagged.

Within this environment, Value underperformed Growth by 0.6% over the month (MSCI AC World ex AU Value +0.9% vs. Growth +1.5%, in AUD). Over the past year, Value has underperformed Growth by 9.0% (AUD), while on a five year basis Value has underperformed Growth by 5.1% p.a. (AUD), providing a significant longer-term headwind for performance.

Despite the Growth headwind during the month, the fund managed to outperform the market largely from stock selection effects. Strong stock selection was seen within North America and Information Technology names, whereas portfolio positioning across sectors and countries were detractors to performance. From a regional perspective, the overweight to Japan was the largest contributor to performance stemming mainly from stock selection while the overweight to Developed Asia was the largest detractor stemming mainly from allocation effects. From a sector perspective, Utilities which the fund is overweight was the largest contributor mainly resulting from stock selection effects, while poor stock selection made the overweight to Consumer Discretionary sector the largest detractor. The largest stock level contributor was the overweight to Novo Nordisk A/S and the largest stock level detractor was the underweight to NVIDIA Corporation.

Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of August 2023 the portfolio reflected a 50.8% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 23.2% price to book discount, a 29.9% price to cashflow discount and 37.8% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value

Note: Returns in parenthesis show the total return for the month ending 31 August 2023. All returns are given in local currency terms unless otherwise stated.

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Product Snapshot

  • Product Overview
  • Performance Review
  • Peer Comparison
  • Product Details

Product Overview

Fund Name APIR Code
? A Product Code is unique a identifier code issued by a group or governing body, to reference products in a large group. For an example, APIR codes are commonly used for Funds and Ticker codes are commonly used for Securities such as ETFs and Stocks.
Structure
?
Asset Class
? An Asset Class breakdown provides the percentages of core asset classes found within a mutual fund, exchange-traded fund, or another portfolio. Asset classes (in microeconomics and beyond) generally refer to broad categories such as equities, fixed income, and commodities.
Asset Category
? An Asset Category is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset categories (or a sub-asset class) are made up of instruments which often behave similarly to one another in the marketplace, looking down to the Asset Category level is important if looking to build a diversified portfolio.
Peer Benchmark Name
? A Peer Index (benchmark) refers to a peer group of investment managers who have the same investment style or category. It is used to compare the performance of one manager to their peer group, which makes it simpler for investors to choose between the vast number of investment managers.
Broad Market Index
? A Market Index (benchmark) refers to a hypothetical portfolio of investments that represents a segment, asset or category of an investable market. Market Indices are used to benchmark managers performance, to assist their style reliability and ability to provide excess returns.
FUM
? Funds/Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company.
Management Fee
? A management fee is a charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise for selecting finanical products and managing the portfolio.
Performance Fee
? A performance fee is a payment made to an investment manager for generating positive returns. This is as opposed to a management fee, which is charged without regard to returns. A performance fee can be calculated many ways. Most common is as a percentage of investment profits, often both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.
Spread
? A spread can have several meanings in finance. Basically, however, they all refer to the difference between two prices, rates or yields. In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity. This is known as a bid-ask spread.
Realindex Global Share Hedged-Class AFSF0975AUManaged FundsForeign EquityCurrency HedgedForeign Equity - Currency Hedged IndexDeveloped -World Index52.95 M0.47%0.00%0.2%

Performance Review

Fund Name Last Month
? Returns after fees in the most recent (last) month).
3 Months Return
? Returns after fees in the most recent 3 months.
1 Year Return
? Trailing 12 month returns.
3 Years Average Return
? Average Annual returns from the last 3 years.
Since Inc. Average Return
? Average (annualised) returns since inception
1 Year Std. Dev. (Annual)
? The standard deviation (or annual volatility) of the last 12 months.
3 Years Std. Dev. (Annual)
? The average standard deviation (or annual volatility) from the last 3 years.
Since Inc. Std. Dev. (Annual)
? The average standard deviation (or annual volatility) since the fund inception.
1 Year Max Drawdown
? The maximum drawdown in the last 12 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
3 Year Max Drawdown
? The maximum drawdown in the last 36 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Since Inc. Max Drawdown
? The maximum drawdown since inception - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Realindex Global Share Hedged-Class A1.8%5.17%26.43%11.03%11.94%9.29%13.36%14.53%-2.97%-16.39%-27.1%

Peer Comparison

Fund Name Peer Index Name
? A group of individuals who share similar characteristics and interests are called peer groups. Peer group analysis is an essential part of assessing a price for a particular stock in investment research. The emphasis here is on making a comparison, meaning that the peer group constituents should be more or less identical to the company being examined, especially in terms of their main business and market capitalization areas.
12 Months Excess Return
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
Excess Return Annualised Since Inception
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
12 Months Alpha
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over 12 months. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
Alpha Annualised Since Inception
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market annualized since inception. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
12 Months Beta
? Rolling 12Month Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
Beta Annualised Since Inception
? Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
12 Months Tracking Error
? 12Month Tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark over the last 12 months. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
Tracking Error Since Inception
? Since Inception tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark since inception. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
12 Months Correlation
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Correlation Since Inception
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Realindex Global Share Hedged-Class AForeign Equity - Currency Hedged Index1.35%0.55%NA%NA%NA%0.972.25%4.56%0.970.95

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
Realindex Global Share Hedged-Class AYesTower 1, Ground Floor, 201 Sussex St,Sydney, NSW, 2000+61 2 93782000https://www.cfs.com.au/-

Product Due Diligence

What is Realindex Global Share Hedged-Class A

Realindex Global Share Hedged-Class A is an Managed Funds investment product that is benchmarked against Developed -World Index and sits inside the Foreign Equity - Currency Hedged 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 Realindex Global Share Hedged-Class A has Assets Under Management of 52.95 M with a management fee of 0.47%, a performance fee of 0.00% and a buy/sell spread fee of 0.2%.

How has the investment product performed recently?

The recent investment performance of the investment product shows that the Realindex Global Share Hedged-Class A has returned 1.8% in the last month. The previous three years have returned 11.03% annualised and 14.53% each year since inception, which is when the Realindex Global Share Hedged-Class A 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 Realindex Global Share Hedged-Class A first started, the Sharpe ratio is NA with an annualised volatility of 14.53%. The maximum drawdown of the investment product in the last 12 months is -2.97% and -27.1% 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 Realindex Global Share Hedged-Class A has a 12-month excess return when compared to the Foreign Equity - Currency Hedged Index of 1.35% and 0.55% 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. Realindex Global Share Hedged-Class A has produced Alpha over the Foreign Equity - Currency Hedged Index of NA% in the last 12 months and NA% since inception.

What are similar investment products?

For a full list of investment products in the Foreign Equity - Currency Hedged Index category, you can click here for the Peer Investment Report.

What level of diversification will Realindex Global Share Hedged-Class A provide?

Realindex Global Share Hedged-Class A has a correlation coefficient of 0.95 and a beta of 0.97 when compared to the Foreign Equity - Currency Hedged 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 Realindex Global Share Hedged-Class A and its peer investments, you can click here for the Peer Investment Report.

How do I compare the Realindex Global Share Hedged-Class A with the Developed -World Index?

For a full quantitative report on Realindex Global Share Hedged-Class A compared to the Developed -World Index, you can click here.

Can I sort and compare the Realindex Global Share Hedged-Class A to do my own analysis?

To sort and compare the Realindex Global Share Hedged-Class A financial metrics, please refer to the table above.

Has the Realindex Global Share Hedged-Class A 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 Realindex Global Share Hedged-Class A?

If you or your self managed super fund would like to invest in the Realindex Global Share Hedged-Class A please contact Tower 1, Ground Floor, 201 Sussex St,Sydney, NSW, 2000 via phone +61 2 93782000 or via email -.

How do I get in contact with the Realindex Global Share Hedged-Class A?

If you would like to get in contact with the Realindex Global Share Hedged-Class A manager, please call +61 2 93782000.

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the Realindex Global Share Hedged-Class A. All data and commentary for this fund is provided free of charge for our readers general information.

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Historical Performance Commentary

Performance Commentary - July 31, 2023

Realindex Global Share Value (Hedged) returned +3.57% (net of fees) during July, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +3.09% (in AUD). The AUD rose 1.2% against the USD over the month.

Global stocks performed well in July, with the MSCI All Country World Index posting positive gains. Abating inflation in the US and abroad, and increasing evidence pointing to a soft landing has helped support global equities. US headline inflation fell more than expected to 3% year on year. In response, the S&P 500 index rose 3.2% in USD terms in July, taking year to date returns to over 20%. This was despite the US Federal Reserve raising rates by 25 basis points in line with market expectations. More broadly, Developed Markets delivered positive performance in July, but it was the riskiest sectors and regions that were the top performers. Energy, Materials and Communication Services led the market, each sector posting more than 5% for the month in AUD terms, while Small cap stocks and the MSCI Emerging Markets Index also strongly performed. In China, GDP growth slowed in the second quarter, but despite this, the MSCI China Index posted a solid 9.1% in local currency and pushed Asian equities higher in July – largely a response to policy easing and hopes for further stimulus within the Chinese economy. Within MSCI All Country World, Energy (+5.2%), Communication Services (+5.0%) and Materials (+4.2%) led the market, while Utilities (+0.7%) and Health Care (+ 0.2%) lagged.

Value stocks outperformed Growth stocks by 0.9% over the month (MSCI AC World ex AU Value +2.8% vs. Growth +2.0%, in AUD) as value oriented sectors outperformed and growth oriented sectors such as Technology posted modest gains. Over the past year, Value has underperformed Growth by 5.7% (AUD) and on a five year basis by 5.7% p.a. (AUD), providing a significant longer-term performance headwind.

Within this environment, from a region allocation perspective, the fund benefited from its overweight to Emerging Markets while the fund’s overweight to Europe detracted performance. Stock selection within North America was a significant contributor with minimal detraction across other regions. From a sector allocation perspective, the fund benefited from its overweight to Financials and underweight to Information Technology. Stock selection within Financials, Materials and Industrials were also major contributors to the fund’s performance. However, stock selection within Communication Services and Information Technology were small detractors. The largest stock level contributor was the underweight to Microsoft Corporation and the largest stock level detractor was the underweight to NVIDIA Corporation.

Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of July 2023 the portfolio reflected a 51.0% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 24.2% price to book discount, a 31.7% price to cashflow discount and 37.0% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value

Note: Returns in parenthesis show the total return for the month ending 31 July 2023. All returns are given in local currency terms unless otherwise stated.

Performance Commentary - May 31, 2023

Realindex Global Share Value (Hedged) returned -2.12% (net of fees) during May, versus the MSCI All Countries World ex Australia Net Index Hedged which returned -0.32% (in AUD). The AUD fell 2.1% against the USD over the month.

Global equity markets were generally weaker in May following uncertainty around the US government default and rising bond yields following further rate rises by the Federal Reserve. Despite a resolution to the US government debt ceiling and generally positive economic data, US equity markets failed to make strong returns with the exception of a select number of large cap Information Technology names amid growing expectations of the future potential of AI. This contrasted with Energy and Materials stocks, which were among the weakest performers in May amid concerns over the demand outlook. Equity market weakness was also seen in Europe, with signs of worsening economic conditions. This was in contrast to Japan, with the Nikkei 225 and TOPIX Index reaching fresh 33-year highs following signs of continued economic recovery. Emerging Markets were also weak, with Chinese equities underperforming following weaker than expected economic data. As a result, Information Technology names posted the strongest gains in May (MSCI ACWI IT: +10.4%), while Energy was the worst performing sector (MSCI ACWI Energy -7.2%).

Within this environment, the strategy underperformed the strength of Growth based names during the month; with Value underperforming Growth by 6.5% (MSCI AC World ex AU Value -2.2% vs. Growth +4.3%, in AUD). Over the past year, Value has underperformed Growth by 13.0% (AUD) and on a five-year basis by 5.6% p.a. (AUD), providing a significant longer-term headwind for performance.

Regionally, much of this underperformance was driven by the underweight positioning to North America, specifically the underweight to a select number of Technology and Technology adjacent names including Tesla, Amazon, Microsoft, Apple and NVIDIA. However, the overweight to Japan offset some of these losses. From a sector perspective, the largest detractor was the underweight to Information Technology, in particular semi-conductors while favourable positioning in Health Care helped performance. The largest stock level detractor was the underweight to NVIDIA Corporation given its strong reported earnings amidst renewed interest in AI related stocks. The largest contributor was the overweight to Meta Platforms, Inc.

Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of May 2023 the portfolio reflected a 54.0% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 25.6% price to book discount, a 31.7% price to cashflow discount and 37.3% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value.

Performance Commentary - April 30, 2023

Realindex Global Share Value (Hedged) returned +1.96% (net of fees) during April, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +1.34% (in AUD). The AUD fell 1.3% against the USD over the month.

Global markets were mixed amidst persistent inflation which continued to pose a challenge to central banks. US stocks made limited gains in April led by large caps, as investor optimism resulting from the Fed’s anticipated moderation of monetary policy was tempered by concerns over economic growth.

Uncertainty in the banking sector also continued with the collapse of First Republic bank. In Europe, equity markets advanced on the back of positive corporate earnings. Japan’s stock markets gained due to the Bank of Japan signalling policy continuity and upgrading inflation forecasts, while China reaffirmed its supportive policy stance for the economy amidst growing exports and consumer demand. Despite this, China’s equity market continued to underperform in April, leading emerging markets lower as concerns over its political stance on Taiwan, relationship with Russia and ongoing regulations with the private sector still weigh on investors.

Overall, global equity markets gained in April, led largely by developed markets with the MSCI ACWI Index posting +2.8% in AUD terms. This was led by Energy (+5.5%) and Consumer Staples (+5.2%). IT and Consumer Discretionary names were the laggards for April each posting +0.7% and +0.5% respectively.

In this environment Value stocks outperformed Growth stocks by 0.7% over the month (MSCI AC World ex AU Value +3.2% vs. Growth +2.5%, in AUD). Over the past year Value has outperformed Growth by 1.4% (AUD), while on a five year basis Growth has outperformed Value by 5.0% p.a. (AUD), providing a significant longer-term performance headwind. As such, the portfolio benefitted especially from its Value positioning in Emerging Markets as Value stocks (MSCI EM Value) outperformed Growth (MSCI EM Growth) stocks by more than 3% for the month.

Performance Commentary - February 28, 2023

Realindex Global Share Value (Hedged) returned -1.00% (net of fees) during February, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned -2.02% (in AUD). The AUD fell 4.3% against the USD over the month.

Global markets were mixed in February, with stronger performance in Developed Markets, in particular Europe, and weaker returns in Emerging Markets (EM). A warmer European winter along with their ability to diversify energy imports have meant a fully-fledged energy crisis has not materialised. This, along with China’s reopening, has brought a degree of softening or cautious optimism in the global economy. In short, we have witnessed a degree of global resilience. However, this also means inflationary concerns will remain persistent, with the Federal Reserve likely to continue its hawkish stance. Bond yields have risen as a result, with a strong degree of inversion between the 2 and 10 year yields. In the MSCI All Countries World Index, IT (+4.1%) and Industrials (+3.3%) were the best performing sectors, while Materials (-1.6%) and REITs (-1.5%) struggled throughout the month.

Within this environment, Value underperformed Growth by 0.6% over the month (MSCI AC World ex AU Value +1.3% vs. Growth +1.9%, in AUD). Over the past year, Value has outperformed Growth by 11.0% (AUD), while on a five year basis Growth has outperformed Value by 3.4% p.a. (AUD), providing a significant longer-term headwind for performance.

The fund outperformed the benchmark due to strong stock selection within EM (+23bps) and Europe (+23bps), while in general the largest detractor was the overweight to Developed Asia. Stock selection within Communication Services was also a strong contributor (+24bps) and largely attributed to the overweight in Meta Platforms. Overall, the largest detractor was the underweight Information Technology, with household names such as NVDIA Corporation, Microsoft, Tesla and Apple posting strong gains for the month.

Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of February 2023 the portfolio reflected a 47.8% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 24.8% price to book discount, a 34.8% price to cashflow discount and 35.7% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value

Note: Returns in parenthesis show the total return for the month ending 28 February 2023. All returns are given in local currency terms unless otherwise stated.

Performance Commentary - January 31, 2023

Realindex Global Share Value (Hedged) returned +5.97% (net of fees) during January, versus the MSCI All Countries World ex Australia Net Index Hedged which returned +6.23% (in AUD). The AUD rose 3.9% against the USD over the month.

Global markets were off to a solid start in January as falling inflation, relatively robust economic data, and China’s COVID policy change, drove investor hopes of a “soft landing” for the global economy. Equities, bonds and alternatives generally rose on the back of this renewed optimism while bond yields declined and equity market volatility fell to its lowest level in almost a year. The MSCI All Countries World Index posted 3.1% in AUD terms, led by strong performance from key countries such as the United States and China. The S&P 500 posted over 6% in local terms and China due to the improved economic momentum and confidence performed well, both onshore (CSI 300 Index +7.3%) and offshore (Hang Seng Index +10.4%). Growth oriented sectors performed well with Consumer Discretionary (+9.8%), Communication Services (+8.9%) and Information Technology (+6.3%) leading the way. Whilst, Value oriented defensive sectors such Health Care (-4.2%), Utilities (-3.9%), Consumer Staples (-2.5%) and Energy (-0.9%) underperformed.

Within this risk on market environment, Value stocks underperformed Growth stocks by 4.5% over the month (MSCI AC World ex AU Value +0.9% vs. Growth +5.4%, in AUD). Over the past year Value has outperformed Growth by 12.6% (AUD), while on a five year basis Growth has outperformed Value by 3.7% p.a. (AUD), providing a significant longer-term performance headwind.

Despite the underperformance of Value indices, the fund managed to perform roughly in line with the benchmark. This is largely due to positive allocation effects in Europe which the fund was overweight and good stock selection in the US which the fund was underweight. Regionally, the largest contributor was the underweight to North America and the largest detractor was the overweight to Emerging Markets. From a sector perspective, the largest contributor from an asset allocation viewpoint was the underweight to Health Care, while Financials generated the largest contribution; largely from stock selection. The underweight to Information Technology was the largest sector detractor due to both poor stock selection and allocation effects. The largest stock level contributor was the overweight to Meta Platforms, Inc. and the largest stock level detractor was the underweight to Tesla, Inc.

Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of January 2023 the portfolio reflected a 51.6% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 28.1% price to book discount, a 35.1% price to cashflow discount and 35.9% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value.

Performance Commentary - December 31, 2022

Realindex Global Share Value (Hedged) returned +9.98% (net of fees) during the December quarter, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +7.03% (in AUD). The AUD rose 5.5% against the USD over the quarter.

Overall the MSCI ACWI Index was down 12.5% in 2022, with both global equities and bonds declining against a surge in inflation, slowing economic growth, geopolitical tensions and monetary tightening. US equity markets had a mixed final quarter despite lower-than-expected inflation and signals that the Federal Reserve may slow the pace of rate increases. In response, the S&P 500 rose almost 2.0%, constrained by end of year sell-offs in Technology and Consumer Discretionary names, while in Europe, shares rose strongly on signs of slowing inflation and potential policy easing by central banks. In China, stocks were largely flat as Beijing moderated its zero-tolerance approach to COVID-19, but economic activity was disrupted by Covid outbreaks.

The MSCI All Countries World Index rose 4.1% for the quarter led by strong performances in Energy (+11.7%) and Industrials (+11.4%), while Consumer Discretionary (-5.9%) and Communication services (-2.9%) lagged for the quarter. With this backdrop, the fund strongly benefitted from Value stocks which outperformed Growth stocks by 8.5% over the quarter (MSCI AC World ex AU Value +8.2% vs. Growth -0.3%, in AUD). Over the past year Value has outperformed Growth by 22.6% (AUD), while on a five year basis Growth has outperformed Value by 3.1% p.a. (AUD), providing a significant longer-term performance headwind.

Regionally, the largest contributor to performance was the underweight to North America with stock selection being the most significant driver contributing over 260bps, while the largest detractor was the overweight to Developed Asia, though the detraction relatively small in comparison. From a sector perspective, the fund’s largest contributor was the overweight to Consumer Discretionary though much of this was driven by stock selection effects; in particular the underweight to Tesla Inc. The largest sector detractor was the overweight to Consumer Staples again driven by stock selection effects though the detraction was small by comparison. The fund’s largest stock level contributor was the underweight to Tesla Inc, while the largest stock level detractor was the overweight to Meta Platforms, Inc.

Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of December 2022 the portfolio reflected a 52.0% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 26.4% price to book discount, a 33.3% price to cashflow discount and 36.7% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value.

Performance Commentary - November 30, 2022

Realindex Global Share Value Hedged returned +6.80% (net of fees) during November, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +6.04% (in AUD). The AUD rose 4.7% against the USD over the month.

With signs that global inflation may be easing in November, global equity markets were boosted by speculation that interest rates in key regions may not need to be raised significantly. The MSCI World Index rose 5.7%, although the gain was lower in AUD terms due to the strength of the Australian dollar. In the United States and Europe, major indices such as the S&P 500 (+5.4%), NASDAQ (+4.4%) and Euro Stoxx 50 (+9.6%) registered solid gains. However, Asian markets took the lead with strong returns from the CSI 300 (+9.8%) and Hang Seng (+26.6%) due to optimism around potential relaxation of China’s COVID restrictions. In Developed Markets, Materials (+8.9%) and Industrials (+4.1%) within the MSCI World index led performance, while Energy lagged (-1.5%) following falls in Oil prices in November. The strength in Emerging Markets was most seen in Real Estate (+29.6%) and Consumer Discretionary (+20.1%) while the weakest sector was Utilities (+2.3%).

Value stocks outperformed Growth stocks marginally by 0.1% over the month (MSCI AC World ex AU Value +2.8% vs. Growth +2.8%, in AUD). Over the past year Value has outperformed Growth by 25.0% (AUD), while on a five year basis Growth has outperformed Value by 3.7% p.a. (AUD), providing a significant longer-term performance headwind.

The fund benefitted from the underweight to North America though stock selection within the United States and was a key contributor to performance. The overweight to Europe contributed the least to performance largely due to stock selection effects. From a sector perspective, the largest contributor was the overweight to Financials and the largest detractor was the overweight to Consumer Staples, both the result of stock selection effects. The largest stock level contributor was the underweight to Apple Inc. and the largest stock level detractor was the exclusion of NVIDIA Corporation.

Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of November 2022 the portfolio reflected a 55.8% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 26.9% price to book discount, a 32.8% price to cashflow discount and 36.8% price to sales discount. The Emerging Markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value.

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