Solaris Core Australian Equity Retail (WHT0012AU) Report & Performance

What is the Solaris Core Australian Equity Retail fund?

The objective of the Fund is 3.0% p.a. outperformance of the S&P/ASX 200 Accumulation Index over rolling 3 year periods. Solaris has no consistent bias towards value or growth stocks, therefore the investment style can be described as style-neutral. Solaris picks stocks using fundamental analysis to exploit market inefficiencies in forecasts and valuations. Fundamental analysis and stock selection are optimized by analysts being empowered and rewarded as portfolio managers.

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For Solaris Core Australian Equity Retail

Solaris Core Australian Equity Retail Fund Commentary September 30, 2023

Equity markets across the globe retraced gains made at the start of the financial year and delivered negative absolute returns in the September quarter as moves higher in global bond yields prompted weakness in equity markets. The S&P/ASX 200 Accumulation index delivered returned -0.8%, outperforming global markets as the S&P 500 returned -3.7% and the MSCI World returned -2.5% in local currency.

Volatility returned during the quarter, firstly throughout August reporting season as companies’ delivered results and then as the macrooutlook dominated headlines and drove uncertainty. Despite the Reserve Bank of Australia and Federal Open Market Committee electing to keep rates on hold during the September meetings the US 10 year yield reached a high of 4.6%, it’s highest level since 2007 while the Australian 10 year yield hit 4.5% as timing for prospective rate cutes was pushed out.

Momentum in the oil price, WTI Oil up over 25% supported the Energy sector (+11.2%), the best performing sector for the quarter, followed by Consumer Discretionary (+5.3) and Financials (+2.4%). The worst performing sectors were Healthcare (-8.6%), Consumer Staples (-5.9%) and Information Technology (-5.8%).

The top 3 performing stocks in the index for the quarter included Megaport (+63.0%) after company management for the networking service business delivered the FY23 result and subsequently provided strong guidance for FY24, Paladin Energy (+50.7%), the uranium miner benefitted from ongoing strength in uranium pricing and G.U.D Holdings (+35.9%) as the car product distributor reported results showing a 32% increase in Net Profit after Tax and Amortisation.

The bottom three performers included Chalice Mining (-62.9%) as the mineral explorer released a disappointing mine scoping study. Core Lithium (-55.0%), underperformed following an operational update that downgraded production guidance for future years and subsequently undertook a capital raising during the month and Sayona Mining (-46.9%), mineral explorer, despite first shipment of spodumene, the company share price continued to underperform due to lower spodumene prices.

A portfolio holding in focus is Altium, which is of one of our preferred holdings in the Software & Services sector. Altium is a global provider of software for Electronic Computer Aided Design, in addition to Parts listing platform, Octopart. Altium delivered a solid FY23 result showing the broader business is performing well. The management team have been successful in executing on their strategy of converting customers from Standalone to Term and SAS based licensing and breaking into the Enterprise customer segment due to their Cloud platform offering.

Solaris continues to see opportunity and growth in Altium, supported by the announcement of multiple Enterprise customers including a significant exclusive deal with Japanese Semiconductor company Renesas.

READ HISTORICAL PERFORMANCE COMMENTARIES

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.
Solaris Core Australian Equity RetailWHT0012AUManaged FundsDomestic EquityAustralia Large Blend - Core / Style NeutralDomestic Equity - Large Cap Neutral IndexASX Index 200 Index772.06 M0.9%00.6%

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.
Solaris Core Australian Equity Retail6.53%7.76%11.16%8.7%7.57%12.15%13.13%14.45%-7.06%-11.91%-28.77%

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.
Solaris Core Australian Equity RetailDomestic Equity - Large Cap Neutral Index-3.34%-0.18%-0.32%-0.01%-0.01%1.054.72%2.63%0.930.98

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
Solaris Core Australian Equity RetailYes-https://solariswealth.com.au/-

Product Due Diligence

What is Solaris Core Australian Equity Retail

Solaris Core Australian Equity Retail 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 Solaris Core Australian Equity Retail has Assets Under Management of 772.06 M with a management fee of 0.9%, a performance fee of 0 and a buy/sell spread fee of 0.6%.

How has the investment product performed recently?

The recent investment performance of the investment product shows that the Solaris Core Australian Equity Retail has returned 6.53% in the last month. The previous three years have returned 8.7% annualised and 14.45% each year since inception, which is when the Solaris Core Australian Equity Retail 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 Solaris Core Australian Equity Retail first started, the Sharpe ratio is 0.42 with an annualised volatility of 14.45%. The maximum drawdown of the investment product in the last 12 months is -7.06% and -28.77% 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 Solaris Core Australian Equity Retail has a 12-month excess return when compared to the Domestic Equity - Large Cap Neutral Index of -3.34% and -0.18% 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. Solaris Core Australian Equity Retail has produced Alpha over the Domestic Equity - Large Cap Neutral Index of -0.32% in the last 12 months and -0.01% 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 Solaris Core Australian Equity Retail provide?

Solaris Core Australian Equity Retail has a correlation coefficient of 0.98 and a beta of 1.05 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 Solaris Core Australian Equity Retail and its peer investments, you can click here for the Peer Investment Report.

How do I compare the Solaris Core Australian Equity Retail with the ASX Index 200 Index?

For a full quantitative report on Solaris Core Australian Equity Retail compared to the ASX Index 200 Index, you can click here.

Can I sort and compare the Solaris Core Australian Equity Retail to do my own analysis?

To sort and compare the Solaris Core Australian Equity Retail financial metrics, please refer to the table above.

Has the Solaris Core Australian Equity Retail 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 Solaris Core Australian Equity Retail?

If you or your self managed super fund would like to invest in the Solaris Core Australian Equity Retail please contact via phone or via email .

How do I get in contact with the Solaris Core Australian Equity Retail?

If you would like to get in contact with the Solaris Core Australian Equity Retail manager, please call .

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the Solaris Core Australian Equity Retail. All data and commentary for this fund is provided free of charge for our readers general information.

Historical Performance Commentary

Performance Commentary - August 31, 2023

The S&P/ASX 200 Accumulation index delivered -0.7% in August outperforming global markets which also delivered negative absolute returns with the S&P500 returning -1.8% and the MSCI World down -1.7%.

August reporting season saw 162 companies deliver results and brought a marked increase in intraday volatility and dispersion between winners and losers. The broader economy has demonstrated resilience as revenue has marginally exceeded expectations however there has been margin compression resulting from headwinds such as labour costs, interest costs, and higher inflation throughout businesses.

The Reserve Bank of Australia (RBA) elected to keep rates on pause and so the cash rate remains at 4.1% Against a backdrop where earnings downgrades outnumbered upgrades, 8 out of 11 sectors posted negative returns for the month.

Consumer Discretionary (+5.7%), Property (+1.6%) and Energy (+0.5%) were the best performers. Utilities (-3.8%), Consumer Staples (-3.2%) and Information Technology (-2.1%), were the worst performing sectors.

The top three performers included Altium (+26.7%) as the company delivered a strong FY23 result and reiterated aspirational 2026 targets, demonstrating that their strategy is working; Inghams Group (+24.3%) as the poultry farmer’s FY23 and future guidance exceeded the market’s expectations and G.U.D Holdings (+24.0%) as the car product distributor reported results showing a 32% increase in Net Profit after Tax and Amortisation.

The worst performers were Chalice Mining (-39.6%) as the share price of the mineral explorer reacted to the announcement of a disappointing mine scoping study; Iress (-38.3%), the financial services software provider delivered a disappointing result and cut their dividend and Core Lithium (-38.3%) as the Lithium explorer reached 12 months lows after undertaking a capital raising during the month.

A portfolio holding in focus is Altium, which is of one of our preferred holdings in the Software & Services sector.

Altium is a global provider of software for Electronic Computer Aided Design, in addition to Parts listing platform, Octopart. Altium delivered a solid FY23 result showing the broader business is performing well. The management team have been successful in executing on their strategy of converting customers from Standalone to Term and SAS based licensing and breaking into the Enterprise customer segment due to their Cloud platform offering.

Solaris continues to see opportunity and growth in Altium, supported by the announcement of multiple Enterprise customers including a significant exclusive deal with Japanese Semiconductor company Renesas.

Performance Commentary - July 31, 2023

The S&P/ASX 200 Accumulation index delivered 2.9% for July, underperforming global markets as the MSCI World returned 3.3% and in the US, the S&P500 returned 3.1% in USD.

Equity markets were supported by improving commodity prices, with Energy names outperforming on the back of stronger prices with Brent Crude Oil up 14.2%. Further, Iron Ore prices were stable over the month while Gold rebounded from its decline in June, up 2.4% for the month Meanwhile, despite strong employment data, the Reserve Bank of Australia (RBA) left cash rates unchanged at 4.10% but noted further increases may be required.

The top-performing sector for the month was Energy (+8.8%) aided by oil prices, followed by Financials (+4.9%) and Information Technology (+4.5%). The worst-performing sectors were Healthcare (-1.5%), Consumer Staples (-1.0%) and Materials (+1.4%)

The top three performers included Megaport (41.3%), after company management for the networking service business delivered the FY23 result and continued to provide positive guidance for future years. Flight Centre Travel (+22.7%), as the travel company upgraded profit guidance, noting better demand from corporate clients and Costa Group Holdings (+21.7%), the share price of the fresh produce company surged after receiving a bid from a Private Equity firm.

The worst performers were Core Lithium (-28.9%), the most shorted stock in the ASX200, underperformed following an operational update that downgraded production guidance for future years. Lake Resources (-25.0%) continued to underperform following a disappointing management update in June, and further announcement of increased capital expenditure. Syrah Resources (-22.7%) underperformed as the graphite producer keeps production paused due to oversupply and low prices for graphite.

Performance Commentary - June 30, 2023

The S&P/ASX 200 Accumulation index delivered 1.0% for the June quarter bringing the index return to 14.8% for the 2023 Financial Year. The local market underperformed the US equity market, as the S&P 500 returned 8.3% in the June quarter and 15.9% for the financial year, driven by ongoing outperformance by technology stocks in the latter half of the period.

The Reserve Bank of Australia (RBA) raised interest rates by 50 basis points during the quarter, bringing the cash rate to 4.10%, and with hawkish commentary and economic data prints not yet indicating a broad economic slowdown, expectations are for further rate hikes to continue.

In terms of commodities, the month of June witnessed a reversal of the 12-month trend; Iron Ore up +8.1% for the month vs -7.1% for the year, Brent Crude Oil up +3.1% but down -34.8% for the year whereas Gold retreated -2.2% for the month but returned +6.2% for the year. The top-performing sector for the quarter was Information Technology (+21.1%) buoyed by the strong performance of global technology stocks, followed by Utilities (+5.5%) and Energy (+3.8%). Conversely, the worst-performing sectors were for the quarter were Healthcare (- 3.2%), Materials (-2.5%), and Consumer Discretionary (-1.7%).

The top three performers included Megaport (+75.2%) after company management for the networking service business announced significant upgrades to earnings for the next two financial years, Telix Pharmaceutical (62.6%) the biotech firm provided a positive quarterly update with increased revenue and demand for their diagnostic imaging agent and Life 360 (+53.8%) which provided a positive Q1 update indicating the growing technology safety company is on track to be cash-flow positive this financial year.

The worst performers were Syrah Resources (-50.7%), who continues to underperform following April’s quarterly business update and subsequent capital raising through a convertible note; Lake Resources (-32.6%) whose share price fell post management update that disappointed due to timing delays and Perseus Mining (-30.7%) following an escalation of armed conflict near their goldmine in Sudan and deferral of their final investment decision.

Performance Commentary - May 31, 2023

The S&P/ASX 200 Accumulation index experienced a decline of -2.5% in May, underperforming global equities as the S&P500 delivered +0.2% and the MSCI World delivered -1.25% in local currency. The strength of technology stocks buoyed US equity markets as concerns regarding the US banking sector faded, and focus shifted to artificial intelligence (AI). Notably, NVIDIA, a US tech company, upgraded earnings from AI, and its share price surged over 50%.

The rate-hiking cycle of global central banks continues, with the Reserve Bank of Australia (RBA) increasing by 25 basis points to bring the cash rate to 3.85%. The US Federal Reserve also increased rates by 25 basis points. Meanwhile, commodity prices were under pressure during the month, with Iron Ore down over 4.5%, Oil (WTI) down over 11% and Gold down 1.4%.

Australian technology stocks performed well alongside their US peers, with Information Technology (+11.6%) the clear topperforming sector for the month, followed by Utilities (1.1%) and Energy (+0.2%). Conversely, the worst-performing sectors were Consumer Discretionary (-6.1%), Consumer Staples (-4.6%) and Materials (-4.4%).

The top three performers included Life360 (+34.1%), which provided a positive Q1 update indicating the growing technology safety company is on track to be cash-flow positive this financial year. Lithium miners Lake Resources (+26.2%) and Allkem (+21.2%) also outperformed, with Allkem announcing a merger with US manufacturer, Livent.

The worst performers were Syrah Resources (-26.0%), who continues to underperform following April’s quarterly update and subsequent capital raising through a convertible note; Lovisa (-22.5%), as local and international peers downgraded, impacting the fast fashion jewellery chain and IDP Education (-22.5%) sold off post announcement that their stranglehold in the Canadian market will be opened to competitors, impacting future earnings.

A portfolio holding in focus is Worley, a global provider of project delivery and consulting services to the Energy and Resources industries. Historically, Worley’s business primarily involved consulting services for carbon-intensive industries such as Oil & Gas, Resources, and Chemicals, resulting in earnings that were closely tied to the capex cycles of these companies, making them cyclical in nature. However, as the world undergoes a significant transition toward achieving net-zero emissions, Worley has strategically positioned itself as a leader in sustainability. They are poised to benefit from the increasing investment in energy transition and decarbonization initiatives.

Worley offers a diverse range of services in key areas including Carbon Capture and Storage, Hydrogen, and Wind. Currently, approximately 35% of their revenues are derived from sustainability projects, and they have set an ambitious target of reaching 75% by 2026. This commitment was reaffirmed by management during a recent investor day, where they highlighted the strong outlook and margins for sustainability projects.

Solaris expects continued earnings growth, that is less cyclical in nature given the future investment in decarbonisation by energy and resources companies and given Worley’s position as market and technical leader in this space.

Performance Commentary - April 30, 2023

The S&P/ASX 200 Accumulation Index returned 1.85% in April. The Reserve Bank of Australia paused rate hikes as they sought time to assess the lagged impact of the previous ten hikes, despite the strong domestic labour market. Investors viewed the pause as supportive for equities and aided the delivery of a positive return for the market for the month.

Throughout the month, mining companies provided quarterly trading updates, with many proving disappointing, citing challenges on production, weather and costs. Materials was the only sector to deliver a negative return, driven by the quarterly updates. The exception was gold companies that outperformed as gold prices continued to rally.

Real Estate (+5.3%) was the top performing sector for the month as the relief in rate hikes was positive, specifically for companies with residential exposure. Information Technology (+4.7%) and Industrials (+4.5%) were also strong performers.

Conversely, the challenging quarterly updates from miners led Materials (-2.6%) to be the worst-performing sector for the month, followed by Utilities (+1.4%) and Energy (+1.7%). The top three performers included Telix Pharmaceutical (+47.1%), the biotech firm provided a positive quarterly update with increased revenue and increased demand for their diagnostic imaging agent. Megaport (+36.7%) after company management announced significant upgrades to earnings for the next two financial years, and Blackmores (+35.0%) received a takeover bid at a substantial premium, $95, from Japanese company Kirin Holdings.

The worst performers were Syrah Resources (-37.1%), whose share price fell following a disappointing quarterly update and subsequent capital raising through a convertible note; Brainchip (-14.7%), the semiconductor company continues to underperform with full-year results showing another loss. Star Entertainment Group (-11.2%) also underperformed after announcing a downgrade to earnings from challenging operating conditions resulting in a reduction of staff.

Performance Commentary - March 31, 2023

The first quarter of 2023 has seen the first cracks of the global rising rate cycle with the collapse of Silicon Valley Bank in the US, and the takeover of Credit Suisse by UBS in Switzerland. The higher bond yields have weighed on equities, but these events were viewed as signs of fragility in the global financial system, and prompted volatility in Australia, with the local markets giving back most of the gains from the strong start to the year, underperforming global equity markets. The S&P/ASX 200 Accumulation index finished the quarter up 3.5%.

Despite the volatility in equity and credit markets, central banks continue to raise rates as inflation continues to print high, albeit declining in Aus. The RBA raised rates for the 9th and 10th consecutive times to bring the official cash rate to 3.6% in Australia, while the Bank of England and the FOMC also raised rates during the period.

The top-performing sectors were Consumer Discretionary (+11.4%), Communication Services (+9.4%) and Information Technology (+8.1%). The worst-performing sectors were Financials (-3.0%), Energy (-1.0%) and Real Estate (+1.2%).

The top three performers for the quarter were all beneficiaries of take-over bids including Liontown Resources (+95.5%), United Malt Group (+36.9%), and Newcrest Mining (+33.0%). Liontown Resources, a lithium exploration and mining company, received a bid from US company Albermarle at a ~65% premium to its share price, which was rejected by the board. United Malt Group received a takeover bid from Malteries Soufflet and entered exclusive due diligence while gold miner, Newcrest Mining, received a non-binding indicative offer from US entity, Newmont Corporation.

The worst performers were Lake Resources (-44.4%), Brainchip (-36.2%) and Megaport (-34.7%). Lake Resources reached 52- week lows and was impacted by the chairman selling, while Brainchip, developer of AI software delivered a disappointing full year result. Megaport’s CEO abruptly resigned, causing the stock to decline 15%.

Performance Commentary - February 28, 2023

After a solid start to the year, equity markets pulled back in February as the S&P/ASX 200 Accumulation index returned -2.5%, in line with global markets as the S&P500 returned -2.6% and MSCI World ex Australia -2.4%.

Central banks remained hawkish, and bond markets priced higher rates, with the yield on the U.S. 1yr bond reaching over 5% for the first time in 20 years. The Reserve Bank of Australia raised rates again in February, bringing the Australian cash rate to 3.35%. While the macro environment continues to prove a headwind to equities, the Australian reporting season provided an opportunity for further volatility at the sector and company level, as over 300 companies reported during the month.

At a sector level, the best performers were Utilities (+3.4%), Information Technology (+2.7%) and Industrials (+1.5%). The worst performers were Materials (-6.6%), Financials ex property (-3.2%) and Energy (-0.8%).

At a company level, two of the top three performers were automobile related, including G.U.D. Holdings (+25.3%) on positive half-year results showing auto sales momentum improving, and Eagers Automotive (+19.9%) delivering strong FY22 results and positive guidance for FY23. Link Administration Holdings (+19.3%) outperformed from news flow on a possible resolution to pending FCA regulatory issues and associated fines.

Conversely, Domino’s Pizza (-33.1%) underperformed after delivering a disappointing result and concerns regarding margin pressure. Mining was one of the worst-performing sectors, led by Lake Resources (-23.3%), impacted by a fall in lithium price and Silver Lake Resources (-22.7%) as gold stocks were impacted by rising real yields.

A portfolio holding in focus is Orica, a global Ammonium Nitrate (AN) manufacturer and technology provider operating across Australasia, the Americas, Europe, and Africa. Disruption in the ammonia market from European curtailments has resulted in higher AN prices globally and on the East Coast of Australia. Orica are positioned to benefit, given the favorable industry structure as Orica is generally one of two main players and will be able to pass on higher AN prices to customers. We expect to see a subsequent uptick in sales and profits, and this is further supported by the cost advantage Orica has with supply of lowcost gas on the East Coast of Australia (gas is a feedstock in making AN). Orica’s technology offering is also notable. They are well advanced compared to competitors in their higher margin technology offer. Management have been investing time and capital into broadening their offer which utilizes digital and automated technologies to create safer and more productive blast outcomes for customers. We expect strong earnings growth over the next few years as the benefit of higher AN prices, and a superior technology offering is realized by the focused management team.

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