Tribeca Alpha Plus Class A (ETL0069AU) Report & Performance

What is the Tribeca Alpha Plus Class A fund?

The Tribeca Alpha Plus Fund is a long/short equity strategy that enables investors to benefit from rising and falling markets by taking long or short positions to profit from positive or negative share price movements. Tribeca can take advantage of negative views of stocks and sectors, as well as weaker fundamentals – short selling a range of stocks with weak investment characteristics and reinvesting the proceeds in long positions in preferred stocks.

  • The investment approach  blends fundamental and quantitative strategies that aim to identify investment opportunities.
  • Benefits of the approach are the significant amounts of company detail that can be unearthed and used to generate insights into its future prospects and likely investment returns.
  • The Fund has an alpha target of 5-6%, a common target for concentrated funds.
  • The Fund has a diversified portfolio and holds, on average 60-70 long positions and 30-40 short positions.

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For Tribeca Alpha Plus Class A

Tribeca Alpha Plus Class A Fund Commentary September 30, 2023

Global equity markets were soft in the September quarter, however the S&P/ASX200 Accumulation Index (-0.77%) comfortably outperformed global benchmarks such as the MSCI World (-3.8%) and the S&P500 (-3.7%). Macro forces continue to pressure equities as the market grapples with uncertainties around the path forward for inflation as well as about whether the economy is headed for a major slow-down. There was a significant steepening of the yield curve through the quarter, as the 2-year Australian bond yield fell 13 basis points while the 10-year yield rose 46 basis points. Such a move in the yield curve, referred to as a Bull Steepener, is quite rare for late in a hiking cycle, and pushes back on the narrative of muted economic growth and taming inflation. Rising long term rates is a sign that the economy is more resilient than expected.

Reporting season was the key focus during the quarter, shifting attention off the macro questions that have driven much of the volatility this year. At a high level FY23 results were in line, with beats and misses squaring up. However, guidance was soft as cost pressures (mostly labour and interest rates) drove earnings downgrades for FY24. During the month, ASX200 EPS estimates for FY24 came down by 2.4%. On this measure (revision to next 12-month earnings estimate), it has been one of the worst reporting periods in the past 2 decades. Interestingly all the damage to forecasts was done at the cost line, with revenue expectations holding up.

The best performing sectors were Energy (+8.0%), Consumer Discretionary (+4.0%) and Financials (+1.4%). The energy sector was buoyed by a sharp move higher by Brent Crude which supported the index heavyweights Woodside and Santos, however the real strength in the sector came from the Uranium names (Paladin +51%) and Coal names (New Hope +31%). Consumer discretionary was supported by an earnings season that was “less bad” than market expectations, coupled with very light positioning by market participants. Wesfarmers was the key contributor from an index perspective while several smaller cap names that had suffered big de-ratings (like Domino’s and Premier Retail) bounced sharply upon reporting.

The worst performing sectors were Healthcare (-9.3%), Consumer staples (-7.3%) and Information Technology (-5.9%). Healthcare was dragged lower by negative trading updates from a number of index heavyweights like Resmed, Healius, Ansell, CSL and Fisher & Paykel. Whilst it is hard to generalise across the whole sector, we have seen margin pressure in these names as inflationary pressure squeezes the cost base, whilst a normalisation of trading post Covid has also played a part in some cases. Consumer staples meanwhile suffered a poor reporting season as some defensive business models reported weaker than expected earnings on cost pressure, in part due to higher interest costs. The Supermarket stocks come to mind here. Meanwhile A2 Milk and Endeavour both saw earning expectations cut on softer revenue outlooks.

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.
Tribeca Alpha Plus Class AETL0069AUManaged FundsDomestic EquityAustralian Long ShortDomestic Equity - Long Short IndexASX Index 200 Index818.06 M0.97%20.50%0.6%

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.
Tribeca Alpha Plus Class A1.32%0.71%17.02%8%9.51%11.29%13.26%15.21%-6.39%-12.8%-43.69%

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.
Tribeca Alpha Plus Class ADomestic Equity - Long Short Index1.39%1.02%NA%NA%NA%1.015.05%5.42%0.90.93

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
Tribeca Alpha Plus Class AYes-https://tribecaip.com/-

Product Due Diligence

What is Tribeca Alpha Plus Class A

Tribeca Alpha Plus Class A 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 Tribeca Alpha Plus Class A has Assets Under Management of 818.06 M with a management fee of 0.97%, a performance fee of 20.50% 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 Tribeca Alpha Plus Class A has returned 1.32% in the last month. The previous three years have returned 8% annualised and 15.21% each year since inception, which is when the Tribeca Alpha Plus 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 Tribeca Alpha Plus Class A first started, the Sharpe ratio is NA with an annualised volatility of 15.21%. The maximum drawdown of the investment product in the last 12 months is -6.39% and -43.69% 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 Tribeca Alpha Plus Class A has a 12-month excess return when compared to the Domestic Equity - Long Short Index of 1.39% and 1.02% 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. Tribeca Alpha Plus Class A has produced Alpha over the Domestic Equity - Long Short 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 Domestic Equity - Long Short Index category, you can click here for the Peer Investment Report.

What level of diversification will Tribeca Alpha Plus Class A provide?

Tribeca Alpha Plus Class A has a correlation coefficient of 0.93 and a beta of 1.01 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 Tribeca Alpha Plus Class A and its peer investments, you can click here for the Peer Investment Report.

How do I compare the Tribeca Alpha Plus Class A with the ASX Index 200 Index?

For a full quantitative report on Tribeca Alpha Plus Class A compared to the ASX Index 200 Index, you can click here.

Can I sort and compare the Tribeca Alpha Plus Class A to do my own analysis?

To sort and compare the Tribeca Alpha Plus Class A financial metrics, please refer to the table above.

Has the Tribeca Alpha Plus 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 Tribeca Alpha Plus Class A?

If you or your self managed super fund would like to invest in the Tribeca Alpha Plus Class A please contact via phone or via email .

How do I get in contact with the Tribeca Alpha Plus Class A?

If you would like to get in contact with the Tribeca Alpha Plus Class A manager, please call .

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the Tribeca Alpha Plus Class A. 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

TThe S&P/ASX 200 Accumulation Index closed 0.7% lower in August, outperforming key offshore benchmarks such as the S&P 500 (-1.8%) and MSCI World (-2.6%). Chinese equities were particularly weak, with the MSCI China Index falling -8.5% during the month as Beijing’s efforts to tackle the economic slowdown have so far disappointed investors. Reporting season was the key focus for August domestically, shifting attention off the macro questions that have driven much of the volatility this year. At a high level FY23 results were in line, with beats and misses squaring up.

However, guidance was soft as cost pressures (mostly labour and interest rates) drove earnings downgrades for FY24. During the month, ASX200 EPS estimates for FY24 came down by 2.4%. On this measure (revision to next 12-month earnings estimate), it has been one of the worst reporting periods in the past two decades. Interestingly all the damage to forecasts was done at the cost line, with revenue expectations holding up.

For the second month in a row, sector performance highlights an appetite for early cycle cyclicals at the expense of defensives. Consumer Discretionary (+4.6%) was the stand-out performer, supported by better-than-expected earnings. Wesfarmers (+10.6%) was the key driver of the index gain, but there were multiple other discretionary retail stocks that posted double-digit returns for the month on earnings and outlooks that were “less-bad” than the market was expecting. Property (+1.7%) was the only other sector with a positive return for the month, driven by Goodman’s (+16.2%) push into data centre development and a strong performance from the residential developers Stockland and Mirvac.

The worst performing sectors were Utilities (-4.3%) and Consumer Staples (-4.1%), where several sector heavy weights had doubledigit drops on weaker earnings and no doubt an element of heavy positioning. August was a tough month for defensives, which in several cases were not true to label, posting negative EPS surprises, in part due to higher interest costs. Notable names here included Resmed (-23%), Ramsay (-13%), A2 Milk (-11%) and Coles (-11%). Interestingly, Coles called out the negative impact of theft on its earnings, which has been a problem in the US for some time, but until now was not as prominent in Australia.

The Fund returned +1.65% in August, outperforming the benchmark by 2.38%. Positive attribution was skewed slightly to the short side of the portfolio, however the long positioning also contributed meaningfully. Overweight positions that contributed positively included: Johns Lyng Group (JLG), which bounced sharply after delivering a slight beat for FY23 which saw consensus upgrades across the forecast period; Goodman Group (GMG), where investor attention was focused on a rapidly building development pipeline in the Data Centre space; and Pro Medicus (PME) which rallied after delivering a clean 5% beat to consensus expectations for FY23.

Underweight stocks that contributed positively included: Alumina (AWC), which fell sharply after reporting widening losses and negative cashflow which focused attention on a levered balance sheet; and Iress (IRE) which collapsed on a downgraded outlook for CY23 and balance sheet pressure which saw the dividend scrapped.

Key detractors included overweight positions in: Resmed (RMD), which has re-rated materially on concerns around the application of GLP-1 drugs (eg. Ozempic) to treat Sleep Apnea related to obesity ; and a2 Milk (A2M) which delivered a weak FY24 outlook based on weak industry sales (low Chinese birth rate) and flat margins. The key underweight position which negatively impacted performance was Wesfarmers (WES), which delivered unexpectedly strong sales growth across its retail portfolio in FY23 and a positive trading update for the first seven weeks of FY24.

Performance Commentary - July 31, 2023

The S&P/ASX 200 Accumulation Index delivered a 2.9% gain in July, understating a +5.8% bounce off intra-month lows. Key offshore benchmarks posted similar gains for the month, including the S&P 500 (+3.1%) and MSCI World (+3.3%). Bond yields were relatively subdued, consolidating the sharp move higher over the past 2 months.

Sector performance highlights a pro-cyclical tilt to markets during the month as cyclicals generally outperformed defensives. Energy (+8.8%) and Financials (+ 4.9%) were the best performing sectors, while Healthcare

(-1.5%) and Consumer Staples (-1.1%) lagged. The rally in Energy stocks was driven by higher oil prices, with WTI crude up nearly 16%. Thermal coal (+7%) also had a strong month. Financials were driven higher by the banks, as benign inflation data lead to reduced rate hike expectations and hence lowered the risk of policy being overtightened.

Healthcare was the worst performing sector for a second consecutive month and is now the worst performing sector over 12 months. This weakness has been driven by materially negative earnings revisions from the likes of CSL, Healius and Ramsay, however, we see selective opportunities arising in the space.

All attention is now focussed on the upcoming FY23 reporting season. Bottom-up consensus expectations are for a 1% contraction in EPS for the financial year. Forecasts have EPS making a low in the current half, with a 5% contraction for the 12-months to December 2023. These bottom-up projections point to a modest downturn in corporate profits to be followed by a moderate recovery in 2024. Our expectations for earnings season is that we should see an easing of supply chain concerns relative to the past few years, which should allow for a release of working capital thus improving balance sheet strength. On the flip side, wage inflation looks like it will increasingly be a headwind for corporate profits in FY24 outlook statements.

The Fund returned +1.75% in July, underperforming the benchmark by 1.13%. Overweight positions that contributed positively included: Woodside (WDS), on the back of rising oil prices; Kogan (KGN), which reported 4Q23 earnings that surprised to the upside thanks to a material improvement in gross margins despite softer sales numbers; and, Smartgroup (SIQ) which rallied after a trading update from Fleet Partners (FPR) highlighted very strong growth in demand for novated leases on Electric Vehicles thanks to a regulatory change in late 2022.

Underweight stocks that contributed positively included: Ansell (ANN), which fell sharply after providing maiden guidance for FY24, which included a stagnant top-line and increased costs and thus was well below market consensus; and Woolworths (WOW) which drifted lower during the month as investors shunned expensive defensive stocks in favour of more cyclical exposure.

Key detractors included overweight positions in: Northern Star (NST), which provided disappointing production guidance for FY24 due to planned mill-shutdowns in the September quarter; and Star Entertainment Group (SGR) which sold off on limited news as investors continue to focus on regulatory pressure and ultimately balance sheet strength. The key underweight position which negatively impacted performance was Megaport (MP1), which provided a quarterly report highlighting cost-out that has improved profitability and materially reduced balance sheet concerns.

Performance Commentary - June 30, 2023

The S&P/ASX200 Accumulation Index gained 1.01% in the June quarter, lagging global benchmarks such as the MSCI World (+6.3%) and the S&P500 (+8.3%). Globally, growth and tech were particularly strong for a second consecutive quarter, with the Nasdaq 100 posting a 15.2% return for the quarter.

Yield curves continue to move around significantly as investors scour economic data and central bank communications for clues as to where cash rates will peak in this cycle. During the June quarter, the Australian 2 Year Bond yield added 126 basis points to close at 4.21%, the highest print since mid-2011. Meanwhile the 10-Year added 73 basis points to 4.02%, a 10 year high. Economic data continues to be more resilient than consensus expectations, particularly in respect to employment data, whilst inflation has moderated (particularly in the US) which has provided support to the soft-landing narrative. Towards the end of the quarter a slew of downgrades in the consumer space provides some evidence that the consumer is starting to feel the impact of higher cash rates.

The best performing sector by far was Information technology (+21.1%) following strong offshore leads. Xero (+33.0%) rallied sharply as the new CEO delivered a strong FY23 result which pointed to a more balanced approach in the trade-off between top-line growth and profitability.

Other strong performers in the sector during the quarter were Megaport (+75%) and Life360 (+54%) which are also accelerating their own paths to profitability with cost out programs following several years of significant headcount expansion. Utilities (+5.5%) was the secondbest performing sector after AGL (+34%) surged on the back of a profit upgrade driven by rising wholesale power prices. Other sectors to see reasonable outperformance were Industrials (+3.8%) and Energy (+3.8%).

The worst performing sectors were Healthcare (-3.2%) and Materials (-2.5%). Healthcare was dragged lower by negative trading updates from sector heavy weights: Ramsay Healthcare (-15.4%); Fisher & Paykel (-9.3%); and CSL (-3.8%). All 3 stocks saw earnings estimates revised lower as margins were squeezed by inflationary pressure in the cost base. Materials were softer on the back of broad-based commodity price weakness. Iron Ore (-10.6%), Copper (-7.5%) and Coking Coal (-38%) all registered material declines despite a relatively flat USD for the quarter.

Against this backdrop, the Fund posted a return of %0.10 for the quarter, underperforming its benchmark by -0.91 %.

At the stock level, notable contributors included overweight positions in:
-Xero (XRO) which reported better than expected FY23 earnings on the back of strong cost discipline from the new CEO. -NextDC (NXT) which rallied on the announcement of a major new longterm contract in its recently constructed S3 Data Centre; and -Pilbara Minerals (PLS), which benefitted from a rebound in Lithium Carbonate prices coupled with a strong growth in production volumes.

Underweights which helped performance included:
-South32 (S32) which issued a weak production update early in the quarter, leading to lower volume guidance across a number of operations; and -Seek Ltd (SEK) which is under pressure due to very soft trends in the Job Ad index.

Detracting from performance were overweight positions in:
-a2 Milk Company (A2M) which provided a subdued update for sales of its infant formula in the Daigou channel early in the quarter and did not recover despite receiving a key Chinese regulatory approval for its Chinese-label infant milk formula late in the quarter; and -Treasury Wine (TWE) which issued a trading update which pointed to a challenged outlook for lower-value commercial wines.

Whilst on the underweight side, negative attribution came from:
-Megaport (MP1) which rallied sharply as management implemented a cost-out program to accelerate its path to cashflow breakeven, plus. -Downer EDI (DOW) which reported multiple material contract wins late in the quarter.

Performance Commentary - May 31, 2023

Australian equities fell in May with a -2.53% drop in the S&P/ASX 200 Accumulation Index. Macro influences remained elevated with a surprise 25bps rate hike from the RBA early in the month, followed by a higherthan-expected inflation print dragging the market lower. Offshore leads were mixed with the S&P 500 (+0.25%) closing marginally positive, while the MSCI World fell -1.25%. Meanwhile the growth and tech heavy Nasdaq lead the way with a +7.61% rise.

Sector dispersion was significant across the month with 4 sectors posting gains and 7 posting negative returns. Technology (+11.6%) significantly outperformed on the back of strong results from Xero (XRO +17.8%) and Technology One (TNE +8.5%), along with Life360 (360 +34.1%) at the smaller end. Offshore leads, from the US in particular, were also very constructive for tech as investors weighed some positive developments in the AI space. Other sectors to post positive returns were Utilities (+1.1%), Energy (+0.2%) and Healthcare (+0.1%).

Discretionary retail (-6.2%) was the laggard on signs of a weaker consumer. Sector heavyweight Wesfarmers (WES -8.3%) called out consumer pressure at their investor day, while there were multiple profit downgrades from small-cap retailers. The recent announcement from the Fair Work Commission of a ~6% pay increase to minimum wage and the award wage floor is also bearish for earnings in the retail sector. Index heavyweight sectors Financials (-4.8%) and Materials (-4.5%) also dragged the index lower. Banks fell on the back of soft updates from Commonwealth Bank and Westpac Bank, while Resource names struggled in the face of waning economic momentum from China.

Consensus earnings expectations for the S&P/ASX200 Accumulation Index were revised down by a further -1.3% during the month, taking 3-month revisions to -3.6%. Modest downgrades were seen amongst the banks and the retail sector. At month end the S&P/ASX200 Accumulation Index was trading at 14.6x forward earnings compared to the long-term average of 14.7x.

Performance Commentary - April 30, 2023

Australian equities moved gently higher in April with the ASX 200 gaining +1.85%. Sentiment improved as the RBA paused its rate hiking cycle and benign economic data continued to provide support to a soft-landing narrative, largely due to the lack of any real negative surprises. Similarly, the absence of any new major developments in the US banking crisis helped improve sentiment, although it should be noted US regional bank share prices noticeably under-performed larger banks with the ongoing deposit and liquidity drain weighing. Major offshore indices were broadly consistent, with the S&P 500 (+1.5%) and the MSCI World (+1.6%) marginally underperforming the local bourse. All sectors bar Materials (-2.6%) posted positive returns for the month. Interest rate sensitive sectors lead the way, with Real Estate (+5.1%) edging out Information Technology (+4.8%) for the best return. Banks contributed to market momentum as investors gained confidence around a potential bottoming for residential property prices. A rise in Sydney house prices and improved auction clearance rates helped presage a turn in confidence. Note, both Real Estate and Banks continue to lag on a rolling 3-month basis.

M&A remains a focus, as announced deals with any Australian involvement are off to the strongest start to a year since 2007. According to data from Refinitiv (through to April 14), there has been US$46.1bn of Australian M&A announced year-to-date, up from US$43.2bn this time last year. A bid for Blackmores from Kirin at the end of the month added to this total. Meanwhile, earnings revisions for the ASX200 continue to be negative. During April, 12- month forward estimates were revised lower by – 1.5%, with Energy (-10.6%) downgraded the most. 3-month revisions are now -3.1% at the index level and remain negative across most sectors. Energy has seen the largest revisions (-21.3%) with Utilities (-5.5%) and Technology (-5.4%) being the other main culprits.

Performance Commentary - February 28, 2023

February saw a partial reversal of January’s very strong returns with the ASX200 falling 2.4%. There were a lot of factors impacting the market at both a macroeconomic and stock specific level as reporting season played out. Early in the month, the RBA raised policy rates for the 9th consecutive time by 25bps to bring the cash rate to 3.35% and this was followed immediately followed up by a repricing of the implied terminal rate to above 4%. The US market also saw a hawkish shift, where expectations for the Fed Funds Rate were pushed to nearly 6%, driving a sell-off in the bond market and pushing yields back towards their late 2022 highs.

A reversal in soft landing fears saw a sizable rally in the US$ which then put pressure on commodity prices and our own mining and gold stocks which both led the market lower with falls of 7.5% and 9.1% respectively. Complicating the rates backdrop was a very volatile reporting season which for the most part was better than expected, but only because expectations had collapsed due to fears that the economic slowdown was well underway and concerns that profit margins were also being squeezed by rising costs. As it turned out, sales lines were broadly better than expected as demand remain solid and inflation boosted nominal prices, but margins squeeze was clearly evident due to numerous headwinds including rising raw materials, higher utility costs and rising labour costs. It is always hard to generalise the reporting season, but defensive stocks (staples, insurance) were the most consistent achievers followed by domestic cyclicals simply due to beaten up expectations. Growth stocks and Resources were both relatively disappointing and there was a clear reversal trend in COVID winners such as Energy and Consumer Services.

Over the month there was a long list of stocks that were sold off heavily following disappointing results and/or announcements (DMP, DOW, SGR, JBH, HVN, AMP, QAN) with a large collection of both large and small cap resource stocks also in the firing line (NST, PLS, MIN, BHP, RIO, SLR, LKE). The bank sector fell 5.1% with CBA (-6.4%) and WBC (-5.9%) leading the declines as it became clear that rising competition was threatening margins across the sector. On the positive side, Insurance rose 6.5% driving by a 15% rise in MPL post a strong result guidance with IAG also rising 7.3%, QBE up 8.8% and SDF rising 9.5%. Other standouts included ORG, ORA, WTC ALD and ORI. While price performance was slightly better than expected across the reporting season, earnings revisions were down across the board with negative revisions at their worst level since the GFC (excluding the pandemic period).

From a sector perspective, Utilities (+2.3%) lead the way, driven by the revised bid for Origin Energy. Information Technology (+2.2%) was also strong on the back of solid updates from Link Group and Computershare which both have exposure to rising interest rates.

Other sectors which outperformed included Industrials (+1.4%) and Consumer Staples (+0.9%). As detailed above, the weakest sector was Materials (-6.9%) as underlying commodity prices fell in response to a US dollar rally (DXY +2.8%). Brent Oil fell by US$2 to US$82.45/bbl, Iron Ore prices fell US$3 to US$126/Mt while the broad-based London Metals Index fell 7.5%. Financials (-3.8%) also dragged the index lower after Commonwealth Bank warned that the bank sector had seen peak Net Interest Margins (NIMs) back in October.

The Fund returned -2.52% in February. Overweight positions that contributed positively included: Medibank Private (MPL), which posted a solid beat to 1H earnings expectations on the back of improved PHI margins and Underweight stocks that contributed positively included: Harvey Norman (HVN), which reported a soft start to sales in the new calendar year with its 1H result; and, Commonwealth Bank of Australia (CBA) which said NIMs peaked in October and foresees a tougher environment competitively for the banking sector this year.

Key detractors included overweight positions in: Dominos Pizza (DMP) which missed 1H earnings expectations and issued a soft sales update for the star of 2H, and Northern Star (NST) which fell along with its gold sector peers in reaction to a softer underlying gold price. The key underweight position which negatively impacted performance was QBE Insurance Group (QBE) which rallied on a solid beat to CY22 earnings on the back of strong growth in GWP which drove operating leverage from the expense base.

Performance Commentary - January 31, 2023

Global equity markets rallied sharply in January, reversing December’s softness. The S&P/ASX 200 Accumulation Index rallied 6.2%, which was inline with the move seen in the S&P 500 (+6.2%) and slightly behind the 7.0% return from the MSCI World Index. Index moves were largely macro driven as some investors saw an increased potential for a soft landing in the US as inflation slows but employment data remains decisively strong.

Successive lower inflation prints have seen the FOMC slow the tempo of rate hikes, with a 25-basis point increase in January, after 50 basis points in December and 4 consecutive 75 basis point hikes prior to that. Powell also indicated that they see only “a couple more hikes” looking forward which saw yield curves drop in both the US and Australia.

All sectors posted positive returns in January, except for Utilities (-3.0%), which lagged on concerns about government intervention and falling power prices. Consumer discretionary (+10.1%) was the best performer as positive pre-announcements from cyclical retailers like JB Hi-Fi (+15%) and Super Retail (+18%) suggests that headwinds from RBA rate hikes and falling home prices are yet to flow through. Materials (+8.9%) outperformed on China re-opening and falling USD, despite a more mixed performance from underlying commodity prices during the month. The Real Estate sector (+8.1%) also bounced strongly on a more dovish rate outlook following significant underperformance in CY22.

In February, all eyes will be on Consensus earnings revisions (12-month forward) for the ASX200 were marginally positive (+0.5%) over the month. This was driven entirely by materials (+3.6%) with all other sectors neutral or negative. At the end of the month the ASX200 was trading at 13.9x forward earnings, below the longer-term average of 14.6x.

The Fund returned 4.85% in January, underperforming its benchmark by 1.38%. Performance attribution was relatively evenly balanced between the long and short sides of the book. Overweight positions that contributed positively included: Goodman Group (GMG), which outperformed a strong REIT sector bounce as investors priced a slightly more dovish rate environment; IDP Education (IEL), which has seen an improving outlook for student placements and benefited from the accelerated Chinese re-opening; and, Pro Medicus (PME) which hit an all-time closing high after announcing a new contract win on the last day of the month.

Underweight stocks that contributed positively included: Amcor (AMC), which has seen downward revisions to EPS estimates on concerns around currency headwinds and cost growth; and, New Hope Corporation (NHC) which saw profit taking due to a 32% drop in the thermal coal price during the month.

Key detractors included overweight positions in: Tabcorp (TAH) which gave up recent out-performance on concerns around the level of promotional activity being undertaken by competitors in the gaming segment, and a2 Milk (A2M) which traded sideways following a strong run-up in its share price in recent months. The key underweight position which negatively impacted performance was Breville Group (BRG) which is a quality discretionary retail name that benefited from the perception of an economic soft landing.

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