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21 Sep 2021 - Jamieson Coote Bonds - August 2021 Market and Performance Review
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Jamieson Coote Bonds - August 2021 Market and Performance Review Channel Capital August 2021 Charlie Jamieson, Chief Investment Officer at Jamieson Coote Bonds discusses the market and performance of high grade bonds in August 2021.
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Funds operated by this manager: CC Jamieson Coote Bonds Active Bond Fund (Class A), CC Jamieson Coote Bonds Dynamic Alpha Fund, CC Jamieson Coote Bonds Global Bond Fund (Class A - Hedged), CC Jamieson Coote Bonds Global Bond Fund (Class B - Unhedged) |
20 Sep 2021 - Performance Report: NWQ Fiduciary Fund
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| Fund Overview | The Fund aims to produce returns after management fees and expenses of RBA Cash Rate + 4.0-5.0% p.a. over rolling five-year periods. Furthermore, the Fund aims to achieve these returns with volatility that is a fraction of the Australian equity market, in order to smooth returns for investors. |
| Manager Comments | The fund's returns over the past 12 months have been achieved with a volatility of 5.2% vs the index's 10.33%. Over all other periods, the fund's returns have been consistently less volatile than the index. The fund's Sortino ratio (which excludes volatility in positive months) has ranged from a high of 5.99 for performance over the most recent 12 months to a low of 0.95 over the latest 36 months, and is 1.35 for performance since inception. By contrast, the ASX 200 Total Return Index's Sortino for performance since May 2013 is 0.72. Since inception in May 2013 in the months where the market was negative, the fund has provided positive returns 53% of the time, contributing to a down-capture ratio for returns since inception of 13.25%. Over all other periods, the fund's down-capture ratio has ranged from a high of 30.01% over the most recent 36 months to a low of -8.46% over the latest 12 months. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months over the specified period, and negative down-capture ratio indicates that, on average, the fund delivered positive returns in the months the market fell. |
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20 Sep 2021 - Performance Report: Bennelong Concentrated Australian Equities Fund
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| Fund Overview | The overriding objective of the Concentrated Australian Equities Fund is to seek investment opportunities which are under-appreciated and have the potential to deliver positive earnings, while satisfying our stringent quality criteria. Bennelong's investment process combines bottom-up fundamental analysis together with proprietary investment tools which are used to build and maintain high quality portfolios that are risk aware. The portfolio typically consists of 20-35 high-conviction stocks from the S&P/ASX 300 Index. The Fund may invest in securities listed on other exchanges where such securities relate to ASX-listed securities. Derivative instruments are mainly used to replicate underlying positions and hedge market and company specific risks. |
| Manager Comments | The fund's returns over the past 12 months have been achieved with a volatility of 9.4% vs the index's 10.33%. The annualised volatility of the fund's returns since inception in January 2009 is 14.94% vs the index's 13.5%. The fund's Sharpe ratio has ranged from a high of 3.59 for performance over the most recent 12 months to a low of 0.86 over the latest 36 months, and is 1.04 for performance since inception. By contrast, the ASX 200 Total Return Index's Sharpe for performance since February 2009 is 0.66. Since inception in January 2009 in the months where the market was positive, the fund has provided positive returns 92% of the time, contributing to an up-capture ratio for returns since inception of 164.56%. Over all other periods, the fund's up-capture ratio has ranged from a high of 154.88% over the most recent 24 months to a low of 126.7% over the latest 12 months. An up-capture ratio greater than 100% indicates that, on average, the fund has outperformed in the market's positive months over the specified period. |
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20 Sep 2021 - Opportunities and risks for investors in the latest UN climate change report
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Opportunities and risks for investors in the latest UN climate change report Edwina Matthew, Pendal 11 August 2021 |
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Key points
THE UN's latest Climate Change report made headlines this week with predictions of irreversible global warming, rising sea levels and climate change affecting every corner of the planet. But it also provides evidence-based information to help investors better understand portfolio risks and identify investment opportunities such as carbon capture and methane-reduction technologies. The 3900-page report from the UN's Intergovernmental Panel on Climate Change (IPCC) -- the United Nations body for assessing the science related to climate change -- is the gold standard for research on the science of climate change and options for adaption and mitigation. Government and corporate decision-makers worldwide rely on the IPCC's findings to inform their climate risk assessments and emissions reduction strategies The report -- which was unanimously endorsed by the governments of all 195 country members including Australia -- is based on a three-year analysis of 14,000 peer-reviewed scientific studies. It will be the central terms of reference later this year at COP26 -- the upcoming United Nations climate conference in Glasgow. The report shows unequivocally that human activities are responsible for the warming world. This warming is increasing the frequency and severity of extreme weather events such as heatwaves, droughts, cyclones and heavy rain. Global temperature rises of between 1.5 and 2 degrees Celsius are expected unless deep reductions in greenhouse gas emissions occur in the next few decades. Regardless of action, changes already occurring due to past emissions are now likely to be irreversible for thousands of years. Low likelihood, high-impact events such as ice sheet collapses, ocean current changes or Amazon dieback cannot be ruled out. "It's a sobering read," says Edwina Matthew, Head of Responsible Investments at Pendal. "And remember that these are averages - different regions, different countries, even different states will be impacted to a greater or lesser degree than this average. "For example, the report finds that average global warming is 1.09 degrees Celsius above pre-industrial temperatures. Australian land areas are already 1.4 degrees Celsius above pre-industrial averages. "This is going to increase the probability of extreme weather events, heatwaves, sea surges and drought." Risks and opportunities for investorsWhat should investors take out of the IPCC report? What does it mean for portfolio construction? And how can investors ensure they understand the risks and opportunities posed by global warming? Matthew identifies three headline risks and opportunities for investors to consider:
The most high-profile litigation so far has been a Dutch court ruling that the multinational oil giant Royal Dutch Shell must reduce its emissions because its contribution to global warming violates human rights. Previous IPCC reports were referenced in the court case and this latest one will likely be used in the appeal hearing. A number of Australian cases have also referenced IPCC findings. Sharma v Minister for the Environment [2021] found the federal environment minister owed a duty of care to children who might suffer potential "catastrophic harm" from the climate change implications of approving a NSW coal mine extension. Investors also need to watch for governments being the target of litigation which could affect regulatory approvals and business permissions in their investments. 2. The report's heightened focus on methane is of interest for investors A "strong, rapid and sustained' reduction in methane emissions is required to help reduce greenhouse gas emissions and hopefully avoid the catastrophic impacts of climate change, the report finds. Methane is not only a vastly more potent greenhouse gas than carbon dioxide, but its concentration in the atmosphere has been increasing rapidly. Importantly, it is short-lived in the atmosphere meaning controls on methane can rapidly reduce atmospheric concentrations. Governments are already acting on methane. The EU is proposing curbs on methane emissions while the US is planning tighter emission rules. But it's a tricky problem to solve. Some gas production emits methane. Raising livestock for meat and nitrogen-based fertilisers are major sources. Rotting waste in landfill also emits methane. "All of these are important challenges that investors can play a part in," says Matthew. "Investors can engage with companies to better understand how they're thinking about these issues, what they're doing to mitigate the risks and how they're transitioning to thrive in a low-carbon economy. "Investors can also direct funds to solutions. For example, CSIRO is working with the private sector to commercialise a livestock feed additive made from seaweed, which has been shown to reduce methane emissions in cattle by up to 80 per cent." 3. Carbon removal solutions can also play a role in investor portfolios "Carbon removal is a vital net zero tool which has a place alongside absolute emissions reductions," says Matthew. "It covers a range of investable methods, from afforestation to wetland restoration to carbon capture and storage (CCS) and ocean fertilisation." However carbon removal technologies such as CCS need more development to work at the scale required. We need more co-ordinated efforts to advance these sorts of emissions reduction solutions in sectors with harder-to-abate industrial processes such as cement and steel production. Future climate scenarios are becoming clearer We now know more than ever how possible climate futures could play out. The report is very clear that without "immediate, rapid and large-scale reductions" in emissions, curbing global warming to below 2 degrees Celsius -- the Paris Agreement goal -- will be "beyond reach". These findings call on us all to accept and act on the reality of the situation, including policymakers, investors, businesses and consumers. In the words of the UN Secretary-General Antonio Guterres the report is a "code red for humanity". |
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Funds operated by this manager: Pendal Total Return Fund |
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This article has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and the information contained within is current as at August 11, 2021. It is not to be published, or otherwise made available to any person other than the party to whom it is provided. This article is for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient's personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information in this article may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information in this article is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections contained in this article are predictive and should not be relied upon when making an investment decision or recommendation. While we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. |
17 Sep 2021 - Hedge Clippings | 17 September 2021
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17 Sep 2021 - Performance Report: Equitable Investors Dragonfly Fund
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| Fund Overview | The Fund is an open ended, unlisted unit trust investing predominantly in ASX listed companies. Hybrid, debt & unlisted investments are also considered. The Fund is focused on investing in growing or strategic businesses and generating returns that, to the extent possible, are less dependent on the direction of the broader sharemarket. The Fund may at times change its cash weighting or utilise exchange traded products to manage market risk. Investments will primarily be made in micro-to-mid cap companies listed on the ASX. Larger listed businesses will also be considered for investment but are not expected to meet the manager's investment criteria as regularly as smaller peers. |
| Manager Comments | Over all periods since inception, the fund's up-capture ratio has ranged from a high of 167.47% over the most recent 12 months to a low of 74.24% over the latest 48 months (since inception). An up-capture ratio greater than 100% indicates that, on average, the fund has outperformed in the market's positive months over the specified period. Equitable Investors noted earnings season was a mixed affair across the ASX; among micro-to-mid caps there were slightly more downgrades than upgrades to consensus revenue, EBITDA and EPS expectations for FY22 (within Dragonfly Fund's portfolio, >80% of companies don't have consensus estimates). Their view is that it's difficult for companies to be bold with guidance but they believe Australia and the world will push through to a 'new normal' where COVID-19 is a manageable part of everyday life and they see great opportunities to capitalise on that view. |
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17 Sep 2021 - Performance Report: Bennelong Australian Equities Fund
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| Fund Overview | The Bennelong Australian Equities Fund seeks quality investment opportunities which are under-appreciated and have the potential to deliver positive earnings. The investment process combines bottom-up fundamental analysis with proprietary investment tools that are used to build and maintain high quality portfolios that are risk aware. The investment team manages an extensive company/industry contact program which helps identify and verify various investment opportunities. The companies within the portfolio are primarily selected from, but not limited to, the S&P/ASX 300 Index. The Fund may invest in securities listed on other exchanges where such securities relate to the ASX-listed securities. The Fund typically holds between 25-60 stocks with a maximum net targeted position of an individual stock of 6%. |
| Manager Comments | The fund's Sharpe ratio has ranged from a high of 3.73 for performance over the most recent 12 months to a low of 0.99 over the latest 36 months, and is 0.93 for performance since inception. By contrast, the ASX 200 Total Return Index's Sharpe for performance since February 2009 is 0.66. Since inception in January 2009 in the months where the market was positive, the fund has provided positive returns 93% of the time, contributing to an up-capture ratio for returns since inception of 152.32%. Over all other periods, the fund's up-capture ratio has ranged from a high of 165.75% over the most recent 24 months to a low of 131.56% over the latest 12 months. An up-capture ratio greater than 100% indicates that, on average, the fund has outperformed in the market's positive months. The fund's down-capture ratio for returns since inception is 96.02%. Over all other periods, the fund's down-capture ratio has ranged from a high of 97.65% over the most recent 36 months to a low of 50.11% over the latest 12 months. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months. |
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17 Sep 2021 - Investment Perspectives: Thinking about office
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Investment Perspectives: Thinking about office Quay Global Investors September 2021 |
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Imagine you are an office manager for a medium sized firm of 20 employees. Under normal circumstances, you and the staff would occupy around 400 sqm of office accommodation located in the CBD. But these are not normal circumstances. Lockdown orders mean that all staff are currently working from home.
You are invited to a Zoom call by the CEO. In between regular interruptions of your 10-year-old requesting you to help print the Storm Boy quiz, it becomes clear the CEO has big changes in mind for the post-COVID world. You are informed that upon returning to the office, the new company policy will be to allow each staff member 1 day per week to work from home (WFH). You have been given the task of negotiating with the landlord the firm's new office space requirements. The maths is not as simple as it seems Assuming the WFH days are not rostered and are available on a random basis, there are potentially days when a large number of your 20 staff are in the office at the same time. You may even contemplate the possibility that all 20 are in the office on the same day. If so, the decision will be to either have no reduction in office space, or risk an uncomfortable and cramped office conditions on random days. To put some science around the problem, you decide to run a Monte Carlo simulation[1] to calculate the maximum number of employees on any given day over 100 days, and the chance (probability) of hitting that number. Again, assuming the days working from home are not rostered and generally random (for example, no preference for Friday or Monday), the probability of at least 1 day (from 100) of each 'number of staff in office' scenario can be estimated as below.
Source: Quay Global Investors What the above chart shows is that over 100 work days (approx 4 months), there is an 85% chance that at least 1 work day will have all 20 employees in the office. Conversely, there is a 15% probability that at most 19 employees will be in. To be clear, there will be other days when there are less - but this analysis is calculating the maximum workers in the office on any particular day over 100 days, since this is the basis for the required office accommodation. As office manager, depending on how un/comfortable an environment you want for your staff, the overall space reduced will be between 0-5%. Running similar analysis for 2, 3 and 4 days WFH scenarios results in less needed space (obviously), but the relationship is far from linear.
Source: Quay Global Investors So even under the scenario where employees are allowed 4 (out of 5 days) to randomly work from home, there is at least 1 day in 100 where 50% of staff will be in on the same day. So office usage is only reduced by 50% despite 80% days worked from home. How realistic are our assumptions? To us, the idea of a rostered WFH day for staff seems unlikely. It seems to fly in the face of 'flexible work days', which is the main attraction of WFH. We think it is more likely there will be biases for preferred days, which suggests our analysis above is too bearish on overall long-term office demand. The above analysis also assumes every employee will want to WFH 1 day per week. As the lockdowns across Australia drag on (6th time in Melbourne), it is reasonable to think this is an unrealistic assumption. This would again mean our analysis above is too pessimistic. Other considerations? Investment considerations So, when considering office property as an investment we simply ask ourselves two questions:
The purpose of this article is to consider the second question. If the answer to both questions is 'yes', an attractive investment opportunity may well exist. What we don't know is whether office tenants will 'experiment' with WFH scenarios, which will temper short-term tenant demand - at least for the foreseeable future. In other words, it could take a long time for values to recover, and the next development cycle to emerge. But for long-term investors, this shouldn't matter. Whether the recovery is quick or slow, so long as the entry point is below cost, then the capital appreciation from the purchase will exceed a rise in building costs (which should roughly match inflation). If an adequate return on capital is generated in the meantime, then our investment objective (CPI + 5%) total return is achievable.
Source: Quay Global Investors Concluding thoughts Yet, as we have highlighted in previous Investment Perspectives, this is certainly not the case for retail; and we think we have illustrated it is not likely to be the case for office. Investing is about finding opportunities or investments priced for a pessimistic outcome that may not happen. These types of investments can sometimes offer a skewed bet - not much loss if the market was right, but big gains if wrong. The office sector may harbour such opportunities. |
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Funds operated by this manager: Quay Global Real Estate Fund |
16 Sep 2021 - Performance Report: Longlead Pan-Asian Absolute Return Fund
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| Manager Comments | Markets such as Taiwan, Australia and Japan performed well in response to generally favourable earnings reports and in the case of Japan a successful experience hosting the Olympics. Conversely, markets such as China, Hong Kong and South Korea saw more tempered performance in response to regulatory concerns and supply chain challenges. Against this backdrop, profits on long positions were partially offset by losses on the short book. By sector, gains were posted in Consumer Staples, Consumer Discretionary and Industrial positions, while holdings in the Healthcare and Materials sectors detracted. Holdings in Australia and Singapore contributed to performance, while losses were experienced in China and Hong Kong. |
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16 Sep 2021 - Performance Report: Collins St Value Fund
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| Fund Overview | The managers of the fund intend to maintain a concentrated portfolio of investments in ASX listed companies that they have investigated and consider to be undervalued. They will assess the attractiveness of potential investments using a number of common industry based measures, a proprietary in-house model and by speaking with management, industry experts and competitors. Once the managers form a view that an investment offers sufficient upside potential relative to the downside risk, the fund will seek to make an investment. If no appropriate investment can be identified the managers are prepared to hold cash and wait for the right opportunities to present themselves. |
| Manager Comments | Since inception in February 2016 in the months where the market was positive, the fund has provided positive returns 85% of the time, contributing to an up-capture ratio for returns since inception of 86.43%. Over all other periods, the fund's up-capture ratio has ranged from a high of 189.49% over the most recent 24 months to a low of 94.92% over the latest 60 months. An up-capture ratio greater than 100% indicates that, on average, the fund has outperformed in the market's positive months. The fund's down-capture ratio for returns since inception is 38.29%. Over all other periods, the fund's down-capture ratio has ranged from a high of 80.04% over the most recent 24 months to a low of -72.58% over the latest 12 months. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months over the specified period, and negative down-capture ratio indicates that, on average, the fund delivered positive returns in the months the market fell. |
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