August, 2023
Over the month, the Fund returned 1.7% (after fees), 0.5% ahead of its benchmark.
In August, equities weakened after a strong run over the past few months. The US outperformed most major developed and emerging market countries, while growth generally outperformed value. Fixed income performance was flat to negative.
Negative equity performance appears to have been driven by an absence of positive news and markets being technically overbought after a few months of strong gains. Comments by Federal Reserve Chairman Powell stating that inflation remains uncomfortably high and the Fed is prepared to raise rates further if needed also contributed to the negative sentiment. Some negative headlines such as the Fitch downgrade of US government debt and Moody’s downgrading US regional banks did not lead to major market reactions. Telecommunications and energy were the only sectors with positive returns during the month.
With most S&P 500 companies having reported their Q2 earnings, FactSet is currently projecting a quarter over quarter earnings decline of around 5%, which would be the worst result in three years and the third straight quarter of declines.
Forward-looking composite purchasing manager indices (PMI) continued to fall. In the US, the composite PMI fell to a six-month low. Overseas, composite PMIs also declined for the UK, Eurozone and Australia. Japan was one of the only regions to see an increase in their PMI. Consumer confidence continues to weaken with growing signs of consumer distress, such as rising credit card and auto-loan delinquencies. Labor markets appear to be cooling off, but generally remain strong.
Headline inflation ticked up slightly in the US and dropped sharply in the UK and Eurozone, largely driven by base effects. Inflation remained unchanged in Japan and turned negative in China. Core inflation generally continued to soften for most regions. At the annual summit in Jackson Hole, central bankers expressed cautious optimism, while acknowledging that inflation remains elevated. The Bank of England raised the bank rate for the 14th consecutive month to 5.25%, while China’s Central Bank introduced some easing measures.
The Australian Trade Weighted Index moved lower over August (-1.1% to 60.6). This outcome was a combination of the Australian dollar depreciating against the US Dollar (-3.9% to US$0.648), Euro (-2.4% to EU€0.597), UK pound (-2.4% to GB£0.511) and Japanese Yen (-1.5% to JP¥94.287).
The MSCI All Country World ex-Australia Net Total Return Index returned 1.2% (gross) for the month, in AUD terms. The positive return was generated from the depreciation of the AUD over the month. The strongest performing sector was again Energy (5.3%) whereas the worst performing sector was Utilities (-1.9%). Other global shares markets saw the MSCI All Country World Small Cap (NR) Index (0.4%) lower and MSCI Emerging Markets (NR) Index (-2.4%) higher, all in AUD terms.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/08.2023-CIF-Report.pdfJuly, 2023
Over the quarter, the Fund returned 2.4% (after fees), inline with its benchmark.
In July, equities continued their run of strong performance with most regions delivering midsingle digit returns. Fixed income performance was mixed with riskier parts of the market faring better.
Equity returns were positive with value modestly outperforming growth during the month. US equities performed in line with international developed markets, while emerging markets outperformed. While the S&P 500 is set to report an earnings decline for the second quarter, most companies that have reported so far have announced better than expected results.
The MSCI All Country World ex-Australia Net Total Return Index returned 2.4% (gross) for the month, in AUD terms. The strongest performing sector was Energy (5.3%) whereas the worst performing sector was Healthcare (0.2%). Other global shares markets saw the MSCI All Country World Small Cap (NR) Index (3.8%) lower and MSCI Emerging Markets (NR) Index (4.84%) higher, all in AUD terms.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/07.2023-CIF-Report.pdfJune, 2023
Over the quarter, the Fund returned 7.0% (after fees), outperforming its benchmark by 0.2%. Over the quarter both Ironbark Royal London and William Blair outperformed the benchmark.
During the second quarter, the global economy displayed remarkable resilience, notwithstanding a slowdown in China. The US experienced decent economic activity, with its labour market remaining robust with a substantial number of new jobs and stable wages. In contrast, Europe witnessed a slight softening in economic growth, barely maintaining positive territory. Economic growth in China, after a robust start to the year, slowed, primarily due to weakness in its manufacturing sector and renewed signs of fragility in the property market.
Global inflation rates experienced a decline at the headline level, albeit showing less significant reductions at the core level in various regions. Consequently, central banks in developed countries continued to raise interest rates.
Meanwhile, global equity markets demonstrated strong growth during the June quarter, mainly driven by the receding inflationary expectations. Valuations deteriorated from already elevated levels.
The quarter witnessed a narrow leadership in equity returns, rendering them susceptible to a potential shift in momentum, particularly in the tech sector. The MSCI All Country World ex-Australia Net Total Return Index performed well, recording a return of 6.9% for the quarter. Notably, Information Technology (14.4%) and Communication Discretionary (8.9%) sectors exhibited the strongest performance, while Materials (-0.2%) and Utilities (0.5%) emerged as the worst performers, all in AUD terms.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/06.2023-CIF-Report.pdfMay, 2023
Over the month, the Fund returned 1.38% (after fees), outperforming its benchmark by 0.28%. Over the month both Ironbark Royal London and William Blair outperformed the benchmark.
In May, performance was mixed for US equities and mostly negative for non-US equities, bonds and real assets. News flow during the month focused predominantly on the looming debt ceiling deadline. Overall, the market impact has been fairly limited, although ratings agencies have placed US credit on watch for potential downgrades. Economic data in general remained resilient in May. US unemployment fell back to the lowest level in over 50 years, although other indicators, such as wage growth, show that the labour market is gradually cooling.
Forward-looking purchasing manager indices remain in expansion territory across most major regions, with strength in services outweighing weakness in manufacturing. Despite economic resilience, headline inflation continued to decline in most major economies. It fell to just under 5% in the US. Inflation in Japan rose to 3.5%, which is high by historical standards, but still lower than in other developed countries. In the UK and Eurozone, inflation remains more resilient, but also on a downward trajectory.
Inflation in China remains low amid a slowly developing economic recovery. Central banks in the US, UK, Eurozone and Australia raised their respective benchmark rates. Equity returns ranged from mid-single digit increases for US growth stocks to declines for value stocks as optimism over developments in artificial intelligence (AI) exposed growth stocks, while more cyclical sectors that dominate value indexes lagged. US equities generally outperformed non-US equities, with emerging markets outperforming non-US developed markets. The AUD Trade Weighted Index remained unchanged at 59.8 over May. The AUD depreciated against the US Dollar (-2.1%) and the Pound Sterling (-0.7%), while appreciating against the Euro (1.4%) and the Japanese Yen (0.5%). The MSCI All Country World ex-Australia Net Total Return Index returned 1.1% (gross) for the month, in AUD terms. The strongest performing sector was information Technology (4.3%) whereas the worst performing sector was Energy (-7.2%). Other global shares markets saw the MSCI All Country World Small Cap (NR) Index (-0.2%) lower and MSCI Emerging Markets (NR) Index (0.4%) higher but at lower levels than the larger developed markets, all in AUD terms.
File:April, 2023
Over the month, the Fund returned 2.94% (after fees), outperforming its benchmark by 0.12%. Over the month, both Ironbark Royal London and William Blair outperformed the benchmark.
In April, risk asset returns in developed markets were mostly positive, while defensive assets also provided modest gains. Emerging market equities were lower on the weakness in Chinese stocks. News flow during April was quiet until the last week of the month when banking concerns resurfaced, as First Republic Bank came under pressure and was ultimately acquired by JP Morgan.
Equity market volatility ended the month at its lowest level since late-2021, despite a brief spike during the last week. Major economies remained resilient, driven largely by service activity. US GDP for Q1 rose at a 1.1% annualised rate, below expectations. Consumer confidence remained on the rise and labour markets remained tight, in spite of high-profile layoffs in the US. Headline inflation continued to decline in major economies, reaching 5% in the US, which is its lowest level since mid-2021. In the UK, inflation fell by less than expected and remained above 10%, the highest rate in major developed economies. Monetary policy remained tight. The People’s Bank of China and Reserve Bank of Australia (RBA) left key lending rates unchanged in April. For the RBA, this was the first pause in their hiking cycle since early 2022.
Equity returns were positive for most sectors with energy delivering the largest gains for the month. Value outperformed growth among large and mid-cap stocks, while growth outperformed among small caps. Emerging markets were relatively flat for the month as weakness in China outweighed better performance for India and Brazil. The AUD Trade Weighted Index decreased to 59.8 over April, down by 0.8% from March.
The AUD depreciated against the US Dollar (-1.3%), the Pound Sterling (-2.9%) and the Euro (-2.9%), while appreciating against the Japanese Yen (1.0%). The MSCI All Country World ex-Australia Net Total Return Index returned 2.8% (gross) for the month, in AUD terms. The strongest performing sector was Energy (5.5%) whereas the worst performing sector was Consumer Discretionary (0.5%).
File:February, 2023
Over the month, the Fund returned 1.9% (after fees), outperforming its benchmark by 0.3%.
Both risk and duration assets sold off in February as pessimism over the monetary policy outlook took hold.
The US economy is showing few signs of a material slowdown in spite of almost a year of monetary tightening. Even though more large companies announced layoffs in February, the labour market as a whole remains exceptionally strong. Consumer confidence strengthened to the highest level in over a year, retail spending came in much stronger than expected and one of the forward looking purchasing manager composite indices returned into expansionary territory. Outside the US, economic data also indicated stronger growth momentum.
Consumer inflation continued to come down from high levels in the US, UK and Eurozone, although increased in Japan and China. US producer inflation, however, came in stronger than expected. The combination of a resilient economy and mixed signals on inflation turned sentiment for the worse. Markets once again priced in the possibility of more inflationary growth momentum that could force central banks to continue with monetary tightening.
Equity returns were negative in February for most countries and sectors though with the depreciation of the AUD over the month, this led to a positive return for Australian investors. The 4Q2022 earnings season continues to disappoint according to what has been reported so far. Negative year-on-year earnings growth is expected for this earnings season.
The AUD Trade Weighted Index decreased to 61.4 over February, down by 1.6% from January. The AUD depreciated against the US Dollar (-4.3%), the Pound Sterling (-2.7%) and the Euro (-2.0%), and slightly appreciated against the Japanese Yen (0.2%).
The MSCI All Country World ex-Australia Net Total Return Index returned 1.6% (gross) for the month, in AUD terms. The strongest performing sector was Information Technology (4.1%) whereas the worst performing sector was Materials (-1.6%). Other global shares markets saw the MSCI All Country World Small Cap (NR) Index (2.3%) higher whilst the MSCI Emerging Markets (NR) Index (-2.3%) was lower, all in AUD terms.
File:January, 2023
Over the month, the Fund returned 4.1% (after fees), outperforming its benchmark by 1.0% with both Ironbark Royal London and William Blair outperforming the benchmark.
Markets started 2023 on an optimistic note. Equities, bonds and alternatives generally rose. Rates and spreads declined and equity market volatility fell to its lowest level in almost a year. Positive market sentiment was helped by US CPI inflation falling for the sixth month in a row. It also seems to have peaked in other developed countries. Investors are still hoping for an end to the monetary tightening cycle, even if central banks remain cautious. Consumer confidence improved over the month, with the University of Michigan consumer sentiment index unexpectedly rising to the highest level since April 2022.
Investors are still hoping for an end to the monetary tightening cycle, even if central banks remain cautious. Your International Fund | January 2023 Forward-looking purchasing manager indices rose in the US, although remained in contraction territory. In the UK and Eurozone, purchasing manager indices also edged higher, as a sharp decline in natural gas prices raised hopes that Europe will avoid a deep recession. Existing home sales, car sales and retail sales on the other hand hinted at an ongoing economic slowdown. Additionally, a number of high profile lay-offs were announced by large US companies.
Equity returns were strong on receding inflation and falling interest rates. Fundamentals were otherwise unfavourable. The first month of the 2022Q4 earnings season yielded disappointing results from a number of companies in a quarter that could see its first decrease in earnings since 2020Q3. Market Commentary The AUD Trade Weighted Index increased to 62.4 over January, up by 1.6% from December.
The Australian Dollar appreciated against the US Dollar (3.9%), the Pound Sterling (1.5%), the Euro (2.1%) and the Japanese Yen (2.4%). The MSCI All Country World exAustralia Net Total Return Index returned 3.1% (gross) for the month. The strongest performing sector was Consumer Discretionary (9.8%) whereas the worst performing sector was Healthcare (-4.2%). Other global shares markets saw the MSCI All Country World Small Cap (NR) Index (4.8%) and MSCI Emerging Markets (NR) Index (3.8%) higher.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/01.2023-CIF.pdfDecember, 2022
Over the month, the Fund returned –0.3% (after fees), performing in line with its benchmark. Over the quarter both Ironbark Royal London and William Blair marginally outperformed the benchmark.
The third quarter of 2022 began with a strong rally in July, however, was followed by a moderate decline in August and a broad based sell-off in September. US Federal Reserve chair Jerome Powell reasserted that monetary policy will be tighter for longer, if needed, during his speech at Jackson Hole. Economic data continued to deteriorate over the quarter with most countries reporting higher than expected inflation and labour markets remained tight. Your International Fund | December 2022 Global equity market performance declined over the third quarter, similarly, the AUD depreciated against all major developed currencies, which provided some downside protection to unhedged investors.
The MSCI All Country World ex-Australia Net Total Return Index returned -0.3% for the quarter. The strongest performing sectors were Energy (5.3%) and Consumer Discretionary (4.0%), while Communication Services (-8.0%) and Real Estate (-6.3%) were the worst performers. Market Commentary Other global share indexes were mixed with the MSCI Small Caps (TR) Index up 1.3% whilst the MSCI Emerging Markets (NR) Index was down -5.4% over the quarter, all in AUD terms.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/12.2022-CIF-Report.pdfNovember, 2022
Over the month, the Fund returned 2.7% (after fees), marginally underperforming its benchmark by 0.1%.
Over November, equities and other growth assets maintained positive momentum from October. The main driver of improved investor confidence in November was a better than expected US inflation reading, which strengthened hopes that monetary tightening may slow down later this year and into 2023. The overall economic outlook remained soft, however, with purchasing manager indices remaining in contraction territory, and layoffs increasing.
eveloped market equities had their second positive month in a row. Your International Fund | November 2022 The equity rally was even more noticeable outside the US. Major developed markets such as Australia, the UK, and Europe enjoyed stronger returns. Much of the outperformance was due to the sharp decline in the US dollar over the month, which sold off. Emerging markets performed best over the month.
In local currency terms, they outperformed both the US and other developed market equities by a considerable margin. This was almost exclusively driven by a rally in Chinese equities and currency over rumors that COVID-19 restrictions would be scaled back.
Market Commentary The AUD depreciated against the US Dollar (-0.5%), the Euro (-1.4%), and the Pound Sterling (-3.6%) while appreciating against the Japanese Yen (2.1%). The MSCI All Country World exAustralia Net Total Return Index returned 2.8% (gross) for the month. The strongest performing sector was Materials (8.9%) whereas the worst performing sector was Energy (-1.1%). Other global share markets saw the MSCI All Country World Small Cap (NR) Index (1.7%) higher and MSCI Emerging Markets (NR) Index (9.6%) higher, following a strong resurgence in Chinese equities for the month, all in AUD terms.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/11.2022-CIF.pdfOctober, 2022
Over the month, the Fund returned 6.9% (after fees), outperforming its benchmark by 0.3%. After two consecutive months of drawdowns across most asset classes, October saw a notable rebound in developed market equities. Defensive fixed income saw modest declines, while emerging market assets had negative returns driven largely by declines in Chinese equities. Sentiment generally improved during the month, given the absence of bad news beyond what is already priced in.
Earnings growth appears to be slowing in line with the weakening macro environment, although US earnings data for Q3 2022 surprised on the upside as a whole, supporting markets. Value outperformed growth by a wide margin as disappointing earnings led to declines for some large US tech companies in late October. Your International Fund | October 2022 Emerging markets underperformed developed markets and ended October with negative returns. This was driven by a double-digit decline in Chinese equities following broad export bans on semiconductors and the negative perception of China’s Party Congress.
Positive performance in other emerging markets did not entirely offset headwinds from China. Brazil performed strongly on the back of rising commodity prices despite political uncertainty amid the presidential election. Korea posted strong results and India had low positive returns. The AUD depreciated against the US Dollar (-0.5%), the Euro (-1.4%), and the Pound Sterling (-3.6%), while appreciating against the Japanese Yen (2.1%). Market Commentary The MSCI All Country World exAustralia Net Total Return Index returned 6.6% for the month. The strongest performing sector was Energy (18.7%) whereas the worst performing sector was Communication Services (-0.4%). Other global shares markets saw the MSCI All Country World Small Cap (NR) Index (7.6%) higher and MSCI Emerging Markets (NR) Index (2.6%) lower for the month, all in AUD terms.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/10.2022-CIF.pdfSeptember, 2022
Over the month, the Fund returned -0.3% (after fees), performing in line with its benchmark. Over the quarter both Ironbark Royal London and William Blair marginally outperformed the benchmark.
Royal London's key contributors and detractors Key contributors and detractors include:
Contributors :
Steel Dynamics
Gained on the back of elevated steel prices which persist well above the pre pandemic average with margins remaining elevated.
HCA Healthcare
The hospital giant, actively managed higher labour costs, which have been increasing over the past few quarters. HCA ultimately benefits from unparalleled scale and high barriers to entry.
Reliance Steel
Reliance has been ploughing cash into share buybacks for the past 12 months with further approval for a further $1 billion of buybacks, this has supported the stock’s price.
Detractors :
Lithia Motors
The company’s stock price declined on the back of concerns about declining second hand car values and the continued shortage of new cars. With competitors announcing poor results there are concerns the environment could deteriorate further.
KB Financial
The stock price fell as the Korean Won weakened due to fears of a global cyclical slowdown with bank stocks pricing in the risk of higher credit losses.
Tesla
Not holding Tesla was a detractor as Tesla shares rose over the quarter.
August, 2022
Over the month, the Fund returned -2.6% (after fees), underperforming its benchmark by 0.6%. Equities sold off in the second half of August.
Poor economic data and the US Federal Reserve reasserting that monetary policy will be tighter for longer were the catalysts for the move downward. Investors had been hoping for a slowdown in monetary tightening following a lower than expected inflation reading, but this appears less likely following hawkish speeches at the annual symposium in Jackson Hole. Value outperformed growth for the broad market, as the most durationheavy stocks suffered the brunt of markets repositioning for tighter monetary policy for longer.
Your International Fund | August 2022 Emerging markets proved to be a good diversifier to developed equities, closing the month with small gains. Strong performance in Brazil and India offset weakness in East Asia, while China was close to flat Whilst the Australian dollar (AUD) held up fairly well against most major developed currencies, it appreciated or remained relatively unchanged against all major developed market currencies except for the USD (-1.8%). For unhedged investors, this provided higher returns.
Market Commentary The MSCI All Country World exAustralia Net Total Return Index returned -2.0% for the month. The strongest performing sector was Energy (4.1%) whereas the worst performing sector was Healthcare (-4.2%). Other global shares markets saw the MSCI All Country World Small Cap (NR) Index (-0.8%) lower and MSCI Emerging Markets (NR) Index (2.2%) higher for the month, all in AUD terms.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/08.2022-CIF.pdfJuly, 2022
Over the month, the Fund returned 6.3% (after fees), outperforming its benchmark by 0.9%.
Equities staged a recovery rally during July despite economic data continuing to deteriorate. US GDP declined for the second consecutive quarter, marking what is by some definitions, a technical recession. Earnings growth also continued to slow. The clearest catalyst for the recovery was the decline in longer term interest rates, suggesting the US Federal Reserve would not have to tighten policy as much to control inflation. Your International Fund | July 2022 Growth stocks outperformed value by a wide margin in a strange market that saw both the less cyclical IT and more cyclical energy sectors among the top performers. Healthcare and communication services lagged.
The US outperformed the rest of the world and China was the only major country with significantly negative returns. The MSCI All Country World exAustralia Net Total Return Index returned 5.4% for the month. Market Commentary The strongest performing sector was Information Technology (10.5%) whereas the worst performing sector was Communication Services (0.3%). Whilst the Australian dollar (AUD) held up fairly well against most major developed currencies, it appreciated against all major developed market currencies with the exception of the Yen. For unhedged investors this provided lower returns.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/07.2022-CIF.pdfJune, 2022
Over the month, the Fund returned -1.1% (after fees), marginal underperforming its benchmark by 0.03%. Over the quarter, the Ironbark Royal London Concentrated Global Share Fund (Royal London) again outperformed, however, this was offset by the underperformance of William Blair as growth stocks continued to be sold down.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/06.2022-CIF.pdfMarch, 2022
For the month, the Fund returned -4.7% Over the month, the Fund returned -4.7% (after fees), outperforming its benchmark by 0.9%. Over the month we again saw William Blair struggle, this was countered by strong outperformance from Ironbark Royal London leading to the outperformance over the month. For Ironbark Royal London, outperformance over the month stemmed from positive stock selection. Steel Dynamics, Anglo American and Reliance Steele strongly contributed to returns whilst, Bridgestone Corporation, Taiwan Semiconductor and Meta Platforms detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/2022.02-CIF-Final.pdfJanuary, 2022
Over the month, the Fund returned -2.6% (after fees), underperforming its benchmark by 0.8%. Whilst the Ironbark Royal London Concentrated Global Share Fund (Royal London) outperformed over the month the William Blair Global Equity Fund (William Blair) significantly underperformed which led to the Fund’s overall performance.
For Ironbark Royal London, its Life Cycle approach was evident in two ways: 1) the investment manager was not unduly exposed to any particular style and 2) the investment manager’s stock picking held up across both ends of the Life Cycle (positive stock selection contribution to performance in Turnaround, Mature, Compounding, and Accelerating stages). Suncor Energy, Anglo American, and Progressive were strong contributors to returns during January whereas Old Dominion Freight Line (ODFL), Legrand, and Steel Dynamics were the largest detractors. Ironbark Royal London remains focused on investing in wealth-creating companies at attractive valuations, as they believe that this will deliver superior risk-adjusted returns for investors over the long term.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/2022.01-CIF.pdfDecember, 2021
Over the quarter, the Fund returned 5.7% (after fees), underperforming its Benchmark by 0.4%. Over quarter, the Ironbark Royal London Concentrated Global Share Fund (Royal London) outperformed its Benchmark whilst the William Blair Global Equity Fund (William Blair) was a key detractor.
For Royal London, key contributors for the month included Nvidia, Old Dominion Freight Line and UnitedHealthcare. Key detractors were Safran, Sanwa and Bridgestone. Royal London remains focused on investing in wealth-creating companies at attractive valuations.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/2021.12-DEC-CIF.pdfNovember, 2021
Over the month, the Fund returned 2.6% (after fees), underperforming its Benchmark by 0.9%. Over November, the Ironbark Royal London Concentrated Global Share Fund (Royal London) outperformed the Benchmark whilst the William Blair Global Equity Fund (William Blair) was a key detractor.
For Royal London, key contributors for the month included Nvidia, Reliance Steel and Amazon. Key detractors were Safran, HCA Healthcare and Steel Dynamics. Royal London remains focused on investing in wealth-creating companies at attractive valuations
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/2021.11-NOV-CIF.pdfOctober, 2021
Over the month, the Fund returned 1.3% (after fees) marginally outperforming the Benchmark by 0.2%. Over October, two holdings within your Fund - the Ironbark Royal London Concentrated Global Share Fund (Royal London) and William Blair Global Equity Fund (William Blair), outperformed the Benchmark.
For Royal London, key contributors for the month include Suncor Energy, Microsoft, and UnitedHealth. Key detractors were Bridgestone and Sumitomo Mitsui Financial Group. Royal London remains focused on investing in wealth-creating companies at attractive valuations.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/2021.10-OCT-CIF.pdfSeptember, 2021
Over the quarter, the Clime International Fund returned 2.7% (after fees) marginally underperforming the MSCI AC World ex Australia Net Return Index by -0.2%. The Fund held a slight overweight to emerging market equities over the quarter, which was a detraction whilst investors became concerned over China’s regulatory crackdown and Evergrande. The slightly positive tilt to emerging markets reflects our belief that much of these concerns have been factored into prices, leaving room for upside surprises. The Ironbark Royal London Concentrated Global Share Fund returned 3.4% (net) for the quarter. The fund underperformed its benchmark over the quarter – stock selection in Consumer Staples and Financials was the main drag. Key contributors for the quarter include Old Dominion Freight Line, Constellation Software and Bridgestone Corporation. Key detractors for the quarter were Ocado, Suncor Energy and Samsung Electronics
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/2021.09-SEP-CIF.pdfJune, 2021
Re-openings in the developed world are unleashing a mini-boom of activity and have broadened the recovery to include service sector firms. Corporate earnings continue to surprise on the upside, and manufacturing PMIs suggest that the expansion is likely to continue in the second half of the year. Global equities continued to move higher in Q2, with the MSCI AC World ex Australia Net Total Return Index gaining 9.3% for the quarter. Emerging market equities rose 6.3% in Q2 in AUD terms. Within emerging markets, European and Middle Eastern emerging markets produced the best results year-to-date.
Over the month, the Clime International Fund returned 4.2% (net) and for the quarter, the Fund returned 8.3% (net). Unfortunately, over the quarter the Fund underperformed the MSCI AC World ex Australia Net Return Index by 0.9%. Over May the Fund transitioned its assets from Sanlam Private Investments UK Limited to the new multi manager fund structure managed by Mercer Investments (Australia) Limited. The impact of the timing and number of transition tranches that occurred over May, resulted in the underperformance over May and contributing to the underperformance over the quarter. However, over June we have seen improved relative performance. The Ironbark Royal London Concentrated Global Share Fund returned 3.5% (net) over the month of June and 9.4% (net) for the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/2021.06-CIF.pdfMay, 2021
Throughout May the global economic recovery continued. Many developed economies reopened as the vaccine roll-out continued to surprise on the upside but ‘variant’ scares put the future of complete reopenings as well as the revival of international tourism on which many economies rely into doubt. The US added fuel to this recovery fire in March with another large $1.9 trillion fiscal stimulus program while an even larger infrastructure program is being discussed. The MSCI All Country World ex Australian Net Return Index returned 1.3%. The index saw some volatility over the month, which was driven by inflation fears. Value sectors outperformed growth sectors with energy and financials being the top performers, while tech performance was negative.
Although interest rates were flat in May, a reflationary/inflationary environment should continue to benefit value stocks, especially if the Fed refrains from tightening. Emerging markets returned 2.3% in May, benefiting from a strong rebound in commodity exporting countries such as Russia and Brazil. However, China weighed on the index amid a regulatory crackdown on its tech sector and continued credit tightening. Over the month, the Clime International Fund returned 0.1% (net fees) unfortunately underperforming the MSCI AC World ex Australia Net Total Return Index. Over May the Fund transitioned its assets from Sanlam Private Investments UK Limited to the new multi manager fund structure managed by Mercer Investments (Australia) Limited. The impact of the timing and number of transition tranches that occurred over May, resulted in the underperformance over May
File: https://commentary.quantreports.net/wp-content/uploads/2021/04/2021.05-CIF.pdfFebruary, 2021
The investment world continues to change, and the world is very different to a number of years ago. There were large drawdowns during the last 7 years but every pullback was an opportunity to add equity exposure. Global equity markets have reached new highs as Central Banks printed $7trillion to fight Covid-19. Today we are witnessing extraordinary gains from shares which generate low cash flows (relative to market value) or burn cash. If you don’t own these companies investors might question our ability to spot these “winners”. Good stories often end with bad outcomes if they are not backed by sound fundamentals. During the 2000 technology bubble, the 2008 financial crisis and the 2020 Covid induced market meltdowns investors suffered tremendously.
Businesses not supported by sound fundamentals collapsed in the market corrections that followed; we aim to minimise the risk of being invested in businesses not backed by sound fundamentals. We will not participate in good stories unless they are backed by measurable free cash flows, and are trading at or below intrinsic value. Every financial crisis is an opportunity to invest in sound businesses. We used the opportunities presented to us by the Covid-related market drawdown, and the subsequent vaccine-induced volatility in the recent months to invest in superior businesses like Anthem, Alibaba, Fiserv and Electronic Arts. To remind our investors, our core investment principals have been unchanged since the strategy launched: • Identify businesses with durable high returns on capital with strong recurring free cash flows • Stay invested whilst the business is trading at or below our assessment of fair value • Don’t sell a great business only because it is temporarily over valued • Repeat steps 1-3 over a full investment cycle.
We avoid businesses which constantly invest all their free cash flows in the hope of a better future outcome. These types of businesses are very popular with investors at the moment. Instead we prefer businesses where we can identify how the cash is generated and reinvested. A year on from the arrival of a global pandemic, and we finally have reason to feel optimistic again. The government has laid down a roadmap to normal life, and key data indicators are already pointing to a strong economic recovery in the next two to three years. The recession has forced businesses to become more efficient by reducing overheads and adopting new technology. This will feed into productivity and profitability when the economy starts to recover, resulting in businesses being able to deliver on – and perhaps even exceed – their carefully laid plans. Governments are being empowered to spend by central banks, with the US leading the way in supportive monetary and fiscal policy. President Biden has laid down significant spending plans, and the Federal Reserve is happy to print money in order to buy government bonds necessary to support that. In the short to medium term, this approach will help to fuel economic growth. Economic indicators suggest global economic expansion Forward-looking economic indicators such as the Purchasing Managers’ Index (PMI) are improving, with the PMI’s manufacturing index at its highest level for over two years. In April 2020, the average index score across the G20 was 36. In January 2021, it was 54, signifying an outlook of growth and expansion. The UK is leading the world with its successful rollout of the Covid-19 vaccine. This will ultimately enable the reopening of a meaningful economy, which will reduce unemployment levels and unleash pent up consumer spending. Cheap finance drives investment Interest rates are expected to remain low for the foreseeable future. This enables businesses to borrow cheaply, which supports growth and investment – especially as new opportunities arise in a post-Covid world. There were no new investments or outright sales this month. We trimmed our position in Intercontinental Hotels and added to our position in Reckitt Benckiser Group.
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ticker: CLA0001AU
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https://clime.com.au/investwithus/#investments
https://clime.com.au/investwithus/#investments
Under Report and Unit Price
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The Clime International Fund (CIF) aims to provide consistent capital growth and income over the long term (5-7 years) by investing in international securities. The Fund is intended to be a medium to high-risk fund, however the ability of the Fund to hold a significant cash position allows for capital preservation and the delivery of a smoother return profile. The Fund seeks to deliver a return in excess of the MSCI World Index. The Clime International Fund will select high quality individual investments to build an appropriately diversified, high conviction global portfolio. Through rigorous fundamental analysis we will identify high quality securities issued by businesses which contain many if not all of the following characteristics:
- A strong balance sheet enabling the business to service debt comfortably; a high cash return on equity.
- Relatively low capital requirements allowing a business to generate cash while growing.
- High market share in their principal product and/or service lines.
- Short customer repurchase cycles and long product cycles.