October, 2023
Realindex Global Share Value (Hedged) returned -2.97% (net of fees) during October, versus the MSCI All Countries World ex Australia Net Index Hedged which returned -2.82% (in AUD). The AUD fell 1.9% against the USD over the month.
October was broadly a challenging month for financial markets, with bonds and stocks falling simultaneously due to rising bond yields and heightened geopolitical uncertainty, ultimately weighing on market sentiment. Commodities were the notable outperformer, as energy prices rallied and investors fled to safe assets such as gold. The collapse in the bond market continued in October with US treasury yields rising above 5% driven by a ‘higher for longer’ scenario with rates. This in turn affected equity markets, with the implication on higher rates on earnings multiples and a reduction in risk appetite stemming from the Israel-Hamas conflict.
Key indices like the S&P500 fell by over 2% in local terms, despite the US economy showing signs of resilience with strong labour market numbers and retail spending. In Asia, despite positive retail sales and industrial production numbers, weakness in the Real Estate sector continued to weigh down the Chinese equity market with MSCI China falling by more than 4% in local terms during October and in turn impacting Emerging Markets.
Globally, the fall in equity performance was led by Consumer Discretionary (MSCI ACWI Consumer Discretionary: - 2.9%) and Industrials (MSCI ACWI Industrials: - 2.6%), while Energy (-2.4%) also fell despite the rally in oil prices. Defensive sectors, namely Utilities (+2.1%) and Consumer Staples (+0.1%) led the market. Value stocks were also weaker, underperforming Growth stocks by 1.0% over the month (MSCI AC World ex AU Value -1.6% vs. Growth -0.6%, in AUD). Over the past year, Value has underperformed Growth by 13.6% (AUD), while on a five year basis Value has underperformed Growth by 5.8% p.a. (AUD), providing a significant longer-term performance headwind.
Despite the weakness in value, the fund’s underperformance was relatively limited, with most of the underperformance coming regionally from North American positions which the fund was underweight; specifically the underweight to US Information Technology. A large contributor from a regional perspective was the overweight to Europe, largely driven by stock selection. From a sector perspective, a large contributor was the funds positioning in Health Care names, while overall large detractors were the overweight to Consumer Discretionary names and the underweight to Information Technology. One of the largest stock level contributors was the underweight to Tesla, Inc. and one of the largest stock level detractors was the underweight to Microsoft Corporation.
Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of October 2023 the portfolio reflected a 49.8% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 27.9% price to book discount, a 29.8% price to cashflow discount and 38.5% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value Note: Returns in parenthesis show the total return for the month ending 31 October 2023. All returns are given in local currency terms unless otherwise stated.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Value-Hedged-Class-A-Adviser-Flyer-7.pdfAugust, 2023
Realindex Global Share Value (Hedged) returned -1.60% (net of fees) during August, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned -2.19% (in AUD). The AUD fell 3.9% against the USD over the month.
Global markets had a volatile start to August with the release of sticky inflation readings, surging bond yields and mixed economic data which included a downgrade in US Government credit. However, sentiment improved and the soft-landing narrative took over mid-month recovering some of the losses earlier in the month. US stocks performed poorly, resulting in the S&P 500 dropping by 1.7% in local currency terms, bringing its year-to-date gains down to +15.4%.
Investor sentiment was hindered by discouraging commentary from the Federal Reserve Chair who alluded to further monetary policy tightening. Developed Markets performed poorly in local currency terms, however due to the weakness in the Australian dollar the MSCI World Index posted +1.56% (AUD terms). In comparison, Emerging Markets were weak with the MSCI EM index posting -2.36% (AUD terms). This mainly stemmed from the downtown in economic indicators in China and its debt levels, which are creating challenges within the property sector. Poor performance was also seen in Asian markets with the Hong Kong’s Hang Seng and China’s CSI 300 falling by 8.5% and 6.2%, respectively. Overall, within the MSCI All Country World Index, Energy (+5.3%) and Health Care (+3.0%) led the market, while Utilities (-1.9%) and Materials (-1.2%) lagged.
Within this environment, Value underperformed Growth by 0.6% over the month (MSCI AC World ex AU Value +0.9% vs. Growth +1.5%, in AUD). Over the past year, Value has underperformed Growth by 9.0% (AUD), while on a five year basis Value has underperformed Growth by 5.1% p.a. (AUD), providing a significant longer-term headwind for performance.
Despite the Growth headwind during the month, the fund managed to outperform the market largely from stock selection effects. Strong stock selection was seen within North America and Information Technology names, whereas portfolio positioning across sectors and countries were detractors to performance. From a regional perspective, the overweight to Japan was the largest contributor to performance stemming mainly from stock selection while the overweight to Developed Asia was the largest detractor stemming mainly from allocation effects. From a sector perspective, Utilities which the fund is overweight was the largest contributor mainly resulting from stock selection effects, while poor stock selection made the overweight to Consumer Discretionary sector the largest detractor. The largest stock level contributor was the overweight to Novo Nordisk A/S and the largest stock level detractor was the underweight to NVIDIA Corporation.
Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of August 2023 the portfolio reflected a 50.8% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 23.2% price to book discount, a 29.9% price to cashflow discount and 37.8% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value
Note: Returns in parenthesis show the total return for the month ending 31 August 2023. All returns are given in local currency terms unless otherwise stated.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Value-Hedged-Class-A-Adviser-Flyer-6.pdfJuly, 2023
Realindex Global Share Value (Hedged) returned +3.57% (net of fees) during July, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +3.09% (in AUD). The AUD rose 1.2% against the USD over the month.
Global stocks performed well in July, with the MSCI All Country World Index posting positive gains. Abating inflation in the US and abroad, and increasing evidence pointing to a soft landing has helped support global equities. US headline inflation fell more than expected to 3% year on year. In response, the S&P 500 index rose 3.2% in USD terms in July, taking year to date returns to over 20%. This was despite the US Federal Reserve raising rates by 25 basis points in line with market expectations. More broadly, Developed Markets delivered positive performance in July, but it was the riskiest sectors and regions that were the top performers. Energy, Materials and Communication Services led the market, each sector posting more than 5% for the month in AUD terms, while Small cap stocks and the MSCI Emerging Markets Index also strongly performed. In China, GDP growth slowed in the second quarter, but despite this, the MSCI China Index posted a solid 9.1% in local currency and pushed Asian equities higher in July - largely a response to policy easing and hopes for further stimulus within the Chinese economy. Within MSCI All Country World, Energy (+5.2%), Communication Services (+5.0%) and Materials (+4.2%) led the market, while Utilities (+0.7%) and Health Care (+ 0.2%) lagged.
Value stocks outperformed Growth stocks by 0.9% over the month (MSCI AC World ex AU Value +2.8% vs. Growth +2.0%, in AUD) as value oriented sectors outperformed and growth oriented sectors such as Technology posted modest gains. Over the past year, Value has underperformed Growth by 5.7% (AUD) and on a five year basis by 5.7% p.a. (AUD), providing a significant longer-term performance headwind.
Within this environment, from a region allocation perspective, the fund benefited from its overweight to Emerging Markets while the fund’s overweight to Europe detracted performance. Stock selection within North America was a significant contributor with minimal detraction across other regions. From a sector allocation perspective, the fund benefited from its overweight to Financials and underweight to Information Technology. Stock selection within Financials, Materials and Industrials were also major contributors to the fund’s performance. However, stock selection within Communication Services and Information Technology were small detractors. The largest stock level contributor was the underweight to Microsoft Corporation and the largest stock level detractor was the underweight to NVIDIA Corporation.
Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of July 2023 the portfolio reflected a 51.0% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 24.2% price to book discount, a 31.7% price to cashflow discount and 37.0% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value
Note: Returns in parenthesis show the total return for the month ending 31 July 2023. All returns are given in local currency terms unless otherwise stated.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Value-Hedged-Class-A-Adviser-Flyer-5.pdfMay, 2023
Realindex Global Share Value (Hedged) returned -2.12% (net of fees) during May, versus the MSCI All Countries World ex Australia Net Index Hedged which returned -0.32% (in AUD). The AUD fell 2.1% against the USD over the month.
Global equity markets were generally weaker in May following uncertainty around the US government default and rising bond yields following further rate rises by the Federal Reserve. Despite a resolution to the US government debt ceiling and generally positive economic data, US equity markets failed to make strong returns with the exception of a select number of large cap Information Technology names amid growing expectations of the future potential of AI. This contrasted with Energy and Materials stocks, which were among the weakest performers in May amid concerns over the demand outlook. Equity market weakness was also seen in Europe, with signs of worsening economic conditions. This was in contrast to Japan, with the Nikkei 225 and TOPIX Index reaching fresh 33-year highs following signs of continued economic recovery. Emerging Markets were also weak, with Chinese equities underperforming following weaker than expected economic data. As a result, Information Technology names posted the strongest gains in May (MSCI ACWI IT: +10.4%), while Energy was the worst performing sector (MSCI ACWI Energy -7.2%).
Within this environment, the strategy underperformed the strength of Growth based names during the month; with Value underperforming Growth by 6.5% (MSCI AC World ex AU Value -2.2% vs. Growth +4.3%, in AUD). Over the past year, Value has underperformed Growth by 13.0% (AUD) and on a five-year basis by 5.6% p.a. (AUD), providing a significant longer-term headwind for performance.
Regionally, much of this underperformance was driven by the underweight positioning to North America, specifically the underweight to a select number of Technology and Technology adjacent names including Tesla, Amazon, Microsoft, Apple and NVIDIA. However, the overweight to Japan offset some of these losses. From a sector perspective, the largest detractor was the underweight to Information Technology, in particular semi-conductors while favourable positioning in Health Care helped performance. The largest stock level detractor was the underweight to NVIDIA Corporation given its strong reported earnings amidst renewed interest in AI related stocks. The largest contributor was the overweight to Meta Platforms, Inc.
Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of May 2023 the portfolio reflected a 54.0% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 25.6% price to book discount, a 31.7% price to cashflow discount and 37.3% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Value-Hedged-Class-A-Adviser-Flyer-4.pdfApril, 2023
Realindex Global Share Value (Hedged) returned +1.96% (net of fees) during April, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +1.34% (in AUD). The AUD fell 1.3% against the USD over the month.
Global markets were mixed amidst persistent inflation which continued to pose a challenge to central banks. US stocks made limited gains in April led by large caps, as investor optimism resulting from the Fed’s anticipated moderation of monetary policy was tempered by concerns over economic growth.
Uncertainty in the banking sector also continued with the collapse of First Republic bank. In Europe, equity markets advanced on the back of positive corporate earnings. Japan's stock markets gained due to the Bank of Japan signalling policy continuity and upgrading inflation forecasts, while China reaffirmed its supportive policy stance for the economy amidst growing exports and consumer demand. Despite this, China’s equity market continued to underperform in April, leading emerging markets lower as concerns over its political stance on Taiwan, relationship with Russia and ongoing regulations with the private sector still weigh on investors.
Overall, global equity markets gained in April, led largely by developed markets with the MSCI ACWI Index posting +2.8% in AUD terms. This was led by Energy (+5.5%) and Consumer Staples (+5.2%). IT and Consumer Discretionary names were the laggards for April each posting +0.7% and +0.5% respectively.
In this environment Value stocks outperformed Growth stocks by 0.7% over the month (MSCI AC World ex AU Value +3.2% vs. Growth +2.5%, in AUD). Over the past year Value has outperformed Growth by 1.4% (AUD), while on a five year basis Growth has outperformed Value by 5.0% p.a. (AUD), providing a significant longer-term performance headwind. As such, the portfolio benefitted especially from its Value positioning in Emerging Markets as Value stocks (MSCI EM Value) outperformed Growth (MSCI EM Growth) stocks by more than 3% for the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Value-Hedged-Class-A-Adviser-Flyer-3.pdfFebruary, 2023
Realindex Global Share Value (Hedged) returned -1.00% (net of fees) during February, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned -2.02% (in AUD). The AUD fell 4.3% against the USD over the month.
Global markets were mixed in February, with stronger performance in Developed Markets, in particular Europe, and weaker returns in Emerging Markets (EM). A warmer European winter along with their ability to diversify energy imports have meant a fully-fledged energy crisis has not materialised. This, along with China’s reopening, has brought a degree of softening or cautious optimism in the global economy. In short, we have witnessed a degree of global resilience. However, this also means inflationary concerns will remain persistent, with the Federal Reserve likely to continue its hawkish stance. Bond yields have risen as a result, with a strong degree of inversion between the 2 and 10 year yields. In the MSCI All Countries World Index, IT (+4.1%) and Industrials (+3.3%) were the best performing sectors, while Materials (-1.6%) and REITs (-1.5%) struggled throughout the month.
Within this environment, Value underperformed Growth by 0.6% over the month (MSCI AC World ex AU Value +1.3% vs. Growth +1.9%, in AUD). Over the past year, Value has outperformed Growth by 11.0% (AUD), while on a five year basis Growth has outperformed Value by 3.4% p.a. (AUD), providing a significant longer-term headwind for performance.
The fund outperformed the benchmark due to strong stock selection within EM (+23bps) and Europe (+23bps), while in general the largest detractor was the overweight to Developed Asia. Stock selection within Communication Services was also a strong contributor (+24bps) and largely attributed to the overweight in Meta Platforms. Overall, the largest detractor was the underweight Information Technology, with household names such as NVDIA Corporation, Microsoft, Tesla and Apple posting strong gains for the month.
Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of February 2023 the portfolio reflected a 47.8% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 24.8% price to book discount, a 34.8% price to cashflow discount and 35.7% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value
Note: Returns in parenthesis show the total return for the month ending 28 February 2023. All returns are given in local currency terms unless otherwise stated.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Value-Hedged-Class-A-Adviser-Flyer-2.pdfJanuary, 2023
Realindex Global Share Value (Hedged) returned +5.97% (net of fees) during January, versus the MSCI All Countries World ex Australia Net Index Hedged which returned +6.23% (in AUD). The AUD rose 3.9% against the USD over the month.
Global markets were off to a solid start in January as falling inflation, relatively robust economic data, and China’s COVID policy change, drove investor hopes of a “soft landing” for the global economy. Equities, bonds and alternatives generally rose on the back of this renewed optimism while bond yields declined and equity market volatility fell to its lowest level in almost a year. The MSCI All Countries World Index posted 3.1% in AUD terms, led by strong performance from key countries such as the United States and China. The S&P 500 posted over 6% in local terms and China due to the improved economic momentum and confidence performed well, both onshore (CSI 300 Index +7.3%) and offshore (Hang Seng Index +10.4%). Growth oriented sectors performed well with Consumer Discretionary (+9.8%), Communication Services (+8.9%) and Information Technology (+6.3%) leading the way. Whilst, Value oriented defensive sectors such Health Care (-4.2%), Utilities (-3.9%), Consumer Staples (-2.5%) and Energy (-0.9%) underperformed.
Within this risk on market environment, Value stocks underperformed Growth stocks by 4.5% over the month (MSCI AC World ex AU Value +0.9% vs. Growth +5.4%, in AUD). Over the past year Value has outperformed Growth by 12.6% (AUD), while on a five year basis Growth has outperformed Value by 3.7% p.a. (AUD), providing a significant longer-term performance headwind.
Despite the underperformance of Value indices, the fund managed to perform roughly in line with the benchmark. This is largely due to positive allocation effects in Europe which the fund was overweight and good stock selection in the US which the fund was underweight. Regionally, the largest contributor was the underweight to North America and the largest detractor was the overweight to Emerging Markets. From a sector perspective, the largest contributor from an asset allocation viewpoint was the underweight to Health Care, while Financials generated the largest contribution; largely from stock selection. The underweight to Information Technology was the largest sector detractor due to both poor stock selection and allocation effects. The largest stock level contributor was the overweight to Meta Platforms, Inc. and the largest stock level detractor was the underweight to Tesla, Inc.
Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of January 2023 the portfolio reflected a 51.6% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 28.1% price to book discount, a 35.1% price to cashflow discount and 35.9% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Value-Hedged-Class-A-Adviser-Flyer-1.pdfDecember, 2022
Realindex Global Share Value (Hedged) returned +9.98% (net of fees) during the December quarter, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +7.03% (in AUD). The AUD rose 5.5% against the USD over the quarter.
Overall the MSCI ACWI Index was down 12.5% in 2022, with both global equities and bonds declining against a surge in inflation, slowing economic growth, geopolitical tensions and monetary tightening. US equity markets had a mixed final quarter despite lower-than-expected inflation and signals that the Federal Reserve may slow the pace of rate increases. In response, the S&P 500 rose almost 2.0%, constrained by end of year sell-offs in Technology and Consumer Discretionary names, while in Europe, shares rose strongly on signs of slowing inflation and potential policy easing by central banks. In China, stocks were largely flat as Beijing moderated its zero-tolerance approach to COVID-19, but economic activity was disrupted by Covid outbreaks.
The MSCI All Countries World Index rose 4.1% for the quarter led by strong performances in Energy (+11.7%) and Industrials (+11.4%), while Consumer Discretionary (-5.9%) and Communication services (-2.9%) lagged for the quarter. With this backdrop, the fund strongly benefitted from Value stocks which outperformed Growth stocks by 8.5% over the quarter (MSCI AC World ex AU Value +8.2% vs. Growth -0.3%, in AUD). Over the past year Value has outperformed Growth by 22.6% (AUD), while on a five year basis Growth has outperformed Value by 3.1% p.a. (AUD), providing a significant longer-term performance headwind.
Regionally, the largest contributor to performance was the underweight to North America with stock selection being the most significant driver contributing over 260bps, while the largest detractor was the overweight to Developed Asia, though the detraction relatively small in comparison. From a sector perspective, the fund’s largest contributor was the overweight to Consumer Discretionary though much of this was driven by stock selection effects; in particular the underweight to Tesla Inc. The largest sector detractor was the overweight to Consumer Staples again driven by stock selection effects though the detraction was small by comparison. The fund’s largest stock level contributor was the underweight to Tesla Inc, while the largest stock level detractor was the overweight to Meta Platforms, Inc.
Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of December 2022 the portfolio reflected a 52.0% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 26.4% price to book discount, a 33.3% price to cashflow discount and 36.7% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Value-Hedged-Class-A-Adviser-Quarterly.pdfNovember, 2022
Realindex Global Share Value Hedged returned +6.80% (net of fees) during November, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +6.04% (in AUD). The AUD rose 4.7% against the USD over the month.
With signs that global inflation may be easing in November, global equity markets were boosted by speculation that interest rates in key regions may not need to be raised significantly. The MSCI World Index rose 5.7%, although the gain was lower in AUD terms due to the strength of the Australian dollar. In the United States and Europe, major indices such as the S&P 500 (+5.4%), NASDAQ (+4.4%) and Euro Stoxx 50 (+9.6%) registered solid gains. However, Asian markets took the lead with strong returns from the CSI 300 (+9.8%) and Hang Seng (+26.6%) due to optimism around potential relaxation of China’s COVID restrictions. In Developed Markets, Materials (+8.9%) and Industrials (+4.1%) within the MSCI World index led performance, while Energy lagged (-1.5%) following falls in Oil prices in November. The strength in Emerging Markets was most seen in Real Estate (+29.6%) and Consumer Discretionary (+20.1%) while the weakest sector was Utilities (+2.3%).
Value stocks outperformed Growth stocks marginally by 0.1% over the month (MSCI AC World ex AU Value +2.8% vs. Growth +2.8%, in AUD). Over the past year Value has outperformed Growth by 25.0% (AUD), while on a five year basis Growth has outperformed Value by 3.7% p.a. (AUD), providing a significant longer-term performance headwind.
The fund benefitted from the underweight to North America though stock selection within the United States and was a key contributor to performance. The overweight to Europe contributed the least to performance largely due to stock selection effects. From a sector perspective, the largest contributor was the overweight to Financials and the largest detractor was the overweight to Consumer Staples, both the result of stock selection effects. The largest stock level contributor was the underweight to Apple Inc. and the largest stock level detractor was the exclusion of NVIDIA Corporation.
Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of November 2022 the portfolio reflected a 55.8% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 26.9% price to book discount, a 32.8% price to cashflow discount and 36.8% price to sales discount. The Emerging Markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Value-Hedged-Class-A-Adviser-Flyer.pdfOctober, 2022
The Realindex Global Share Hedged Fund returned +7.18% (net of fees) during October, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +6.09% (in AUD). The AUD fell 0.5% against the USD over the month.
Global markets recovered in October, posting broad gains on the hopes of more dovish central bank behaviour with some economic data pointing to softening in wage pressures and core inflation (CPI year-over-year at 8.2%, PPI at 8.5%). Developed equity markets gained in October offsetting the poor performance in September, with the MSCI World index posting +7.8% in AUD terms. This was led by a surge in Energy (+20.7%) and Industrials (+11.0%).
However, the gains in Developed markets were not observed in Emerging markets with the MSCI EM index falling 2.6% for the month. The losses were largely observed in China (MSCI China: -16.4%) while Latin America performed strongly (MSCI Latin America: +10.3%).
Value stocks outperformed Growth stocks by 5.0% over the month (MSCI AC World ex AU Value +9.1% vs. Growth +4.1%, in AUD) helping to drive the fund’s outperformance for the month. Over the past year Value has outperformed Growth by 22.5% (AUD), while on a five year basis Growth has outperformed Value by 3.8% p.a. (AUD), providing a significant longer-term performance headwind.
Regionally, the largest contributor was the underweight to North America which delivered most of the fund’s performance (in excess of +5.5%); stock selection across most sectors being the key driver. The largest detractor was the overweight to Developed Asia though this only contributed to marginal underperformance (-0.3%). From a sector perspective, the largest contributor was the underweight to Consumer Discretionary mainly from stock selection within that sector, while the largest detractor was the underweight to Industrials which detracted performance by approx. 13bps. The largest stock level contributor was the underweight to Amazon.com, Inc. and the largest stock level detractor was the overweight to Facebook, Inc Class A.
Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of October 2022 the portfolio reflected a 57.9% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 28.0% price to book discount, a 35.3% price to cashflow discount and 38.4% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value
Note: Returns in parenthesis show the total return for the month ending 31 October 2022. All returns are given in local currency terms unless otherwise stated.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-14.pdfSeptember, 2022
The Realindex Global Share Hedged Fund returned -6.27% (net of fees) during the September quarter, versus the MSCI All Countries World ex Australia Net Index Hedged which returned -5.62% (in AUD). The AUD fell 6.5% against the USD over the quarter.
Value stocks underperformed Growth stocks by 1.9% over the quarter (MSCI AC World ex AU Value -1.3% vs. Growth +0.6%, in AUD). Over the past year Value has outperformed Growth by 15.3% (AUD), while on a five year basis Growth has outperformed Value by 5.2% p.a. (AUD), providing a significant longerterm performance headwind.
Central banks around the world continued to signal their commitment to tighter monetary policy by combatting inflation with further rate rises. The European Central Bank indicated rates will likely be raised over several meetings following its 75bps rise in September, with further policy tightening in the US also expected following its own series of increases. In the US, the core PCE price index rose 0.6% month-over-month in August after being flat in July. In the Eurozone, preliminary data showed headline consumer price inflation reached 10% in September, an increase from 9.1% in August. Concerns over the UK's fiscal policy stance also added further volatility to markets in September, which led to the Pound/Dollar exchange rate collapsing to an all-time low, with the 30-year yield on gilts rising above 5% for the first time since 2008. It was not long before the Bank of England intervened and bought gilts, restoring market order. Geopolitical risks also remained, with the recent declaration of the annexation of four Ukrainian provinces only adding to the escalation in tensions and overall market volatility and downside risks for economic growth. The stronger US dollar, higher inflation, and tighter financial conditions also weighed on Emerging Markets equities, and relations between the United States and China came under greater strain as both countries tried to secure their supply chains and worries over Taiwan intensified.
Consequently, over the first three quarters of 2022, the S&P 500 posted its 3rd worst performance since the 1950s, while the US Dollar Index (DXY) has had its strongest year on record and US treasury yields have sharply risen, reaching a high of 4.0%. Commodities have also reversed their gains from the first half of the year due to the sign of global economic slowdown; with crude oil and gas falling by more than 11% and 25% respectively, in September alone.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Quarterly-3.pdfAugust, 2022
The Realindex Global Share Hedged Fund returned -1.87% (net of fees) during August, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned -3.06% (in AUD). The AUD fell 1.8% against the USD over the month.
Value stocks outperformed Growth stocks by 1.9% over the month (MSCI AC World ex AU Value -1.1% vs. Growth -3.0%, in AUD). Over the past year, Value has outperformed Growth by 15.6% (AUD), while on a five year basis Growth has outperformed Value by 5.4% p.a. (AUD), providing a significant longer-term performance headwind.
Hawkish central bank behaviour and ongoing poor sentiment around China’s growth prospects dominated equity markets in August. Rising inflation, and concerns over hawkish monetary policy from both the Federal Reserve System and European Central Bank, pushed both equity markets lower. Softening demand for oil but a looming energy crisis, particularly in Europe, resulted in volatile commodities in August, as oil prices fell but coal and gas prices soared.
Global equity markets sold off, especially within Developed Markets, with the MSCI World index falling almost -2.5% in AUD terms. Most sectors underperformed in Developed Markets, with MSCI World Health Care (-4.3%), and MSCI World IT (-4.3%) leading the losses. However, Energy stocks were favoured in this environment, with MSCI World Energy posting +3.6% for the month. Emerging Markets posted positive performance, delivering 2.2% for the month in AUD terms. Energy was the strongest sector, delivering 8.3% for the month, followed by Utilities (+5.5%). Whereas, Health Care and IT sectors posted losses for the month (-1.0% and -1.3% respectively)
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-13.pdfJuly, 2022
The Realindex Global Share Hedged Fund returned +4.19% (net of fees) during July, versus the MSCI All Countries World ex Australia Net Index Hedged which returned +7.01% (in AUD). The AUD rose 1.5% against the USD over the month.
Value stocks underperformed Growth stocks by 6.1% over the month (MSCI AC World ex AU Value +2.5% vs. Growth +8.6%, in AUD). Over the past year, Value has outperformed Growth by 13.3% (AUD), while on a five year basis Growth has outperformed Value by 6.3% p.a. (AUD), providing a significant longerterm performance headwind.
Global equities saw a recovery in July following their protracted slide during the first half of the year despite deteriorating fundamentals posed by persistent inflation and growth fears. The tech heavy Nasdaq, which saw significant losses since the start of the year, recovered by almost a third as the market began buying back beaten up stocks in a tech led rally. Despite persistent recent inflation data prints, markets priced in a more front-loaded rate hiking cycle by the Federal Reserve and other central banks, as long dated treasury yields fell. In July, US inflation expectations fell from the previous months while US core CPI also declined for three consecutive months amid concerns of a global recession. In the US, second-quarter GDP contracted 0.9% on an annualized basis, the second consecutive quarterly decline while the PMI dropped to 47.5 in July from 52.3 in June.
In developed markets, IT and Consumer Discretionary sectors saw the largest uplift both posting 11.5% and 13.8% respectively, while defensive based sectors such as Health Care, and Communication services posted the weakest returns (1.8% and 1.7% respectively). This sector rotation in turn led to growth based firms strongly outperforming value based ones with MSCI World Growth posting 9.9% returns versus MSCI World Value which delivered 3.0% for the month.
Emerging markets experienced a poorer month (MSCI EM Index), underperforming developed markets (MSCI World Index) and finishing down approximately 1.7%. The fall was largely the result of the Chinese market wiping away the gains seen during the previous month as economic growth fears resurfaced. MSCI China posted a loss of 10.8% in AUD terms pulling the overall emerging market index down; this was despite positive performance posted in Korea (+4.3%) and LATAM (+2.7%) while Emerging European equity markets were flat. From a sector perspective, Real Estate (-12.9%) and Consumer Discretionary (-8.8%) sectors were heavily down due to ongoing Chinese property and overall economic concerns, while IT (+2.8%) Utilities (1.9%) and Energy (1.4%) were the leading sectors in July.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-12.pdfJune, 2022
The Realindex Global Share Hedged Fund returned -9.73% (net of fees) during the June quarter, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned -14.38% (in AUD). The AUD fell 8.4% against the USD over the quarter.
Value stocks outperformed Growth stocks by 9.7% over the quarter (MSCI AC World ex AU Value -3.2% vs. Growth -12.9%, in AUD). Over the past year, Value has outperformed Growth by 16.9% (AUD), while on a five year basis Growth has outperformed Value by 5.0% p.a. (AUD), providing a significant longer-term performance headwind.
Global equities resumed their protracted slide in the June quarter, with most markets significantly down in June, amid resurgent worries over the pace of global central bank tightening and concerns that elevated inflation will erode consumer confidence and lead to a global economic slowdown. By the end of June, the decline left the S&P 500 20% lower year-to-date, resulting in the worst first-half since 1970. The MSCI All Country World index also fell 2.2% in USD terms in the final week of June, leaving it down 20.9% for the first half of 2022.
Overall economic concerns weighed heavily on developed markets with the MSCI World contracting 8.5% for the quarter in AUD terms and almost 16% down for the first half of 2022. During the quarter, Consumer Discretionary and Technology sectors led the declines with -16.8% and -14.6% respectively. Energy (3.6%) and defensive sectors (Staples and Utilities) posted positive returns for the quarter. This however masked the movements observed in June, where the market was down almost 5%, led by a collapse in Energy (-11.4%) and Materials (-11.9%) sectors as growth fears led to a sharp sell-off in line with energy prices retracing the gains made in the first half of the year.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Quarterly-2.pdfMay, 2022
The Realindex Global Share Hedged Fund returned +1.50% (net of fees) during May, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned -0.21% (in AUD). The AUD rose 0.9% against the USD over the month.
Value stocks outperformed Growth stocks by 3.9% over the month (MSCI AC World ex AU Value +1.0% vs. Growth -2.9%, in AUD). Over the past year, Value has outperformed Growth by 13.5% (AUD), while on a five year basis Growth has outperformed Value by 4.7% p.a. (AUD), providing a significant longer-term performance headwind.
Overall, global markets remained mixed in May. While there were pockets of positive returns in the energy and financial sectors, as well as value, the broad market fell slightly. On macro perspectives, inflation remained forefront among investors and the central banks alike. Key thematics continue to be the rate hike trajectory given persistent inflationary pressures and supply chain disruptions from the war in Ukraine. Whilst we are seeing some easing in Chinese lockdowns, China's overall zero Covid policy has remained in place. China’s growth concerns remain for the global economy as the world's second largest economy is expected to yield between 3.0 to 3.7% GDP growth for 2022, lower than the official 5.0% target. These issues paint a 'risk-off' environment globally. The US labour market continues to show strength with the unemployment rate steady at 3.6%. Wage growth and strong hiring coupled with the continued rally in commodity prices will force the US Federal Reserve to continue tightening at an aggressive pace. Developed markets saw mixed performance. Overall, the MSCI World Index fell -0.9% in AUD terms. The Energy and Utilities sectors continue to do well, appreciating by +12.3% and +2.1% in AUD terms over the month. REITs fell 4.7% on the back of interest rate hikes, whilst financials gained 1.8%. Value stocks outperformed, gaining +1.1% whilst growth stocks fell -3.2%.
Emerging markets fell slightly posting -0.5% in AUD terms. Value stocks in EM were flat (-0.1%) whilst Growth stocks fell -0.9% with small cap names underperforming. In Asia, Chinese stocks traded flat in May with Covid restrictions and geopolitical tensions largely priced in. Inflation and a looming food crisis driven in part by the war in Ukraine continue to provide strong headwinds in non LATAM EM. Hungary, Turkey and India have fallen -14.5%, -7.5% and - 8.9% respectively. IT (+2.2%) and Energy (+1.6%) performed relatively well whilst REITs (-4.6%) fell sharply.
Regionally, the largest contributor was the underweight to North America and the largest detractor was the overweight to Developed Asia. From a sector perspective, the largest contributor was the overweight to Energy and the largest detractor was the overweight to Consumer Staples. The largest stock level contributor was the underweight to Tesla, Inc. and the largest stock level detractor was the overweight to Walmart Inc.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-11.pdfApril, 2022
The Realindex Global Share Hedged Fund returned -3.71% (net of fees) during April, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned -7.04% (in AUD). The AUD fell 5.4% against the USD over the month. Value stocks outperformed Growth stocks by 6.6% over the month (MSCI AC World ex AU Value +0.4% vs. Growth -6.3%, in AUD). Over the past year, Value has outperformed Growth by 12.9% (AUD), while on a five year basis Growth has outperformed Value by 6.1% p.a. (AUD), providing a significant longer-term performance headwind.
April saw the continuation of major themes exhibited in March. Overall, global markets traded lower on the back of greater uncertainty. Key themes driving market uncertainty were: i) persistent inflationary pressures, particularly in the US and Europe; ii) subsequent central bank monetary tightening along with market expectations of an aggressive rate hike trajectory; and iii) supply chain disruptions from both the Ukraine War and Chinese lockdowns. Record wage growth in the US and a continued rally in commodity markets contributed to stronger inflation. In Europe, stagflation concerns have intensified with lacklustre Q1 GDP growth at 0.2% QoQ. EU alternatives to Russian Oil and Gas will be slow and costly, and economic sanctions continue to add to the already presentinflationary pressures.
China’s zero-COVID policy has also weighed heavily on global growth and aggregate demand. Whilst inflation has risen in March to 1.5% pa, these is still room for further monetary stimulus by the PBoC. For the rest of the EM, inflationary pressures and economic fears remain, despite efforts by various central banks to raise rates, due to the rising rates in the US and the impact on food and energy prices. In developed markets, we saw a continuation of trends in April. The broad market fell -3.1% in AUD terms. The Energy sector continued to do well in April (MSCI World Energy: +4.1% in AUD terms) whilst IT firms continued to struggle (MSCI World IT: -6.9% in AUD terms). Over the month, Value stocks have heldup, but Growth stocks have fallen significantly continuing their downward trend as interest rates continue to rise. Low volatility stocks have also outperformed under these conditions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-10.pdfFebruary, 2022
The Realindex Global Share Hedged Fund returned -2.88% (net of fees) during February, versus the MSCI All Countries World ex Australia Net Index Hedged which returned -2.70% (in AUD). The AUD rose 3.0% against the USD over the month. Value stocks outperformed Growth stocks by 1.9% over the month (MSCI AC World ex AU Value -4.7% vs. Growth -6.5%, in AUD). Over the past year, Value has outperformed Growth by 9.8% (AUD), while on a five year basis Growth has outperformed Value by 8.3% p.a. (AUD), providing a significant longer-term performance headwind.
Multiple themes affected markets and investors in February and the year more broadly. With inflationary pressures continuing, there was a clear shift by central banks positioning themselves towards controlling inflation and away from economic stimulus. The direction of future policy however has been made more uncertain by Russia’s recent invasion of Ukraine. The economic sanctions governments around the world have imposed on Russia, including a freeze of the global payments system into and out of Russia, have increased the risk of an economic downturn. A flattening yield curve and an emerging crisis over oil and gas supplies have heightened fears of a global recession. The result of these events was a sell-off in global equities and a spike in equity volatility. As fears of an economic downturn gave way to managing the risks of a spike in energy and commodity prices more broadly, the cyclically oriented Value sectors outperformed Growth-oriented sectors.
In developed markets, most regions underperformed (MSCI World: -5.4% in AUD terms). As expected differences were seen across sectors; Energy and Materials were the two sectors that outperformed all others (MSCI World Energy: +2.0% in AUD terms, MSCI World Materials -0.9% in AUD terms) aided by the renewed surge in oil prices. Communication Services and IT posted the largest losses (-8.2% and -7.5% in AUD terms respectively). From a style perspective, Value and low-risk stocks as highlighted by their historic price volatility were again heavily favored by investors, while growth-related names were the main underperformers.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-9.pdfJanuary, 2022
The Realindex Global Share Hedged Fund returned +0.06% (net of fees) during January, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned -4.71% (in AUD). The AUD fell 3.1% against the USD over the month.
Value stocks outperformed Growth stocks by 7.6% over the month (MSCI AC World ex AU Value +2.0% vs. Growth -5.6%, in AUD). Over the past year, Value has outperformed Growth by 13.1% (AUD), while on a five year basis Growth has outperformed Value by 9.0% p.a. (AUD), providing a significant longer-term performance headwind.
Global equity markets braced for a volatile start in 2022 driven by concerns around tighter Central Bank policy in the US. The growing tensions between Russia and Ukraine and disappointing earnings calls from major US firms also added to global market uncertainty. The result was a large sell off in equity markets; Developed markets suffered; the S&P 500 fell almost 10% with a late stage recovery to end the month approximately 5% down. Emerging markets also declined, but to a lesser extent.
The beneficiaries were low duration value oriented cyclical sectors that are favourably exposed to the reflation trade and less sensitive to future rate rises. Growth, and in particular stocks commonly seen as defensive plays, have become increasingly viewed as risky in this inflationary environment, and in turn led the losses in January. In developed markets, most regions underperformed (MSCI World: -2.2% in AUD terms). The Energy sector outperformed (MSCI World Energy: +19.1% in AUD terms) aided by a renewed surge in oil prices. All other sectors largely underperformed, with IT (MSCI World IT: -5.6% in AUD terms) and Consumer Discretionary (MSCI World Consumer Discretionary (-5.5% in AUD terms) were the most significant underperformers. From a style perspective, with Value being the main winner, low risk stocks as highlighted by their historic price volatility were heavily favoured by investors, while growth related names were the main underperformers
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-8.pdfDecember, 2021
The Realindex Global Share Hedged Fund returned +5.38% (net of fees) during the December quarter, versus the MSCI All Countries World ex Australia Net Index Hedged which returned +6.72% (in AUD). The AUD rose 0.7% against the USD over the quarter. Value stocks underperformed Growth stocks by 0.6% over the quarter (MSCI AC World ex AU Value +5.7% vs. Growth +6.3%, in AUD). Over the past year, Value has outperformed Growth by 2.7% (AUD), while on a five year basis Growth has outperformed Value by 11.3% p.a. (AUD), providing a significant longer term performance headwind.
It was another strong period for equity investors as global equity markets (as measured by the MSCI ACWI index) ended 2021 with a gain of more than 25% for the year and 6% for the quarter in AUD terms. Developed markets such as the US benefited from signs of an improving economy where the Fed signalled the likelihood of interest rate rises in 2022 in response to strengthening demand, a sentiment echoed by other central banks including the BoE and ECB. As aresult, developed markets were the main benefactors, gaining more than 7% for the quarter and more than 29% for the year in AUD terms.
Emerging markets however ended the quarter and year down due to both uncertainty associated with the impact Covid-19 will continue to have on these economies, and China’s ongoing regulatory restructuring that has led to significant sell-offs in key industries. The MSCI China Index fell by almost 7% for the quarter and more than 20% in local terms for the year, representing its worst annual performance since the financial crisis. While the equity markets in general enjoyed strong gains, sector as well as style leadership rotated throughout the year. In developed markets Real Estate, Utilities and Information technology stocks rallied during the quarter, though in the case of technology this was concentrated in the early part of the quarter. Stocks in communication services lagged the market for the quarter. From a style perspective, investors favoured stocks with growth attributes rather than attractive valuations, though this was underscored by a strong underperformance of growth stocks in December. Stocks with favourable sentiment including companies with positive analyst earnings revisions and favourable price momentum were preferred by investors along with high quality names, which remained in favour throughout the fourth quarter. Sentiment and value based measures however have been the most favourable factors in developed markets throughout 2021.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Quarterly.pdfNovember, 2021
The Realindex Global Share Hedged Fund returned -2.76% (net of fees) during November, versus the MSCI All Countries World ex Australia Net Index Hedged which returned -1.81% (in AUD). The AUD fell 5.6% against the USD over the month. Value stocks underperformed Growth stocks by 2.9% over the month (MSCI AC World ex AU Value +2.0% vs. Growth +4.8%, in AUD). Over the past year, Value has outperformed Growth by 3.7% (AUD), while on a five year basis Growth has outperformed Value by 11.9% p.a. (AUD), providing a significant longerterm performance headwind.
The month was characterised by renewed stagflation fears as persistent inflation prints and the possibility of a slowdown in global GDP growth following the discovery of the Omicron coronavirus variant weighed on markets. These concerns triggered a sell-off in equities late November with the S&P500 falling 2.3% on the 26th November – its largest decline on more than a year. Other risk assets such as oil heavily sold off, with Crude Oil prices falling more than 20% in November. Global long dated treasures rallied as yields also fell while VIX levels rose markedly from 10 to over 28. The Australian dollar also sold off heavily, falling by more than 5% for the month against the US dollar. The impact on Value was swift as investors sold off Value names in search of growth oriented defensive names including Technology and Consumer Discretionary, while Energy and Financials performed poorly. In developed markets, stocks ended up marginally positive for the month in AUD terms (MSCI World +3.6%) due to the AUD sell-off. Technology (+8.7%) and Consumer Discretionary (+5.7%) led the market, while Energy (-1.4%) and Financials (-0.9%) were the largest laggards. Emerging markets ended lower for the month in local currency terms across most regions and sectors, but were positive in AUD terms for the month (+1.6%). IT (+7.3) led the market while Energy and Consumer Discretionary sectors were down in AUD terms (-1.9% and -4.7% respectively).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-7.pdfOctober, 2021
The Realindex Global Share Hedged Fund returned +3.02% (net of fees) during October, versus the MSCI All Countries World ex Australia Net Index Hedgedwhich returned +4.85% (in AUD). The AUD rose 4.0% against the USD over the month.
Value stocks underperformed Growth stocks by 2.0% over the month (MSCI AC World ex AU Value +0.1% vs. Growth +2.1%, in AUD). Over the past year, Value has outperformed Growth by 4.6% (AUD), while on a five year basis Growth has outperformed Value by 10.6% p.a. (AUD), providing a significant longerterm performance headwind.
The month was characterised by renewed stagflation fears as persistent inflation prints and the possibility that earlier than anticipated central bank policy tightening will stall already sluggish global economic growth. Short term yields rose sharply across multiple regions, including Australia where the yield on the 3-year government note rose over 90 basis points, and the US where 2-year Treasury yields rose 22 basis points. The result was a flattening of yield curves as investors brought forward their expectations of interest rate hikes. Inflation and supply chain disruptions remain an issue, as does oil and energy prices more generally. Both WTI and Brent Crude moved higher in the month gaining more than 11% and 7% respectively. While the bond market’s volatility provided some resistance, several equity markets continued their rally. Overall, US equities performed strongly for the month boosted by continued strength in corporate earnings and forward-looking earnings growth remains positive; and while Europe also performed well, Asian markets struggled. Although the debt crisis associated with China’s Evergrande Group seems to have been averted thus far, investors in China remain nervous over credit worthiness and the government’s ongoing crackdown on various sectors.
Despite the equity rally, Value stocks faltered as economic growth fears weighed on investors who sought refuge in growth like sectors such as Technology and Consumer Discretionary, while Energy also continued to perform strongly. In developed markets, stocks ended up marginally positive for the month (MSCIWorld +1.6%). Consumer Discretionary (+4.0%), Energy (+3.9%) and Technology (+3.4%) led the market, while the rest posted smaller or marginally negativereturns for the month. Emerging markets ended lower for the month (-2.9%) driven by losses across most regions; the losses were led by Health Care (-10.7%), Real Estate (-7.5%) and Utilities (-6.8%) though most sectors with the exception of Consumer Discretionary (+2.9%) were down.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-6.pdfAugust, 2021
The Realindex Global Share Hedged Fund returned +2.39% (net of fees) during August, versus the MSCI All Countries World ex Australia Net Index Hedged which returned +2.62% (in AUD). The AUD fell 0.6% against the USD over the month. Value stocks underperformed Growth stocks by 1.4% over the month (MSCI AC World ex AU Value +2.4% vs. Growth +3.8%, in AUD). Over the past year, Value has outperformed Growth by 4.7% (AUD), however, on a five year basis Growth has outperformed Value by 10.3% p.a. (AUD), providing a significant longer-term performance headwind.Global equity markets were up in August, posting 3.1% in AUD terms as measured by the MSCI ACWI, buoyed by evidence of a global economic recovery in various developed markets, particularly in Europe and the US.
The US Federal Reserve made reassuring comments that an interest rate hike would not be imminent even if the central bank began to taper their asset purchase program this year. Central banks around the globe echoed this sentiment and pushed markets higher, despite the pressures of renewed lockdowns resulting from the delta strain. Concerns over the impact of Chinese regulatory based crackdowns also abated which pushed various sectors including global luxury stocks higher. Emerging markets overall had a positive month. Oil prices weakened on the back of increased inventories and weaker consumer demand stemming from the spread of the delta variant, while gold prices fell on the back of dovish comments made by the Fed to keep rates low.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-5.pdfJuly, 2021
The Realindex Global Share Hedged Fund returned -0.57% (net of fees) during July, versus the MSCI All Countries World ex Australia Net Index Hedged which returned +0.70% (in AUD). The AUD fell 2.1% against the USD over the month. Value stocks underperformed Growth stocks by 1.6% over the month (MSCI AC World ex AU Value +2.1% vs. Growth +3.6%, in AUD). Over the past year, Value has slightly outperformed Growth by 1.8% (AUD), however, on a five year basis Growth has outperformed Value by 9.7% p.a. (AUD), providing a significant longer-term performance headwind.
Global equity markets moderated their upward gains in July amidst concerns the global economic recovery would stall due to the emergence of a fourth wave of Covid cases, as many governments attempt to increase vaccine uptake. Global equities were up posting 2.8% in AUD terms as measured by the MSCI ACWI. Developed markets gained overall for the month, while emerging markets underperformed, led by a drop in China equities. In the US, the S&P 500 increased 2.4% in July, despite concerns over Fed tapering, signs of persistent inflation, and a surge in Covid delta variant cases. Emerging markets experienced a challenging month, as the MSCI EM declined heavily (-4.7% in AUD terms).
China experienced a significant fall in equity prices (MSCI China - 12.0% in AUD terms) amid a Chinese government regulatory clampdown on tutoring and tech companies as well as foreign listing requirements. Global bond yields continued to soften in July in line with growth expectations for the global economy, which in turn led to a strengthening of gold prices for the month. In developed equity markets, stocks ended up higher overall during the month, with the MSCI World Index posting +4.0% in AUD terms and positive returns observed across most countries in developed markets with the notable exception of Hong Kong and Japan. All sectors with the exception of Energy were positive for the month. Emerging markets also ended lower with China leading the losses and most sectors underperforming; in particular Real Estate (- 15.7%), and Consumer Discretionary sectors (-12.3%).
Regionally, the largest contributor was the overweight to Emerging Markets and the largest detractor was the underweight to North America. From a sector perspective, the largest contributor was the overweight to Consumer Discretionary and the largest detractor was the underweight to Information Technology. The largest stock level contributor was the underweight to Tencent Holdings Ltd. and the largest stock level detractor was the underweight to Alphabet Inc. Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of July 2021 the portfolio reflected a 61.4% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 41.2% price to book discount, a 43.4% price to cashflow discount and 49.9% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-4.pdfMay, 2021
The Realindex Global Share Hedged Fund returned +2.87% (net of fees) during May, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +1.02% (in AUD). The AUD rose 0.2% against the USD over the month. Value stocks outperformed Growth stocks by 3.1% over the month (MSCI AC World ex AU Value +2.8% vs. Growth -0.3%, in AUD). Over the past year, the Value headwind has finally subsided, with Value versus Growth outperforming by 0.1% (AUD), while on a five year basis Growth has outperformed Value by 8.2% p.a. (AUD), providing a significant longer-term performance headwind.
Global markets edged higher in May underpinned by ongoing inflation concerns and strong economic data seen in the US. In the US, reporting season was buoyant where S&P 500 companies grew earnings by an average of almost +50% YoY, beating estimates by large margins. IT suffered throughout the month on rising inflation expectations following the US economy posting its highest annual increase in headline core CPI price for over a decade as well as renewed concerns over future central bank tapering. Under this climate, metals and oil continue to rise, with the VIX continuing its downward trend toward pre-pandemic levels. Whilst continued optimism over the economy had a favourable impact on various developed equity markets, in Asia, equity markets had a mixed month where sentiment was heavily impacted by the re-emergence of Covid 19 infection across Asia. In particular, Singapore and Taiwan underperformed while Japan outperformed. In total, cyclical sectors and value oriented names continued their outperformance from previous months. In developed markets, stocks ended up higher overall during the month, with the MSCI World Index posting +1.2% (in AUD terms) and positive returns observed across most countries in developed markets.
Cyclical sectors, led by Energy and Financials outperformed (MSCI World Energy posting +4.9% and +4.5% respectively in AUD terms) while growth oriented sectors such as IT and Consumer discretionary underperformed (-1.3% and -1.3% respectively in AUD terms). Emerging markets also ended higher posting +2.1% (in AUD terms) for the month; with most sectors outperforming being led in particular by Energy (+8.0%), Consumer Staples (+5.8%) and Financials (+5.7%). Like developed markets, Consumer Discretionary and IT sectors underperformed the broader EM market (-1.6% and -0.3% respectively).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-3.pdfApril, 2021
The Realindex Global Share Hedged Fund returned +1.98% (net of fees) during April, versus the MSCI All Countries World ex Australia Net Index Hedged which returned +3.68% (in AUD). The AUD rose 1.4% against the USD over the month. Value stocks underperformed Growth stocks by 2.8% over the month (MSCI AC World ex AU Value +1.6% vs. Growth +4.3%, in AUD). Over the past year, the magnitude of the Value headwind has been considerable, with Value versus Growth underperforming by 8.0% (AUD), and on a five year basis by 9.2% p.a. (AUD), providing a significant longer-term performance headwind.
Global markets pushed higher in April as the vaccine rollout continued at pace in North America and Europe. Earnings season also commenced in the US with several companies beating expectations by large margins. Commodity prices rallied aggressively including iron ore and soft commodities such as sugar and wheat. Oil posted some gains though energy stocks tracked lower as OPEC debated proposals to gradually ease production cuts. Equity market volatility also ameliorated with the VIX tracking lower than previous months, though still higher than pre-pandemic levels. Bond yields remained elevated from March levels indicating that inflationary expectations and pressures remain.
In developed markets, stocks ended up higher overall during the month, with the MSCI World Index posting +3.2% (in AUD terms). Most MSCI sectors posted gains (Communication services: +5.4% in AUD terms and Real Estate: +4.9%), while Energy underperformed (-1.0%). Emerging markets ended slightly higher posting +1.1% (in AUD terms) for the month; the Materials and Health Care were the strongest sectors (MSCI EM Materials +7.0% in AUD terms, MSCI Health Care +5.7% in AUD), whilst Energy and Utilities posted the largest losses (-1.9% in AUD terms and -1.3% in AUD terms respectively).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-2.pdfFebruary, 2021
The Realindex Global Share Fund returned +4.76% (net of fees) during February, outperforming the MSCI All Countries World ex Australia Net Index which returned +1.39% (in AUD).
Value stocks significantly outperformed Growth stocks by 4.1% over the month (MSCI AC World ex AU Value +3.5% vs. Growth -0.7%, in AUD). Over the past year, the magnitude of the Value headwind has been considerable, with Value versus Growth underperforming by 21.0% (AUD), and on a five year basis by 9.1% p.a. (AUD), providing a significant longer-term performance headwind.
The month saw continued volatility as the vaccine-led global recovery pushed global equity markets higher in the early part of the month. However markets led by technology stocks experienced a sharp sell off in late February following a spike in global bond yields as oil prices continued to surge and markets began to form expectations of a rise in inflation and future interest rate hikes. In the midst of this activity, growth and defensive stocks struggled while low duration, value stocks surged led by the Energy and Financials sectors. The MSCI World index posted 2.7% in AUD terms with Energy (MSCI World Energy +14.7%) and Financials (MSCI World Financials +9.0%) leading and Utilities (MSCI World Utilities -6.7%) lagging. Emerging markets were more muted (MSCI EM posting -0.1% in AUD terms), with Real Estate outperforming (MSCI EM Real Estate +7.7%) and Health Care underperforming (MSCI EM Health Care - 5.2%).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Fund-Class-A-Adviser-Flyer-1.pdfJanuary, 2021
The Realindex Global Share Hedged Fund returned +1.36% (net of fees) during January, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned -0.21% (in AUD). The AUD fell 0.6% against the USD over the month. Value stocks underperformed Growth stocks by 0.7% over the month (MSCI AC World ex AU Value -0.3% vs. Growth +0.5%, in AUD). Over the past year, the magnitude of the Value headwind has been considerable, with Value versus Growth underperforming by 26.4% (AUD), and on a five year basis by 9.9% p.a. (AUD), providing a significant longer-term performance headwind.
The month saw elevated uncertainty as markets continued to re-evaluate their growth expectations around the success of a global vaccine rollout and the likelihood of US stimulus packages being approved by Congress. This uncertainty coupled with unprecedented events surrounding the en masse action of retail investors interested in holding heavily shorted stocks such as GameStop helped drive global equity market volatility higher and US market trading volumes to levels not seen since the global financial crisis. In the midst of this activity, developed markets struggled with the MSCI World index positing-0.4% in AUD terms with Energy leading (MSCI World Energy +2.3%) and Consumer Staples lagging (MSCI World Consumer Staples -3.4%). Emerging markets rallied (MSCI EM posting + 3.7% in AUD terms), led by Communication Services (MSCI EM Communication Services +13.1%) and Consumer Discretionary (MSCI EM Consumer Discretionary +7.8%) sectors.
Regionally, the largest contributor was the underweight to North America and the largest detractor was the overweight to Emerging Markets. From a sector perspective, the largest contributor was the overweight to Consumer Discretionary and the largest detractor was the overweight to Financials. The largest stock level contributor was the overweight to GameStop Corp. and the largest stock level detractor was the underweight to Tencent Holdings Ltd. Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of January 2021 the portfolio reflected a 63.3% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 46.3% price to book discount, a 48.1% price to cashflow discount and 53.5% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer-1.pdfDecember, 2020
The Realindex Global Share Hedged Fund returned +17.16% (net of fees) during the December quarter, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +12.21% (in AUD). The AUD rose 7.7% against the USD over the quarter.
Value stocks outperformed Growth stocks by 3.0% over the quarter (MSCI AC World ex AU Value +8.0% vs. Growth +5.0%, in AUD). Over the past year, the magnitude of the Value headwind has been considerable, with Value versus Growth underperforming by 31.6% (AUD), and on a five year basis by 9.5% p.a. (AUD), providing a significant longer-term performance headwind.
The December quarter was characterised by strong rallies across global markets within the MSCI ACWI universe in light of improving prospects of a Covid vaccine and investor confidence following the Biden US Election victor. Fears over lockdowns in Europe and of a no deal Brexit lingered throughout the quarter; however renewed optimism in markets with the advancement of vaccine distributions, the approval of a US economic stimulus package and a Brexit deal helped propel markets forward. The S&P 500 ended higher, gaining 4.2% in AUD terms and 12.0% in local currency terms for the quarter. Gold stabilised following initial losses in the quarter (-0.3% in USD) while Crude Oil (NYM) staged a recovery in the final quarter following significant losses in the earlier part of the year (+20.6%).
Developed markets were up strongly over the December quarter both in local and AUD terms. MSCI World was up 5.9% in AUD terms and 12.7% in local terms with strong gains across all DM regions. Emerging markets were also strongly positive, with MSCI EM posting 11.2% in AUD terms and 16.0% in local currency terms.
Regionally, the largest contributor was the underweight to North America and the largest detractor was the overweight to Developed Asia. From a sector perspective, the largest contributor was the overweight to Financials and the largest detractor was the underweight to Communication Services. The largest stock level contributor was the underweight to Alibaba Group Holding Ltd. and the largest stock level detractor was the underweight to Tesla, Inc..
Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of December 2020 the portfolio reflected a 62.0% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 45.8% price to book discount, a 48.5% price to cashflow discount and 53.3% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Quarterly1.pdfNovember, 2020
The Realindex Global Share Hedged Fund returned +15.16% (net of fees) during November, outperforming the MSCI All Countries World ex Australia Net Index Hedged which returned +11.02% (in AUD). The AUD rose 4.9% against the USD over the month.
Whilst we know one swallow doesn’t make a summer, it was nice to see a thawing of the Value freeze, as Value strongly outperformed off the back of a Covid vaccine breakthrough. Value stocks significantly outperformed Growth stocks by 4.1% over the month (MSCI AC World ex AU Value +9.2% vs. Growth +5.1%, in AUD). Over the past year, the magnitude of the Value headwind has been considerable, with Value versus Growth underperforming by 30.5% (AUD), and on a five year basis by 9.4% p.a. (AUD), providing a significant longer-term performance headwind.
The month was characterised by a strong rally right across global markets within the MSCI ACWI universe in light of improving prospects of a Covid vaccine. This renewed optimism in markets pushed the S&P 500 higher, gaining 5.7% in AUD terms and 10.9% in local currency terms; its best performance since April. The fall in market uncertainty was evidenced by the CBOE Market Volatility Index (VIX) closing at 20.6, a significant reduction versus the prior month’s value of 38.0. Gold suffered its worst month for the year following a sell off of safe haven assets (-5.6% USD) whilst crude oil was up very strongly (NYMEX
+26.7%).
Outside of US equity markets, developed markets performed well, with the MSCI World Index posting 7.5% (AUD). Emerging markets gained but less so; the MSCI EM Index posting 4.1% (AUD) with the MSCI China Index being a noticeable laggard (-2.1% in AUD).
Regionally, the largest contributor was the underweight to North America and the largest detractor was the overweight to Japan. From a sector perspective, the largest contributor was the overweight to Financials and the largest detractor was the underweight to Information Technology. The largest stock level contributor was the underweight to Alibaba Group Holding Ltd. and the largest stock level detractor was the underweight to Tesla, Inc.
Driven by the methodology of rebalancing further into cheap Value companies, the portfolio continues to sit on deep valuation discounts. At the end of November 2020 the portfolio reflected a 60.5% dividend yield premium to the MSCI ACWI ex AU index, whilst trading at a 41.2% price to book discount, a 46.7% price to cashflow discount and 52.9% price to sales discount. The emerging markets portion of this strategy sits at even deeper discounts, indicating that the portfolio remains well positioned for mean reversion in Value.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Realindex-Global-Share-Hedged-Fund-Class-A-Adviser-Flyer.pdfticker: FSF0975AU
release_schedule: Monthly
fund_features:
Realindex Global Share Hedged Fund aimes to provide capital and income growth by investing in global shares and outperforming the MSCI All Country World (ex Australia) Index, hedged to Australian dollars over rolling five-year periods before fees and taxes.
- Realindex forms a universe of global companies based on accounting measures, which gives the portfolio a value tilt. Factors such as quality, near-term value and momentum are applied to form a final portfolio of companies.
- The resulting portfolio has a value tilt relative to the benchmark and provides the benefits of being lower in cost, lower turnover and highly diversified compared to traditional active investment strategies.
- By weighting the portfolio based on accounting measures and factors such as quality, value and momentum, Realindex aims to generate higher returns versus the benchmark over the long term.
manager_contact_details: Array
commentary_block: Array
factsheet_url:
https://www.firstsentierinvestors.com.au/au/en/adviser/performance/literature.html
For Quarterly (March, June, Sept, Dec) use the Quarterly Factsheets Tab , otherwise use Monthly
asset_class: Foreign Equity
asset_category: Currency Hedged
peer_benchmark: Foreign Equity - Currency Hedged Index
broad_market_index: Developed -World Index
structure: Managed Fund