September, 2023
The Fund underperformed the Benchmark by 1.2% (including fees and franking credits) during the quarter. Key performance drivers for the period were from the following positions:
Positive contributors:
• CSL (underweight): continued to decline off its COVID peaks, as it struggles with the impact of elevated donor fees on margins, and as it continues to lose share to key rival Takeda.
• AMP (overweight): outperformed following its full year result announcement, with banking and investment platform earnings higher, and with the company noting an ambitious cost-out target.
• Treasury Wine Estates (overweight): benefited from the thawing of geopolitical tensions between Australia and China, with the barley tariff removals viewed by the market as increasingly the likelihood of the wine tariff removal.
• News Corporation (overweight): benefited from its full year result showing strong earnings growth, in particular in its Dow Jones and News Media divisions.
• CSR (overweight): outperformed as the downturn in the Australian housing market has proven less severe to date than expected, following aggressive RBA interest rate hikes.
Negative contributors:
• Star Entertainment Group (overweight): continued to struggle as the company attempt to navigate an increasingly restrictive regulatory environment aimed at curbing problem gaming.
• Alumina Limited (overweight): was impacted by disruptions to its planned mining activities following a referral to the Environmental Planning Agency by the WA Forest Alliance.
• Coles Group (overweight): underperformed as the market was the company reported a slower than expected unwind of COVID costs, coupled with a higher capex program to increasingly automate its warehouse capabilities.
• Healius (overweight): was impacted by pathology volumes remaining weak in the face of an expected recovery, flowing through to continued low margins from elevated fixed costs and higher interest costs.
• A2 Milk Company (overweight): underperformed as market expectations for China births in 2023 deteriorated, albeit offset by market share gains. The risk reduction overlay contributed positively during the quarter, insulating the Fund from some of the falls in the underlying share portfolio.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-Sept-23.pdfAugust, 2023
Sustainable income: Paid monthly and majority franked. As the Fund’s name suggests, sustainable above-market income is a targeted outcome of our investment approach and a key objective of the Fund.
Proven Investment Philosophy: We believe people are motivated by short-term outcomes, overemphasise recent information and are uncomfortable having unpopular views.
Portfolio Diversification: The benchmark unaware approach to portfolio construction is a key structural feature, especially given the concentrated nature of the ASX200 index.
Downside protection: In addition to placing a heavy emphasis on capital preservation through our fundamental research, we use derivatives to reduce the Fund’s market exposure and risk by 30% whilst still retaining all of the dividends and franking credits from the portfolio.
Integrated ESG Approach: We believe deep consideration of governance, social as well as environmental issues – coupled with active ownership – enhances investment, business and community outcomes.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-Aug-23.pdfJuly, 2023
Sustainable income: Paid monthly and majority franked. As the Fund’s name suggests, sustainable above-market income is a targeted outcome of our investment approach and a key objective of the Fund.
Proven Investment Philosophy: We believe people are motivated by short-term outcomes, overemphasise recent information and are uncomfortable having unpopular views.
Portfolio Diversification: The benchmark unaware approach to portfolio construction is a key structural feature, especially given the concentrated nature of the ASX200 index.
Downside protection: In addition to placing a heavy emphasis on capital preservation through our fundamental research, we use derivatives to reduce the Fund’s market exposure and risk by 30% whilst still retaining all of the dividends and franking credits from the portfolio.
Integrated ESG Approach: We believe deep consideration of governance, social as well as environmental issues – coupled with active ownership – enhances investment, business and community outcomes.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-Jul-23.pdfJune, 2023
The Fund outperformed over the quarter, returning 5.4% (after fees and including franking credits). Key positive contributing exposures during the quarter included overweight positions in AGL Energy, which benefited from the market’s realisation that operational issues impacting returns has been addressed, and that higher electricity prices relative to the company’s fixed cost base would flow through to improved earnings; and IAG, which benefited from the market’s expectation of an improving policy pricing cycle.
Also assisting were overweight positions in News Corporation, and Aurizon, as well as an underweight position in BHP. Negative contributions from overweight positions in A2 Milk, ANZ, and Alumina were not sufficient to offset these positive contributors. The risk reduction overlay was a detractor for the quarter, as expected given the underlying share portfolio returned 6.1%. The performance of the overlay was ahead of the targeted net exposure of 70% with the Fund retaining ~88% of the underlying share portfolio’s return.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_FR-June-23.pdfMay, 2023
Sustainable income: Paid monthly and majority franked. As the Fund’s name suggests, sustainable above-market income is a targeted outcome of our investment approach and a key objective of the Fund.
Proven Investment Philosophy: We believe people are motivated by short-term outcomes, overemphasise recent information and are uncomfortable having unpopular views.
Portfolio Diversification: The benchmark unaware approach to portfolio construction is a key structural feature, especially given the concentrated nature of the ASX200 index.
Downside protection: In addition to placing a heavy emphasis on capital preservation through our fundamental research, we use derivatives to reduce the Fund’s market exposure and risk by 30% whilst still retaining all of the dividends and franking credits from the portfolio.
Integrated ESG Approach: We believe deep consideration of governance, social as well as environmental issues – coupled with active ownership – enhances investment, business and community outcomes.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-May-23.pdfApril, 2023
Sustainable income: Paid monthly and majority franked. As the Fund’s name suggests, sustainable above-market income is a targeted outcome of our investment approach and a key objective of the Fund.
Proven Investment Philosophy: We believe people are motivated by short-term outcomes, overemphasise recent information and are uncomfortable having unpopular views.
Portfolio Diversification: The benchmark unaware approach to portfolio construction is a key structural feature, especially given the concentrated nature of the ASX200 index.
Downside protection: In addition to placing a heavy emphasis on capital preservation through our fundamental research, we use derivatives to reduce the Fund’s market exposure and risk by 30% whilst still retaining all of the dividends and franking credits from the portfolio.
Integrated ESG Approach: We believe deep consideration of governance, social as well as environmental issues – coupled with active ownership – enhances investment, business and community outcomes.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-Apr-23.pdfMarch, 2023
The Merlon Australian Share Income Fund returned 0.2% (net of fees & including franking credits) for the March quarter, under-performing the benchmark, which returned 3.1%. This relative performance should be viewed in the context of a three-year outperformance of 5.1%(including franking) per annum. As expected, this performance was delivered with consistent monthly income, while the volatility of the last 3 years was significantly reduced by the structural risk reduction overlay. From the depths of the market downturn at the onset of the global COVID-19 pandemic, which at the time we published our ‘Covid Roadmap’, the underlying share portfolio has returned 102%, a figure our internally portfolio construction framework (PCF) estimated at the time. This compares to a 64% return for the ASX200.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_FR-Mar-23_FINAL.pdfFebruary, 2023
Sustainable income: Paid monthly and majority franked. As the Fund’s name suggests, sustainable above-market income is a targeted outcome of our investment approach and a key objective of the Fund.
Proven Investment Philosophy: We believe people are motivated by short-term outcomes, overemphasise recent information and are uncomfortable having unpopular views.
Portfolio Diversification: The benchmark unaware approach to portfolio construction is a key structural feature, especially given the concentrated nature of the ASX200 index.
Downside protection: In addition to placing a heavy emphasis on capital preservation through our fundamental research, we use derivatives to reduce the Fund’s market exposure and risk by 30% whilst still retaining all of the dividends and franking credits from the portfolio.
Integrated ESG Approach: We believe deep consideration of governance, social as well as environmental issues – coupled with active ownership – enhances investment, business and community outcomes.
The Fund aims to provide a higher level of tax effective income with a lower level of risk than the S&P/ASX 200 Accumulation Index, whilst also aiming to outperform the benchmark on a total return basis over the medium to long term.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-Feb-23.pdfJanuary, 2023
Sustainable income: Paid monthly and majority franked. As the Fund’s name suggests, sustainable above-market income is a targeted outcome of our investment approach and a key objective of the Fund.
Proven Investment Philosophy: We believe people are motivated by short-term outcomes, overemphasise recent information and are uncomfortable having unpopular views.
Portfolio Diversification: The benchmark unaware approach to portfolio construction is a key structural feature, especially given the concentrated nature of the ASX200 index.
Downside protection: In addition to placing a heavy emphasis on capital preservation through our fundamental research, we use derivatives to reduce the Fund’s market exposure and risk by 30% whilst still retaining all of the dividends and franking credits from the portfolio.
Integrated ESG Approach: We believe deep consideration of governance, social as well as environmental issues – coupled with active ownership – enhances investment, business and community outcomes.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-Jan-23.pdfDecember, 2022
The Merlon Australian Share Income Fund generated a remarkable 18.6% total return in 2022 (before fees and including franking credits), a very pleasing result against a backdrop of surging inflation and interest rates, geopolitical tension, recession fears and double-digit declines in most asset classes. The underlying share portfolio outperformed the S&P/ASX200 Index by 21.3% (including franking credits), with the main driver being sticking with our “behavioural bias” philosophy –
“We believe people are motivated by short-term outcomes, overemphasise recent information and are uncomfortable having unpopular views”
– and disciplined process –
“We invest in undervalued companies where we think market participants have become too pessimistic.””
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-Dec-22.pdfOctober, 2022
Sustainable income: Paid monthly and majority franked. As the Fund’s name suggests, sustainable above-market income is a targeted outcome of our investment approach and a key objective of the Fund.
Proven Investment Philosophy: We believe people are motivated by short-term outcomes, overemphasise recent information and are uncomfortable having unpopular views.
Portfolio Diversification: The benchmark unaware approach to portfolio construction is a key structural feature, especially given the concentrated nature of the ASX200 index.
Downside protection: In addition to placing a heavy emphasis on capital preservation through our fundamental research, we use derivatives to reduce the Fund’s market exposure and risk by 30% whilst still retaining all of the dividends and franking credits from the portfolio.
Integrated ESG Approach: We believe deep consideration of governance, social as well as environmental issues – coupled with active ownership – enhances investment, business and community outcomes.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-Oct-22.pdfAugust, 2022
Fund’s name suggests, sustainable above-market income is a targeted outcome of our investment approach and a key objective of the Fund.
Proven Investment Philosophy: We believe people are motivated by short-term outcomes, overemphasise recent information and are uncomfortable having unpopular views.
Portfolio Diversification: The benchmark unaware approach to portfolio construction is a key structural feature, especially given the concentrated nature of the ASX200 index.
Downside protection: In addition to placing a heavy emphasis on capital preservation through our fundamental research, we use derivatives to reduce the Fund’s market exposure and risk by 30% whilst still retaining all of the dividends and franking credits from the portfolio.
Integrated ESG Approach: We believe deep consideration of governance, social as well as environmental issues – coupled with active ownership – enhances investment, business and community outcomes.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-Aug-22-1.pdfJuly, 2022
Performance figures are calculated after fees have been deducted and assume distributions have been reinvested. All returns are grossed up for franking credits. No allowance is made for tax when calculating these figures. Past performance is not a reliable indicator of future performance.
The Fund’s benchmark is a composite of 70% S&P/ASX 200 Accumulation Index / 30% Bloomberg Ausbond Bank Bill Index and is used for all time periods. From 30 September 2005 to 16 May 2022, the Fund’s benchmark was the S&P/ASX 200 Accumulation Index. 3The Inception Date for the fund is 30 September 2005
Yield represents the Gross distribution yield (inclusive of franking credits)
In line with the Fund’s benchmark change, the Fund’s objective was also amended on 16 May 2022 to include a total return objective.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-Jul-22.pdfJune, 2022
The Australian market shed 11.9% during the quarter, ending the financial year down 6.5%. All sectors were negative, with the exception the Energy and Utilities sectors, primarily a function of continued demand normalisation meeting the effect of several years of underinvestment. Russia’s early 2022 invasion of Ukraine heightened energy market tensions.
As inflation continued to rise and prove less transitory than expected – driven by supply constraints and spiking energy prices - central banks moved quickly to commence an aggressive tightening phase. This process seems likely to be more rapid than seen in recent cycles to combat inflation, while central banks are also cognizant that prior policy normalisation efforts fell short of targeted levels before cycles turned.
Markets are now firmly focused on the risks of recession, as COVID stimulus fades, while higher than expected inflation strangles purchasing power. We can see activity levels in the US and Europe falling relatively quickly, and into contractionary levels in the case of
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MASIF_A-June-22.pdfMarch, 2022
Energy prices continued to rally during the quarter, a function of underinvested supply chains, in conjunction with Russia’s invasion of Ukraine risking supply further. Russia is a key global supplier of oil, gas and thermal coal. The portfolio’s energy exposures rallied alongside these commodity price movements, driving much of the portfolio’s outperformance. Last quarter we noted the apparent valuation discount across Australian energy companies.
This quarter saw some of that valuation gap closed as investors began to see the tightness evident in these commodities. At a stock level, the key contributors to the portfolio during the quarter were Woodside Petroleum, New Hope Coal, Whitehaven Coal, Santos, and Origin Energy. Partly offsetting these contributions were underweight positions in BHP, NAB, CBA and Rio Tinto, and an overweight position in Super Cheap Retail. The hedge overlay detracted given the strong performance from the underlying share portfolio however, will protect the Fund in the event of market declines.
Over the financial year to date, the Portfolio also outperformed, driven by many of the same energy exposed names as well as Incitec Pivot, which has benefited from its exposure to lower gas prices in regional specific markets. Partly offsetting these returns were underweight positions in BHP and NAB, and overweight positions in AMP, Unibail and IAG. And over the rolling twelve-month period, the portfolio was also ahead of the market, again due to energy names including Whitehaven Coal, New Hope Coal, Woodside Petroleum, and Origin Energy. Key detractors over the year were overweight positions in AMP, Unibail Group and Super Retail Group, and underweight exposures to BHP Group and the Commonwealth Bank of Australia.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2203-Merlon-Australian-Share-Income-Fund.pdfFebruary, 2022
Locally the ASX200 rebounded 2.1% from January’s falls, outperforming global markets that fell as rapidly rising geopolitical risks led to a risk-off environment. Energy companies were the best performers driven by a surge in the price of oil. Mining companies, in particular BHP and the major Banks also contributed strongly to the market’s return. Technology and Consumer Discretionary companies underperformed and were the largest drag on returns. The Fund returned 4.5% for the month, outperforming the market. Investments in energy companies (Whitehaven, New Hope, Woodside Petroleum, Origin and Santos) contributed positively, benefitting from the rapid rise in the prices of coal and oil. Investments in Newcrest mining and non-bank financials IAG Insurance, Insignia Financial (formerly IOOF) and AMP also outperformed. Not owning BHP was the largest detractor as the iron price appreciated. Within the portfolio UnibailRodamco-Westfield, Super Retail and Incitec Pivot detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2202-Merlon-Australian-Share-Income-Fund.pdfJanuary, 2022
Global markets fell significantly to the calendar year against a backdrop of rising inflation and the imminent unwinding of extremely supportive monetary policy. Locally the ASX200 fell 6.4%, with the more expensive parts of the market underperforming significantly. Energy companies (+7.9%) were the stand out performers followed by Utilities (+2.6%). The Fund performed well during the month, outperforming the market by 6.2%. The underlying share portfolio contributed the bulk of the relative performance with investments in energy companies Woodside, Santos and Origin Energy outperforming significantly. Not owning the iron ore minors detracted, with BHP being the largest, driven by the consolidation of its dual listing back to Australia and large increase in its index weight, forcing significant buying. The hedge overlay added approximately 1% for the month, insulating the Fund from the falls in the share portfolio and the broader market.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2201-Merlon-Australian-Share-Income-Fund.pdfNovember, 2021
The ASX200 fell for the third consecutive month, returning -0.4%. The materials sector, led by BHP and Fortescue, were the best performers notwithstanding a fall in the iron ore price. Goodman Group, Woolworths CSL and Telstra also outperformed. Commonwealth Bank was the largest detractor after providing quarterly results that disappointed the market, Westpac’s full year results also underwhelmed. Energy companies were also weaker as the oil price retreated from recent highs. The Fund returned -3.4% (after fees, including franking) in November. The underlying share portfolio underperformed driven primarily by investments in energy companies, Alumina, IOOF and IAG Insurance. Not owning iron ore miners BHP and Fortescue also detracted. NIB, APA Group, Coles and not owning Commonwealth Bank were the largest contributors. The hedge overlay contributed positively, insulating the Fund from some of the falls in the underlying share portfolio.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2111-Merlon-Australian-Share-Income-Fund.pdfOctober, 2021
After rallying steadily during the month, the ASX200 retreated to return -0.1% in October. Technology companies were the best performers followed by Health Care and Financials. Mining companies were generally weaker led by BHP Billiton, Rio Tinto and Fortescue as the iron ore price continued to fall. Energy stocks fell despite the oil price rising during the month. The Fund returned -1.1%, underperforming the ASX200. After several months of outperforming, the Fund’s investments in energy companies (Whitehaven, New Hope, Woodside, Oil Search) detracted. Aurizon underperformed after announcing the acquisition of One Rail. Unibail-Rodamco-Westfield underperformed after releasing third quarter earnings. Ampol and Origin Energy outperformed after releasing quarterly results that were ahead of market expectations. AMP (+9%), also contributed, rebounding from its recent lows.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/MBA-Aus-Share-Wholesale-Commentary-11.pdfSeptember, 2021
As has been our historic practice, we continue to provide an aggregate assessment of the ASX200 valuation, based on the individual company valuations for the 150 stocks we actively cover. On this basis the market appears more than 20% overvalued after rallying by more than 2% during the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2109-Merlon-Australian-Share-Income-Fund-1.pdfAugust, 2021
As reporting season wrapped up the ASX200 returned 2.7% for the month. Weakness in the iron ore price and other commodities saw the Materials and Energy sectors declining whilst these losses were more than offset by gains in Financials, Healthcare and Information Technology companies.
The Fund returned 2.7% (net of fees and inclusive of franking), matching the market’s return, a pleasing result given the structurally lower market exposure. Investments in IOOF, QBE Insurance, Alumina, insurers IAG and Suncorp were the largest contributors. In a relative sense having minimal exposure to the iron ore miners (BHP, Rio Tinto and Fortescue) contributed positively. The risk overlay detracted given the positive returns from the underlying share portfolio.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2108-Merlon-Australian-Share-Income-Fund.pdfJuly, 2021
Against a backdrop of escalating lockdowns in Sydney the ASX200 began the financial year with a 1.1% return. Resources companies, in particular the iron ore miners, were the largest contributors despite the iron ore price retracing from recent highs. Coal miners continued to outperform with the coal price rallying 86% in 2021. Sydney Airport (+35%) and Spark Infrastructure (+24%) rallied after receiving takeover offers during the month. Technology stocks, led by an 18% fall in Afterpay, underperformed as did the major banks. The Fund returned 0.5% for the month. Private health insurer NIB was the largest positive contributor during the month, investments in IPL, Aurizon and Viva Energy also contributed positively. Not owning the iron ore miners was the largest detractor from relative returns. The downside protection overlay was a small detractor for the month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2107-Merlon-Australian-Share-Income-Fund-1.pdfMay, 2021
Global markets rallied in May as vaccine rollouts gained momentum and additional fiscal stimulus raised expectations of global growth rebounding. Domestically, the Federal budget contained $96 billion in stimulus to be delivered over five years. Continued strength in the major banks, consumer stocks and CSL contributed to the ASX200 returning 2.5% in May.
Information Technology companies, led by Afterpay (-21%), were the notable laggards. A2 Milk fell 24% after issuing another earnings downgrade. Against this backdrop the Fund returned 2.1% (net of fees and inclusive of franking credits). An agreement with the Federal Government on the future of refining saw Ampol and Viva Energy outperform. QBE Insurance, IOOF, Unibail-Rodamco-Westfield and Super Retail also contributed strongly. The Fund’s investments in energy companies (Oil Search, Origin Energy and Woodside) detracted despite oil prices continuing to rebound from the COVID related lows. The hedge overlay detracted, partly offsetting the gains from the share portfolio.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Merlon-Australian-Share-Income-Fund.pdfApril, 2021
Strong performances from resource companies, led by the iron ore minors driven by a 20% rise in the iron ore price, and the major banks, drove a 3.5% return from the ASX200 in April. Rebounding from recent falls Afterpay and CSL also contributed strongly to the index return. Energy companies were the laggards retreating from recent gains despite the oil price rallying. Woolworths fell after announcing third quarter sales that disappointed the market. Against this backdrop the Fund fell -0.9%. The Fund’s investments in energy exposed names (Origin Energy and Oil Search) were the largest detractors.
AMP fell after ending talks with Ares Capital over the sale of the private markets business and announcing a plan to separately list the business within the next year. Health insurer NIB was the largest contributor after providing the market with positive earnings update. Fuel retailer Viva Energy also outperformed after issuing first quarter operational data that was ahead of market expectations. The hedge overlay offset some of the falls in the underlying share portfolio.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2104-Merlon-Australian-Share-Income-Fund.pdfMarch, 2021
As has been our historic practice, we continue to provide an aggregate assessment of the ASX200 valuation, based on the individual company valuations for the 160 stocks we actively cover. On this basis the market appears approximately 19% overvalued after rallying more than 4% during the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2103-Merlon-Australian-Share-Income-Fund-1.pdfFebruary, 2021
A generally positive reporting season saw the market up 4.7% by the middle of the month, however concerns over rising bond yields resulted in the market giving up the majority of these gains to return 1.6% in February. Gains were led by the miners and the major banks, the energy sector also managed to deliver a positive return. Information Technology (-8.9%) and Utilities (-8.0%) were the notable laggards with rising bond yields being the driver. Against this backdrop the Fund returned 0.6%. The Fund’s investment in QBE Insurance along with not owning CSL, Wesfarmers and Afterpay were the largest positive contributors. Having minimal exposure to the iron ore miners was the largest detractor from relative returns. Unibail-Rodamco-Westfield was the largest detractor along with Coles, which underperformed post result with the market concerned about potential market share loss and less than expected leverage to the pandemic induced sales boom.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2103-Merlon-Australian-Share-Income-Fund.pdfJanuary, 2021
The ASX200 erased early month gains to return 0.3% to start the calendar year. Consumer exposed sectors (retailing, staples and media) along with banks were the best performing sectors. Resources pulled back towards the end of the month as iron ore gave up some of its recent gains. Real Estate (-4.4%) was the notable laggard underperforming as bond yields continued to rise.
The Fund returned -0.3% for the month (net of fees and inclusive of franking), underperforming the market. Within the portfolio Incitec Pivot, Unibail-Rodamco-Westfield, Woodside Petroleum and Super Retail were the largest contributors whilst IOOF, Alumina, NIB and Ampol were the larger detractors for the period. The hedge overlay added 0.2% for the month, insulating the Fund from some of the fall in the underlying share portfolio
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2101-Merlon-Australian-Share-Income-Fund.pdfDecember, 2020
The portfolio increased by 14.9% in the quarter (net of fees and including franking), outperforming the market by 1.1%. Being non-benchmark was a modest tailwind, with the average company outperforming the cap weighted index by 0.4% despite the major bank rally. Pleasingly, contributions to this outperformance was varied, with Unibail-Rodamco (Real Estate Investment Trust), Sims Metals (General Industrials), NIB Holdings (Insurance), Southern Cross Media (Media), and Janus Henderson (Financials) the top five performers, in addition to not holding CSL. Despite gold ending the quarter only 5% below all-time highs, Newcrest detracted, as equity investors sought to move ahead of a potential tapering of monetary policy.
Other detractors within the portfolio included QBE Insurance, on an earnings downgrade and reserve increases and Super Retail Group, seen as laggard when travel resumes. Stocks not held that detracted include the major banks, CBA, ANZ and National Australia Bank, iron ore producers BHP and Fortescue Metals, and Afterpay.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2012-Merlon-Australian-Share-Income-Fund.pdfNovember, 2020
The ASX200 returned an extraordinary 10.3% in November driven by positive developments on coronavirus vaccines, Reserve Bank of Australia rate cuts and the American election pointing to a Joe Biden presidency with a Republican controlled Senate. The euphoria was tempered with the ASX200 falling from intra-month highs as trade tensions escalated between Australia and China.
The Fund returned 11.5% (net of fees, inclusive of franking) for the month, outperforming the market whilst maintaining 30% less exposure. The underlying share portfolio performed very strongly, outperforming the ASX200 by 6.5%. Unibail-Rodamco-Westfield (+71%) and the Fund’s energy investments (Origin Energy, Woodside, Ampol and Oil Search) were the largest contributors post the positive vaccine news. NewsCorp (+33%) also contributed strongly after releasing first quarter results ahead of expectations. Given the rapid rise in the underlying share portfolio the hedge overlay detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/2011-Merlon-Australian-Share-Income-Fund.pdfOctober, 2020
Against a backdrop of falling global equity markets the ASX200 bucked the trend returning 1.9% in October. Optimism was fuelled by additional fiscal measures announced in the Federal Budget, relaxation of restrictions in Victoria and a path to domestic border openings prior to Christmas as domestic COVID cases continued to fall. Information Technology (+9.0%), Financials (+6.3%) and Consumer Staples (+4.8%) were the best performers whilst Industrials (-3.9%), Utilities (-1.5%) and Materials (-1.2%) were the laggards.
The Fund returned 3.1% for the month, outperforming the market. AMP (+17%) was the largest contributor, following an announcement that Ares Corporation had made an indicative bid to acquire the company. Sims Group, Unibail-Rodamco-Westfield, and Janus Henderson also contributed positively.
ticker: HBC0011AU
commentary_block: Array
factsheet_url:
https://www.merloncapital.com.au/income-fund/quarterly-reports/
MONTHLY FACTSHEET
release_schedule: Monthly
fund_features:
Merlon Australian Share Income Fund aims to provide a higher level of tax-effective income with a lower level of risk than the S&P/ASX 200 Accumulation Index, whilst also providing the potential for capital growth and inflation protection over the medium to long term.
- The Fund is intended to be suitable for investors who are happy to invest for at least five years, are seeking high levels of return, with a large proportion of returns coming from income (predominantly via franked dividends) and who are comfortable with moderate volatility including the possibility of periods of negative returns.
- The portfolio is builded of undervalued companies with high levels of sustainable free cash flow.
- Cash allocation is maximum 10%
manager_contact_details: Array
asset_class: Domestic Equity
asset_category: Australia Derivative Income
peer_benchmark: Domestic Equity - Derivative Income Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund