September, 2023
The Apis Global Long/Short Fund (the ‘Fund’) returned 2.43% (net) for the quarter (in Australian dollar terms).
Regionally, North America was exceptionally good on both longs and shorts in the quarter, offset by Asia and Europe, where losses on the long-side curtailed returns. From a sector perspective, technology contributed positively to the quarter, with other sectors flat or down; the biggest declines were in the consumer (-0.9%) and industrials & materials (-0.7%) areas.
The largest stock contributor was Alchip Technologies in Taiwan which added about 1.4% to returns. Alchip continues to report excellent results on legacy designs, while additional wins with aspiring AI chip developers such as AWS (Amazon) provide future optimism. The next three long contributors (together adding 1.4%) came in the offshore oil services area. Higher energy prices and strong pricing of multi-year contracts support visibility. On the other hand, AMG (Netherlands) detracted 1.0% as earnings forecasts fell on weakening lithium prices. As mentioned, consumer names also underperformed, as Evolution Gaming and Square Enix detracted about 0.50% each. The hangover from COVID continues to weigh on online gaming
Outside a couple of detractors in healthcare, short performance was strong. Four of the top five shorts were in the solar energy sector, where a bubble of excess capacity is driving product prices down. The investment manager also saw some retracement in the speculative “concept” stocks which were resurgent earlier in the year. Detractors were limited with Intercept Pharma which lost 0.2% on a takeover by a private Italian firm.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Apis-GLS-Quarterly-Report-8.pdfJune, 2023
The Apis Global Long/Short Fund (the ‘Fund’) returned 2.88% (net) for the quarter (in Australian dollar terms).
The Fund’s second quarter returns lagged relevant benchmarks as big tech drove market averages higher. Regionally, Asia ex-Japan stands out positively, while Japan disappointed. Across sectors, technology and industrials shined while materials fell. Consistent with this, the Fund’s top longs were technology companies Alchip (Taiwan) and HPSP (Korea), while the Fund’s biggest loser was a materials company, Osaka Titanium (Japan).
The unique conditions from Q1 extended into Q2, where a small number of stocks with a subset of characteristics (e.g. growth, large size and high beta) significantly outperformed.
Despite being momentarily misaligned with the current trends, the investment manager’s bias towards small/ value/ quality remains unchanged and they know the pendulum will eventually swing more favourably their way. So long as the investment manager remains consistent, style or factor alignments will self-correct over time.
On the macro side, the investment manager has been surprised by the weakness in China which they thought would experience a strong rebound upon the COVID-19 “re-opening.” The rebound has been anemic at best. Lockdowns combined with political brinksmanship are causing lasting damage. One of the Fund’s holding in Taiwan had a growing franchise restaurant business in China. Half of the franchises went out of business due to lockdowns – it’s hard to rebound when half of your business is gone (although the stock has been strong this year). Additionally, many larger companies saw their factories shut down sporadically and often for extended periods due to the government’s harsh COVID-19 policies. Years of on-off top-down business disruptions will weigh on future investment plans. Beyond governmental dictates, political pressures from Washington act to further deter foreign direct investment. Outside of some small shorts, the Fund has no direct exposure to China, but the Fund does have exposure to areas of commodities or materials (i.e., mining/energy) that the investment manager thought would benefit from a return to growth. In recognition of China’s disappointing recovery, the investment manager has reduced the Fund’s basic materials exposure by about half, primarily in the energy-related stocks.
A second macro surprise was the return of quantitative easing and a resurgence in risk taking. Between bailing out depositors at “systemically important” banks and running the Treasury General Account down to near zero (adding liquidity to the economy), conditions that were tightening suddenly reversed. This renewed risk appetite ignited another rally in a number of shorts the investment manager has discussed in the past. The investment manager has now witnessed this pattern numerous times in 2021, 2022, and again this year in January and June. While it is impossible to time these shorts perfectly, an opportunity presents itself yet again in all manner of speculations, including space travel, quantum computing, flying electric planes, etc. The investment manager’s expectation was that after taking severe losses in 2022, speculators would have moved on, however, that has not been the case. The danger of getting squeezed in these names is as high as ever and the investment manager remain vigilant about risk management through position sizing.
From a stock-specific viewpoint, Osaka Titanium detracted about 1% this quarter. The investment manager sees this as a period of consolidation, as the stock was up nearly 400% in 2022. Fundamentally, the investment manager hoped they would aggressively raise prices (20%+) while actual prices increased 10-15%. Still, even backing off the investment manager’s initial exuberance, they expect sales to surpass street estimates by more than 20% and profits to be more than double estimates. As previously discussed, the investment manager expects to see double-digit price increases for years to come. The investment manager had the opportunity to confirm this with the company during their trip to Japan last month.
There were no other significant standouts from the loss column, either long or short, and the Fund’s biggest gainers were limited to a contribution of about 1%. HPSP, featured below, is among this group.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Apis-GLS-Quarterly-Report-7.pdfMarch, 2023
The Apis Global Long/Short Fund (the ‘Fund’) returned 0.99% (net) for the quarter (in Australian dollar terms).
During the quarter, the market performed strongly, largely driven by only three stocks – Apple, Nvidia and Microsoft – accounting for more than half the S&P 500’s gains. Still, global benchmarks had a good quarter however the Fund lagged, notably in February, which was due to individual stock performance as a result of Q4 earnings reports and/or forward guidance.
Another contributing factor was due to being caught on the wrong side of some technical rotations in the market. For one, the best stocks of 2022 were the worst during Q1 of 2023. Last year’s top 3 decile performers were all down while the worst-performing, bottom-decile stocks soared. The investment manager had a good year last year however as they did not rotate away from these stocks on January 1st, they were negatively impacted. This also extended to the investment manager’s shorts from last year, where many of the bottom decile performers that plummeted last year convincingly outperformed.
Outside of the “January Effect,” other coincident factors did not go the investment manager’s way. Small versus large, growth versus value, and a few other themes also caught the investment manager offside.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Apis-GLS-Quarterly-Report-6.pdfDecember, 2022
The Apis Global Long/Short Fund (the ‘Fund’) returned 3.41% (net) for the quarter (in Australian dollar terms). Since the Fund’s strategy launched more than 18 years ago, there have been five times when equity markets dropped in the year. Three of those years were modest, falling single-digit percentages during 2011, 2015, and 2018, while 2008 was a real doozy, crashing 42%. We’ll characterize 2022 as solidly bad, with market indices generally down almost 20%. Of those five down market years, the investment manager was able to generate positive returns in three of them. Relative to general markets, 2022 will go down as one of the investment managers best as they outperformed the MSCI ACWI global benchmark by more than 20%. On that basis, 2022 would be considered one of the investment managers strongest years, as there have only been two other years where they have beat the benchmark to such an extent. Stellar short performance and finding a few pockets of solid long performance were key to holding up against the general tide. For Q4, Europe contributed 4.8%, but all major regions were positive. For the year, North America added the most value, rising 8.1%, with losses on the long side more than offset by gains of 11.1% on the short side. Looking across sectors, the materials area stood out, adding 7.2%, with 6.7% of that coming from the long side. All sectors contributed to short performance for the year, but consumer was the leader, adding 9.9%. Looking at individual stocks, Osaka Titanium in Japan added over 2.1% in the year. All five top longs were also in the Materials area, including two North American oil and gas companies and a couple of coal companies, one in Indonesia and a second in the US detractors were led by Vicor (detracting 1.5%) of the US, a power semiconductor company that could have a bright future but suffered supply chain and production capex delays that we fear will continue. Overall, ten names detracted more than 1%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Apis-GLS-Quarterly-Report-5.pdfSeptember, 2022
The Apis Global Long/Short Fund (the ‘Fund’) returned 3.70% (net) for the quarter (in Australian dollar terms). Losses in the portfolio were about half of the market overall during the quarter, primarily due to net positioning and long-side outperformance, while shorts were positive but more in line with weak markets. Geographically, Asia contributed, with Korea and Taiwan notably strong.
On the other end of the spectrum, longs in Europe dragged on performance by over 2%. Sectors were generally flat in the quarter except for Industrials which detracted 3%, all of which and more coming in the month of September. Stock picking was overwhelmed by macro with energy-related names contributing positively to the period despite a substantial selloff in September.
The largest detractor was Solaria in Spain, a developer and operator of solar farms. Solaria fell victim to a growing trend of political interference. A portion of Solaria’s business is exposed to spot prices, which have been very favourable due to the energy crisis in Europe. As a result of this “windfall” profit (which could be redeployed into more solar investments), the European Union ministers have proposed a cap on prices. These types of unanticipated risks are the reason Europe is viewed as cheap. These policies work to subsidize demand and slow the supply of needed energy, exacerbating the situation. On the short side, there were no notable trends, although Asia stood out with 12 of the top 15 contributors.
The Fund’s biggest detractor (about 0.30%) in the quarter was a battery play that has garnered hundreds of millions of dollars in benefits through the Inflation Production Reduction Act. Again, political interference worked unfavourably here, complicating what was a straightforward investment case. The investment manager suggests the only winner from these subsidies will surely be the management.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Apis-GLS-Quarterly-Report-4.pdfJune, 2022
The Apis Global Long/Short Fund (‘the Fund’) returned 5.47% (net) for the quarter (in Australian dollar terms).
The portfolio’s returns for the second quarter of 2022 were considerably better than equity markets in general thanks to the short side of the portfolio which contributed about 12% to performance for the quarter. “Streaks” of monthly performance are largely statistical noise, but it is notable how long this streak of positive short performance has lasted – 10 months through June.
Regionally, Asia ex Japan was relatively quiet. While positive short performance in North America was able to overwhelm negative long performance, the opposite was true in Japan and Europe. The two sectors that stood out during the quarter were consumer and cyclicals (materials & industrials). Shorts were particularly strong in consumer, adding over 5% to performance, while longs were a meaningful detractor in cyclicals, amounting to more than 10%.
Top performers during the quarter on the long side included Silicon Motion, Aixtron, and Ranger Oil. All were relatively small contributors, adding less than 0.50%. Detractors on the long side included IMDEX, Serica Energy, and Major Drilling. Each name detracted approximately 1.4%. The primary driver on the long side was general market “risk-off” sentiment. In the case of Silicon Motion, the company received a takeout offer currently valued at $93 of cash plus $12 of stock (in USD terms). The company trades at $83 (in USD terms) as of this writing. The market is skeptical of everything at the moment. On the short side, there were a handful of detractors, but nothing of substance worth noting. Short contributors were broadly distributed across the portfolio, with the top ten names adding 0.4% to performance on average. As mentioned last quarter and discussed further below, the investment manager continues to see attractive opportunities here – the “garbage-bubble” has yet to truly deflate.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Apis-GLS-Quarterly-Report-3.pdfMarch, 2022
The Apis Global Long/Short Fund returned -4.00% (net) for the quarter. Most of the credit goes to the short side, which contributed over 6.0% and offset long losses. This continues a streak of monthly positive short performance, which now dates to September of last year. Regionally, North America was especially strong with gains both long and short, adding about 4.2% (gross), while Asia detracted almost as much, contributing to the flat overall result.
Sectors were generally steady, with two big exceptions – technology fell over 5.6% (gross) primarily due to semiconductor long positions, while gains in the materials sector compensated by adding over 5.1% (gross). Six of the top 7 long performers were materials names led by Serica (adding 1.7%), highlighted below.
On the downside, three semiconductor names were top detractors, led by Vicor, which missed earnings estimates due to supply chain issues (a common refrain of late). Vicor has unique intellectual property on power management semiconductors for data centres and electric vehicles (EVs), which the investment manager believes holds tremendous potential. Still, the investment manager lowered the position to “farm” as these issues will take a least a few quarters to resolve. As mentioned, shorts continue to be fruitful, with most of the credit going to profitless unicorns whose survival depends on the continued influx of capital.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Apis-GLS-Quarterly-Report-2.pdfJune, 2021
The Apis Global Long/Short Fund returned 2.60% (net) for the quarter. The second quarter of 2021 was characterised by several feuds playing out in the market. The retail embrace of SPACs and meme stocks continued in earnest. While the Fund is somewhat impacted on the short side, the Fund maintains a handful of small positions. The long side was characterised by strong performances from commodity-related names offset by a pullback from other companies in the Fund’s portfolio that performed strongly last year. In general, the market is working out whether to favour growth or value stocks. However, the investment manager’s framework allows for both growth and value; moreover, the investment manager often find both elements in the same stock.
Regionally, Europe and Asia both contributed more than 2.0% gross while North America was slightly negative due to the short side. By sector, cyclicals added nearly 5.0% and financials contributed nearly 2.0%. Consumer was a detractor (again, driven by the short side), down about 3.1% during the quarter.
Notable winners on the long side included Penn Virginia, a shale oil name the Fund has owned during past cycles. It is a conservative, hedged operator, which participated solidly in the oil rally, contributing about 1.7%. Also contributing more than 1.0% were flatexDEGIRO (an online broker in Europe), Cornerstone Building (building supplies in the US) and HEG Ltd (Indian manufacturer of graphite electrodes). Long detractors were all below 1.0% each and included companies such as Intelligent Systems which the investment manager expects to have a strong catalyst in the fourth quarter of the year as well as Darling Ingredients. On the short side of the portfolio, the Fund had one retail-driven detractor, costing the Fund about 2.7%, along with a handful of others detracting between 0.3% and 0.6%. These continue to be some of the most compelling shorts the Fund has ever seen, but the investment manager acknowledges the need to manage risk and have intentionally kept them small, generally between 0.2% to 1.0% in size.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Apis-GLS-Quarterly-Report-1.pdfDecember, 2020
The Apis Global Long/Short Fund returned 12.06% (net) for the quarter. 2020 was a year to expect the unexpected and the investment manager humbly admits being surprised, not only by the market’s general strength under the circumstances, but also their ability to successfully navigate it. In the end, 2020 returns were the second best in their 17-year history with December 2020 being the single-best month. The Fund benefited from emerging tailwinds for small capitalisation companies as well as renewed interest in ex-US and emerging markets which can hopefully sustain, given years of relative underperformance.
At the macro level, the Fund’s best returns came from the industrials sector (22.9% contribution), followed by consumer (up 17.1%) which aligns with the Fund’s long-term success in those sectors. An outlier this year, however, is the regional performance contribution from Europe, which added 19.6% to returns compared with North American and Asia (including Japan) which added 13.7% and 14.4%, respectively. 2020 marks the first time Europe has led the way. As self-described “stock-pickers,” the most gratifying aspect of 2020 for the investment manager was the strength and breadth of positive contributors. Long side stock performance was outstanding, generating in excess of 68% to returns. Top companies such as West Holdings (Japan) and Kambi (Sweden) each contributed more than 5.0%, but in sum there were 26 companies that added more than 1.0% to returns versus 4 companies that detracted over 1.0%, and all these were crystalised in the first quarter crash. While there is nothing wrong with owning Tesla or other unicorns, the investment manager finds it satisfying there isn’t a winner in the Fund that is a household name. For the quarter, there were 12 holdings that each added over 1.0% to returns, led by Darling Ingredients in the US (up 2.6%) and Evolution Holdings in Sweden (up 2.1%). Other winners included Rush Street Interactive, Myokardia, Flatex, and Global Wafers to name just a few. Part of success is avoiding failures and the largest quarterly loser was Pexip Holding (Norway) which only detracted about 0.3%. On the short side, the fourth quarter was better, with notable winners stemming losses.
The top short was Penumbra, which fell on reports that the company misled investors about its flagship products for treating ischemic stroke. Another notable winner, Beyond Meat, declined on weak third quarter results. With 3% third quarter growth valued at 20 times sales for a food product company that will never achieve high margins, the investment manager thinks this unicorn has considerably more distance to fall.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Apis-GLS-Quarterly-Report.pdfasset_class: Foreign Equity
asset_category: Long Short
peer_benchmark: Foreign Equity - Long Short Index
broad_market_index: Developed -World Index
manager_contact_details: Array
ticker: HFL0108AU
release_schedule: Quarterly
commentary_block: Array
factsheet_url:
https://ironbarkam.com/funds/apis-global-long-short-fund/
Fund Information
Performance
Quarterly Report
fund_features:
Apis Global Long/Short Fund aims to provide investors with risk adjusted, absolute returns through diversified exposure to global equities over 3 to 5 years. The Fund gains its investment exposure indirectly through its investment in the AUD share class of Apis Offshore Capital, Ltd. (’Flagship Fund’ or ‘Underlying Fund’).
- The Underlying Fund employs a global long/short equity investment approach to construct a portfolio with an emphasis on companies that operate in global industries such as technology, healthcare, consumer and industrials/cyclicals.
- The investments held in the Underlying Fund may include long and short publicly listed global equities, cash and derivatives.
- Geographically, the Underlying Fund invests in North America, Asia, and Europe, with some emerging markets exposure, and invests across all market capitalisations.
structure: Managed Fund