June, 2023
The S&P/ASX 200 Accumulation Index returned +1.01% for the quarter. The fund outperformed the market and delivered a +2.51% return over the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/GREE-FR-BF-3.pdfMarch, 2023
The S&P/ASX 200 Accumulation Index returned +3.46% for the quarter. The fund outperformed the market and delivered a +6.47% return over the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/GREE-FR-HCF-2.pdfSeptember, 2022
The S&P/ASX 200 Accumulation Index returned +0.39% for the quarter. The fund underperformed the market and delivered a -
0.52% return over the quarter.
June, 2022
The S&P/ASX 200 Accumulation Index returned -11.90% for the quarter. The fund underperformed the market and delivered a - 12.33% return over the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/GHCF_FR_FullReport_202206-Gross.pdfDecember, 2021
The ASX200 posted its fifth consecutive quarterly gain in a row to end the year, a feat which has not been achieved since 2006. The COVID-19 pandemic continued to throw up surprises, with a new variant becoming globally dominant in a matter of weeks. In contrast to the beginning the pandemic, central bank policy became markedly more hawkish in light of increasing evidence of persistent inflationary drivers.
As expected, the RBA didn’t move on rates in any of its three meetings during the period. In a December speech, RBA Governor Philip Lowe said the bank’s central case was to not raise the cash rate in 2022. This is in stark contrast to the futures curve which implies the market is expecting there to be at least three rate rises this year. In the same speech, Governor Lowe also outlined three options for the current $4bn per week bond purchasing program; further tapering with an expectation to cease purchasing in May, taper and assess in May or cease purchases in February altogether. These options will be assessed at the RBA’s first board meeting for the year in February. Australian job ads staged a remarkable recovery at the back end of the year. The gains were broad based, with the hardest hit sector in 2020 in Hospitality and Tourism bouncing back the strongest.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/ghcf_fr-3.pdfJune, 2021
The S&P/ASX 200 Accumulation Index returned +8.29% for the quarter. The fund underperformed the market and delivered a
+8.07% return over the quarter.
March, 2021
The S&P/ASX 200 Accumulation Index returned +13.70% for the quarter. The fund underperformed the market and delivered a
+12.39% return over the quarter
December, 2022
The S&P/ASX 200 Accumulation Index returned +13.70% for the quarter. The fund under performed the market and delivered a +12.39% return over the quarter. The Australian market rallied throughout the quarter, initially buoyed by a successful effort to suppress the virus relative to the rest of the developed world. The index then got a ‘shot in the arm’ in November as positive data was released for several vaccine candidates. Despite the late recovery, the ASX200 only managed to achieve a slight gain for the calendar year. The Reserve Bank of Australia (RBA) fired its final Cash Target Rate bullet in November, cutting the rate from 0.25% to 0.10% in November. Philip Lowe (RBA Governor) also revealed the central bank does not expect to raise the benchmark rate “for at least three years”.
Given the lack of room to maneuver on the cash rate, the RBA indicated they would continue to pursue further unconventional mechanisms, including buying $100bn in government bonds over the next six months. Incredibly, the average G10 central policy rate went negative in December. This suggests that monetary policy will continue to be more unconventional going forward, and fiscal policy will be likely be forced to carry more of the stimulus burden. Elsewhere, much of the focus was on the US Election which ran in November. As has become custom, the result was much closer than the polls suggested in the lead up to the vote. The likely outcome in the aftermath of the election, whereby Biden takes the White House but the Republicans retain control of the senate, was viewed as a ‘goldilocks’ outcome for global markets. Under this scenario, Biden likely didn’t have a path to implementing his administration’s proposed tax reform, however he was still in theory able to implement immediate stimulus. This scenario was forced to be reconsidered post period end following the Senate run-off elections which were both won by the Democrats.
The market reaction to the election was relatively muted compared to the announcement a week later that the Pfizer vaccine was indicated to be over 90% effective in preventing COVID-19. Value and Cyclical stocks which had been hit by the pandemic rallied strongly, whilst COVID-19 ‘winners’ were sold off harshly. This saw investors trade out of sectors such as Technology and E-Commerce into Travel and Energy, the latter whose recovery profile became a lot more visible due to the encouraging vaccine data. Following the release of the Pfizer data, the Equal Weight S&P 500 Index had its largest outperformance day on record relative to the (market weight) S&P 500.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/ghcf_fr.pdfOctober, 2020
The S&P/ASX 200 Accumulation Index returned +16.48% for the quarter. The fund outperformed the market and delivered a +18.37% return over the quarter.
The market strength and positive sentiment throughout the quarter came as a genuine surprise to us. The momentum in the market appeared at odds with the apparent uncertainty regarding medium term consumer demand and clear caution demonstrated by corporates with respect to capital management. As always, the benefit of hindsight provided commentators with the ability to explain the apparent drivers. The most commonly parroted explanations for market strength included unlimited liquidity injections from central banks, retail day traders punting their stimulus payments, negligible bank deposit rates and re-opening news flow (including hopes for a vaccine). We believe that most of these drivers should in time prove temporary. With this in mind, Greencape has become more cautious. This results in a preference for greater liquidity in positions and higher than typical cash weights.
We believe the scarcity of sustainable dividends will be front of mind for investors during forthcoming reporting seasons. We therefore expect there to be some rotation towards those companies who are able to pay out an attractive distribution without risking the balance sheet.
As always, Greencape will continue to favour our higher scoring shareholder stewardship companies. We believe effective management teams become more valuable in such uncertain times, given the abundance of cheap funding sources magnifies capital allocation outcomes in both positive and negative directions.
ticker: HOW0035AU
commentary_block: Array
factsheet_url:
Downloads -> Latest Report
https://www.greencapecapital.com.au/funds/high-conviction/
release_schedule: Quarterly
fund_features:
Greencape High Conviction Fund offers investors access to a highly concentrated portfolio of stocks. It can invest in Australian listed companies as well as up to 10% in stocks listed on any international stock exchange.
- Aims to fully hedge any international asset exposure back to Australian dollars.
- The Fund can invest in listed equity securities or hybrid equity securities such as convertible notes, redeemable preference shares and partly paid shares.
- Concentrated portfolio of between 15 and 40 stocks.
- To outperform the benchmark (S&P/ASX 200 Accumulation Index) over rolling three-year periods.
- Suggested investment timeframe is at least five years.
manager_contact_details: Array
asset_class: Domestic Equity
asset_category: Australia Large Growth
peer_benchmark: Domestic Equity - Large Growth Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund