September, 2023
Australian equities fell through September 2023, as investors took a cautious stance during a period where the Australian 10-year bond yields reached the strongest levels since October 2011. The S&P/ASX 200 outperformed the Developed World performance, with a fall of -2.8% in September, while the S&P 500 also fell -4.8% in local currency terms. For the quarter ending September 2023, the S&P/ASX 200 ended down -0.8%. On a sector basis, Energy, Financials, and Consumer Staples outperformed in Australia, and Health Care, IT, and REITs sectors were the relative worst performers during the month. During the quarter ended September 2023, the Lazard Australian Equity Fund returned 1.4% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which declined -0.8%.
Contributors to Performance
• Monadelphous (MND) was a contributor to portfolio performance over the current quarter. The company announced several major construction contract awards in the lithium and iron ore segment, bringing the value of secured contracts since the start of FY23 to nearly A$1bn with over half of this post balance date. Monadelphous Managing Director, Zoran Bebic, stated that these contracts represented the first in a new wave of major construction projects to come to market. We continue to remain shareholders in MND, with the view that the medium-term earnings power of the company is higher than its current share price valuations.
• Costa Group’s (CGC) shares performed strongly during Q3 2023, rising around 15% after the board entered a Scheme of Arrangement with Paine Partners for the sale of the company at a price of A$3.20 per share. This price was disappointingly lower than the A$3.50 level discussed few months earlier before CGC’s most recent earnings downgrade.
Detractors from Performance
• Despite reporting results and guidance in-line with market expectations, Waypoint REIT’s (WPR) underperformance accelerated over Q3 2023 as bond yields rose. The ‘higher for longer’ thesis for bond yields placed pressure on the broader REIT sector, with the key implications being negative asset revaluations and rising debt costs. WPR is relatively well-positioned, with full-year CY23 earnings guidance unchanged being flat versus the prior year, with ~3% rent growth offset by the full-year impact of prior asset sales and higher cost of debt. The balance sheet remains strong with gearing at the low end of the 30-40% target range and 93% hedging for FY24, providing significant headroom. We are still awaiting the competition regulator ACCC’s adjudication of main tenant Viva Energy’s (VEA) acquisition of On the Run (OTR). This will determine VEA’s rollout of the OTR format across the store network, which could be partially funded by WPR and provide redevelopment returns. WPR currently trades at a 7.3% dividend yield and 25% discount to net tangible assets, providing a good valuation support.
• Healius (HLS) was subject to a conditional non-binding offer from another pathology services operator to acquire the company in March 2023, which offered some support to the shares in recent months. However, the stock underperformed the market in Q3 2023 in anticipation and later release of the ACCC’s preliminary finding that the acquisition would likely substantially lessen competition in Australian pathology services. This highlighted that the proposed offer might need to be revised before it is considered again. At current levels, we believe there is still value in the stock as we believe the market is not yet fully appreciating the recovery in diagnostics volumes and the company’s refocusing initiatives.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2023-09.pdfAugust, 2023
The S&P/ASX 200 outperformed the Developed World markets performance, falling -0.7% in August 2023. Weakness in Australian equities was mainly on the back of dull guidance from companies through the earnings season. The Australian 10-year bond yields sold off by 2bps to 4.03%, trading relatively unchanged as the Reserve Bank of Australia (RBA) remained unmoved on the cash rate, however still retained a tightening bias. On a sector basis, Consumer Discretionary, REITs, and Energy outperformed, while Utilities and Consumer Staples sectors were the relative worst performers.
During the month ended August 2023, the Lazard Australian Equity Fund returned -1.5% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which returned -0.7%.
Contributors to Performance
• Bapcor (BAP) announced their results on August 16, 2023 which were in-line with expectations. BAP shares rose 6% over the month, outperforming the ASX200 which declined in August as the market had concerns that BAP may be impacted by the slowing consumer demand in Australia. The largest value driver for BAP remains the ‘Better Than Before’ program, for which management has announced aggressive cost saving targets. If these are mostly realized, we believe there might be a meaningful upside for BAP shares. We remain attracted to BAP’s resilient top line and rational competitive dynamics in key markets with minimal ‘Better Than Before’ upside included in our valuation. We continue to hold BAP shares.
• Ridley (RIC) posted another solid result in August with NPAT increasing 15.5% for FY23. The shares were weak in the last quarter of the financial year as the market was concerned that weaker tallow pricing would derail the company’s earnings growth. We used this share price weakness to add to our RIC positions. While commodity price tailwinds have undoubtedly assisted in previous periods, RIC has numerous growth drivers to depend on, as detailed in management’s “Growth Plan 2” initiative. Confirmation of these growth options across the stockfeed, packaged products and rendering business units saw the shares rise through August and outperform the broader index. We continue to hold RIC shares as we believe that the market is factoring in less than the full upside we believe “Growth Plan 2” provides.
Detractors from Performance
• Towards the end of August 2023, Costa Group (CGC) reported a very disappointing earnings downgrade, with a deterioration in the quality of the citrus harvest. The shares fell 14% as the market was concerned the downgrade could impact the indicative takeover offer Paine Partners made to the CGC board for $3.50 per share from progressing to a binding acquisition proposal. We expect an update on the status of the proposal from the CGC board in mid-late September 2023.
• South32 (S32) underperformed the market in August 2023 as concerns about a slower than expected Chinese economic recovery continued to weigh on sentiment. S32 reported its FY23 result during the month, and while it was broadly in line with consensus, we believe the guidance for FY24 was disappointing. Costs guidance was significantly higher than expected and production growth guidance was also soft. While S32 is investing in growth, these benefits won’t be seen until post FY25. S32 continues to transform its portfolio with 71% of FY23 revenue related to base metals, up from 45% when the business was demerged from BHP almost 10 years ago. In our view, S32 is well positioned to benefit from the significant energy transition demand for base metals in the medium to long term. Despite some near-term headwinds we continue to see S32 as attractively priced.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2023-08.pdfJuly, 2023
Australian equities gained ground in July 2023, lifted by a rally in energy stocks on the back of rising oil prices with the S&P/ASX 200 closing +2.9% for the month. Australian 10-year bond yields sold off by 3bps to 4.05%, trading relatively unchanged as Reserve Bank of Australia's (RBA) July meeting saw the cash rate paused at 4.10%. On a sector basis, Energy was the strongest performer, while Financials and Information Technology also outperformed. The Materials, Consumer Staples, and Health Care sectors were the relative worst performers.
During the month ended July 2023, the Lazard Australian Equity Fund returned 4.3% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 2.9%.
Contributors to Performance
• Monadelphous (MND) was a contributor to portfolio performance over the month. The company announced two major construction contract awards: the supply and construction of an overland conveyor and transfer station at Fortescue’s Christmas Creek mine and works associated with the expansion of Albemarle’s Kemerton Lithium Hydroxide Processing Plant. Monadelphous Managing Director, Zoran Bebic, stated that these contracts represented “the first in a new wave of major construction projects to come to market.” We continue to remain shareholders in MND, with the view that the medium-term earnings power of the company is significantly higher than its share price is currently capitalizing.
• SmartGroup (SIQ) performed strongly in July, with its share price up by 14%. Whilst there was no company specific news, several industry peers have commented that recent legislation providing fringe benefit tax (FBT) exemption on electric vehicles has driven robust growth in novated lease demand. As a leading salary packaging and novated lease provider, SIQ may be a beneficiary of the expansion in the addressable market. We continue to hold SIQ shares.
Detractors from Performance
• Aurizon’s (AZJ) had a weaker month in July with the share price falling by 3%. On 17 July 2023, the company held an investor day where FY23 earnings guidance was restated and FY24 guidance was issued for the first time. While the guidance was largely in line with consensus estimates the shares fell in response to the news. This may in part be due to the strong run up in the share price since February 2023 but also likely suggests skepticism at the growth drivers the company outlined at the investor day, with the containerized freight land bridging initiative being the prime example. While we remain agnostic on the success or otherwise of this initiative, we don’t believe any success is reflected in the share price and that the capital being invested which may be at risk of impairment is immaterial. We continue to hold AZJ shares.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2023-04-3.pdfJune, 2023
Australian equities rallied in June 2023 and closing Q2 2023 in positive territory up by +1% as investors shrugged off recession fears amid a local retail spending rebound and easing of inflation. The S&P/ASX 200 rose +1.8% in June, underperforming the Developed Market World during the month, on softening rate hike expectations. Australian 10 - year bond yields sold off by 0.42bps to 4.02%, as the Reserve Bank of Australia's (RBA) June meeting saw the cash rate hike by 25bps, to 4.10%. On a sector basis, Materials was the strongest performer, while Information Technology, and Financials also outperformed for the month. The Health Care and Communication Services sectors were the relative worst performers.
During the quarter ended June 2023, the Lazard Australian Equity Fund returned 2.4% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 1.0%.
Contributors to Performance
• Aurizon’s (AZJ) shares rose more than 16% during Q2 2023, outperforming the S&P ASX 200. During the month of May 2023, the company presented at the Macquarie Conference where earnings guidance for the 2023 financial year were confirmed. With an increasing number of earnings downgrades in the market due to an apparent slowing in consumer spending, this earnings stability was welcomed by the market. Positively an increase in Aurizon’s Regulated Asset base from $5.5 billion to $6.2 billion was confirmed as well as an increase in the allowed return expected to significantly increase earnings from FY24. We continue to favor Aurizon’s defensive earnings profile, cash generation ability as well as the growth supplement from the Bulk division. We also note that the company is a clear beneficiary from higher inflation providing attractive diversification benefits and hence we continue to hold our positions.
• SmartGroup’s (SIQ) share price rose by more than 20% over the quarter. In early April 2023, SIQ announced that former The Star Sydney CEO Scott Wharton would be succeeding outgoing CEO Tim Looi. The company then presented at the Macquarie Conference in May and a provided a positive trading update. There was growth across novated leasing leads, orders, settlements, and yields. In mid-June 23, Eagers Automotive (APE) announced that it had acquired an economic interest of above 5% in McMillan Shakespeare (MMS), the key competitor to SIQ in the salary packaging and novated lease sector. The market has subsequently viewed APE’s strategic investment in MMS as a vote of confidence in the potential growth of the novated lease sector, following recent legislation that provides fringe benefit tax (FBT) exemption to novated leases of electric vehicles below ~A$85,000. SmartGroup (SIQ) may be a key beneficiary of this Government legislation, and we remain shareholders.
Detractors from Performance
• South 32 (S32) underperformed on weaker commodity prices. Disappointing growth in China, a key source of commodity demand continued to weigh on sentiment. We continue to see S32 as attractively valued and hold the shares in the portfolio.
• Ridley (RIC) shares fell in the June 2023 quarter, largely retracing the strong gains in Q1’23 on the back of a strong H1’23 result. There was no company specific news, and it appears that weakness in tallow prices was behind the fall in the share price. While RIC does have an exposure to tallow pricing the company has a plethora of other earrings drivers as detailed in the company’s ‘Growth Plan 2’ initiatives. The company reactivated the small buyback program seemingly in response to the share price weakness and CEO, Quinton Hildebrand, signed a longer-term commitment to the company during the quarter. While these are only qualitative factors, we believe that this may suggest the board and management see higher profits in the future. We remain holders of RIC shares and await the FY23 result in August.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2023-04-2.pdfMay, 2023
Australian equities fell through May 2023 with the S&P ASX 200 index closing down -2.5% for the month, on continued rate hike expectations from central banks and concerns around US law makers intentions on the country's debt ceiling. Australian 10-year bond yields sold off by 0.26bps to 3.60%, on the resumption of rate hikes by the Reserve Bank of Australia to 3.85% in the May 2023 meeting. On a sector basis, Information Technology was the strongest performer, while Utilities and Energy also outperformed. The Consumer Staples and Consumer Discretionary sectors were the relative worst performers.
During the month ended May 2023, the Lazard Australian Equity Fund returned -2.4% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which declined -2.5%.
Contributors to Performance
• Costa Group’s (CGC) share price outperformed during the month with the shares rising 3% while the market declined about 3%. On the 25 May 2023, the company gave a positive qualitative update specifically noting strength in the international berry business in China and Morocco as well as in the recently acquired 2PH citrus assets. After several years of disappointing earnings, this positive news was well received by the market. We continue to believe that CGC’s assets can earn profits materially higher than what has been produced in recent history. If this expectation is confirmed through the results we expect, we expect CGC share price to perform strongly. We continue to be invested in the company.
Detractors from Performance
• Metcash (MTS) underperformed in May 2023 on the back of a slowing macro environment in Australia. It’s two main pillars: food and hardware are the markets main concerns. Food has been a strong performer over the last four to five years especially on the back of strong local shopping during COVID-19 years. Now with rising interest rates the concern is that shoppers will look to discounters such as Aldi and reduce the dollars spent at a local IGA. Hardware is Metcash’s fastest growing pillar but again a slowing housing market in both new construction and renovations is likely to see the growth in recent times from both Mitre10 and Total Tools slow. Metcash will report their annual numbers for April 2023 in late June this year as the market awaits an update on these two businesses. We believe there will be some weakness as the economy slows but our estimates remain conservative, and in our view Metcash still trades on a multiple discount to its long run average.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2023-04-1.pdfApril, 2023
Australian equities rallied over April 2023, as a slowing inflation rate (Q1 -23 headline 7.0% y/y vs 7.8% previously) prompted a reassessment on the need for any further rate hikes from the RBA at that time. The S&P/ASX 200 Index rose +1.9% during the month outperforming the DM World Index, on the back off with strong Australian consumer sentiment underpinned by an RBA interest rate hike pause to 3.60% in April. Australian 10 -year bond yields tracked sideways as the cash rate remained unchanged, rallying 4bps to 3.34%. On a sector basis, REITs were the strongest performer, while Information Technology, and Industrials sectors also outperformed on a relative basis. The Energy, Utilities and Materials sectors were the relative worst performing sectors.
During the month ended April 2023, the Lazard Australian Equity Fund returned 1.2% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which rose 1.8%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2023-04.pdfMarch, 2023
The S&P/ASX 200 fell -0.2% during the month of March 2023 and closed Q1 2023 returning 3.5% for the quarter on the back of slowing earnings momentum and continued rate hikes by the Reserve Bank of Australia, raising another +0.25bps to 3.60% during the month of March. Australian 10-year bond yields moved in reaction to slowing inflation, rallying 56bps to 3.30%. During the month, the Materials was the strongest performer, while Communication Services and Consumer Discretionary sectors also outperformed in Australia. The Energy, Financials and REITs sectors were the relative worst performers.
During the quarter ended March 2023, the Lazard Australian Equity Fund returned 1.1% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which rose 3.5%.
Contributors to Performance
• Eagers Automotive (APE) shares rose 24% during Q1 2023 outperforming the market, on the back of a strong CY22 result. The key driver of the positive share price response was the above consensus turnover guidance for CY23. With conservative assumptions, APE expect to earn A$9.5-10 billion of turnover which was 4-10% above prior consensus expectations. Management further detailed their expectations that margins will be ‘stronger for longer’ resulting in much larger increases in profit forecasts than the increase in turnover. Beyond 2023, we believe APE is well positioned to prosper in the transition to (EV) and the company has a balance sheet that provides flexibility to capitalize on opportunities.
Detractors from Performance
• Aurizon (AZJ) underperformed during the March 2023 quarter on the back of a weak H1’23 profit result which was released in February 2023. Heavier than normal rainfall lowered volumes in both the Coal and bulk divisions, which impacted revenues. We view weather related impacts as random and expect a strong recovery in profits as has occurred historically. During the quarter the divestment of East Coast Rail was finalized, improving AZJ’s balance sheet, and additional contract wins in the Bulk business were announced. We believe that the market remains highly skeptical of AZJ’s Bulk growth strategy, and no benefit of success is reflected in the share price. We have modest assumptions for AZJ and believe the company stacks up well on a risk, reward basis. We also note that the company is a clear beneficiary from higher inflation providing attractive diversification benefits and hence we continue to hold our positions.
February, 2023
February was a weak month for equities, as company results illustrated waning earnings momentum. The S&P/ASX 200 declined -2.4% during February 2023, as the RBA’s 25bps rate hike to 3.35% placed pressure on the already decelerating economy. Australian 10-year bond yields moved in reaction to tightening monetary policy, selling off 30bps to 3.86%. Commodity prices fell across the board. In Australia, Utilities was the strongest performer, while Information Technology and Industrials also outperformed. The Energy, Financials and Materials sectors were the relative worst performers.
During the month ended February 2023, the Lazard Australian Equity Fund returned -2.6% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which declined -2.4%.
Contributors to Performance
• QBE’s share price rose following its 2022 full year results. Continuing premium rate rises that commenced in 2019 and first became visible in the balance sheet in 2021 have started to flow through the P&L. These benefits and higher yields on the technical reserves held suggest that EPS will rise significantly once more in 2023. The hard market in premiums continued into 2023, with affected reinsurance lines experiencing 20-30% rises over the 1 January 2023 renewal season. Reinsurance markets tend to lead primary rates, and QBE is roughly balanced in terms of inward and outward reinsurance. In addition, global rates continue to rise and investment yields expectations are being raised in consequence. The new CEO, Andrew Horton, emphasized stability of results as a focus of his strategy, which might have reassured some that in the past were critical of QBE’s earnings volatility. In our view, the major risks to QBE remain; (1) the possibility of sustained high rates of inflation that would necessitate provision increases on long-tailed liability classes; and (2) the Australian LMI business, which is exposed to mortgage defaults. At a consensus 2024 EPS of $1.63, the stock remains on only 9.2x forward earnings. While the share price is not extraordinarily lowly priced as in 2021, we believe QBE remains an attractive investment in terms of future expected returns.
Detractors from Performance
• AMP’s stock price fell in February following the full year 2022 result. The operational results were soft, but broadly in line with the lower expectations. The market was disappointed, however, with the lack of any commentary or plans to deal with some of the outstanding issues. These include the drag from three loss-making businesses within the group, the very high employee numbers and costs post-AMP Capital divestment and additional capital returns. The price fell to its low on 28 February 2023 as this was the revised due date for the completion of the sale of the final part of AMP Capital to Dexus. The company subsequently announced that the deadline had been extended and that the terms remained unchanged. We continue to engage with the company to address the legacy cost/staffing issues and to expedite capital returns. At A$1.03, AMP traded at an 18% discount to December 2022 NTA of A$1.26 and a 22% discount to pro-forma NTA post settlement of all sales. At the end February price, AMP was once more amongst our more attractive holdings in terms of expected future returns.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2023-02.pdfJanuary, 2023
Equities rallied over January 2023 off the back of stabilising recessionary expectations and easing rate hike fears after a soft US GDP print. The S&P/ ASX 200 performed strongly rising +6.2% over January, as investors improved their outlook. This was also reflected in bond markets, as the Australian 10-year yield fell by 50bps to 3.55%. On a sector basis, Consumer Discretionary was the strongest performer, while Materials and REITs also outperformed in Australia. The Utilities, Energy and Health Care sectors were the relative underperformers.
During the month ended January 2023, the Lazard Australian Equity Fund returned 4.1% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which returned 6.2%.
Contributors to Performance
• South 32 (S32) outperformed the market strongly in January as the Chinese government’s push for a reopening of the economy continue to gather pace. Base metal prices were broadly stronger during the month with aluminium price up 15% and copper prices rallied over 10%. The business reported its December 2022 quarterly result in January, which saw their key assets managing well in a period of high inflation, and management has maintained its FY23 guidance. Overall, despite concerns and some headwinds for near-term recession risk, we continue to see S32 as attractively priced today. • Smartgroup (SIQ) outperformed the broader market in January, with its share price up around 12%. There was no company specific news through the month, however we believe that SIQ presents an attractive investment proposition with a normalisation in new vehicle supply.
Detractors from Performance
• Whitehaven Coal’s (WHC) share price declined in January, as a mild winter in both Europe and Asia, saw a weaker demand for energy. Benchmark Newcastle (NEWC NAR 6,000 kcal/kg) coal retreated from US$390/t to US$250/t at the end of January. There is typically a six-to-nine-month lag between spot price and the realised price achieved by WHC, meaning the high prices in the December quarter will likely continue to flow through into WHC’s earnings over the next six-to-nine months. We do not expect the US$400/t coal price to be sustainable in the medium to long-term. In our valuation, we capture the next six to twelve months strength in coal prices but brought down our coal price in FY24 to US$125/t and remains anchored to our long-term coal price assumptions of US$85/t for NEWC 6,000kcal/kg. On that basis, we believe WHC still looks relatively attractive.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2023-01.pdfDecember, 2022
December 2022 saw equity market decline across the world, as a stronger than expected US GDP print caused investor concerns that central bank interest rates could potentially remain higher longer than expected. The S&P/ASX 200 declined - 3.4% during the month, in response to the RBA's 25bps hike to 3.10%, which was slightly higher than what the markets were pricing in. The S&P/ASX 200 closed the year 2022 with a decline of -1.1%. On a sector basis, Materials was the strongest performer, while Utilities, and Consumer Staples also outperformed in Australia. The Consumer Discretionary, Information Technology and Industrial sectors were the relative worst performers during the month.
During the quarter ended December 2022, the Lazard Australian Equity Fund returned 9.1% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which returned 9.4%.
Contributors to Performance
• Rio Tinto’s (RIO) share price rebounded strongly in Q422 as the Chinese government’s push for a reopening of the economy gathers pace. This expectation has helped boost sentiment in the market which boosted commodity prices recently. Iron ore was up more than 15% and the aluminum price recovered more than 5% during the quarter. Consumer confidence in China, however, is still very low and property data continues to be very weak; these are what we view as the key fundamental demand drivers of commodities in China. Fear of recession in the rest of the world will likely also continue to weigh on the broader demand for metals in the near-term. For our RIO valuation we are factoring some headwinds for near-term recession risk. In the medium to long -term, we have a conservative view on iron ore and look to capitalise earnings on our long-term price of US$60/t which is lower than the spot price of over US$110/t. In contrast, we have a more bullish view on RIO’s aluminum business. We see this business as structurally more profitable in the medium to long-term as demand accelerates, driven by the global energy transition, and combined with an underinvestment in supply. RIO is one of the lowest cost aluminum producers with the lowest CO2 intensity globally. Despite near-term earnings headwinds, we see RIO’s current share price as relatively attractive.
Detractors from Performance
• Collins Food Limited’s (CKF) share price fell approximately 18% during Q4 22 post the release of the H1’23 financial results which was announced in November 22. While the profit for the first half of the year broadly met expectations, CKF’s downgraded margin expectations for the full year. Australian margin expectations were downgraded to 15-16% from 16-17% and European margins are now expected to decline by 2-3% compared to the 1-2% decline initially expected. CKF also expects a slower recovery in margins from current low levels. There was also an impairment of the emergent Taco Bell store network which, while disappointing, is immaterial for the valuation. While this near-term earnings downgrade is disappointing, we note it is solely due to cost pressures and that the top line of the business, indicative of demand, remains robust. Cost pressures should, we believe, ease in time and with pricing initiatives expected to support margins. Crucially, management has not altered their long-term profitability expectations for the business. We remain attracted to CKF’s long term growth profile through store expansion and have increased our position in the company during the quarter.
November, 2022
Equities had a strong month in November 2022 following on from a strong performance in October, as Federal Reserve Chair Powell's comments on potentially slowing rate hikes "as soon as December" provided relief to markets. The S&P/ASX 200 outperformed the developed market indices, rising over +6% during November, as investors responded to a more dovish than expected RBA 25bps hike to 2.85% during the month. This was reflected in Australian bond markets, as the Australian 10-year yield moved down by 23bps to 3.53%. On a sector basis, Utilities was the strongest performer, while Materials, and Health Care also outperformed in Australia. The Communication Services, Financials and Energy sectors were the relative worst performers.
During the month ended November 2022, the Lazard Australian Equity Fund returned 4.5% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which returned 6.6%.
Contributors to Performance
South 32 (S32) outperformed the market strongly in November as the Chinese government’s push for a reopening of the economy gathers pace. Both aluminium and copper prices recovered over 10%, and nickel price jumped over 20% during the month in response. S32 is a mining conglomerate with more than 95% of its portfolio leveraged to the green energy transition. During Q4 2021, S32 announced an acquisition of a 45% interest in the Sierra Gorda Copper mine in Chile for US$1.5bn. This mine has 20 years of reserve life and annual production of 210kt. This transaction adds another future facing commodity to the portfolio. Copper is estimated to account for 20% of underlying earnings on an annualized basis for FY21. The Sierra Gorda deal was attractively priced at 3.3x EV/EBITDA or 2x EV/EBITDA at spot copper prices. Our value for Sierra Gorda is lower than the markets due to a conservative copper price but this doesn’t include the option value for mine life extension or a phase 2 concentrator expansion. In addition, S32 bought an additional 25% interest in the Mozal aluminum smelter, which is backed by hydro power, at an attractive acquisition multiple of 3.6x. The deal will increase S32’s ownership in this smelter to 72%, adding another 145kt pa of green aluminum production. Overall, despite some headwinds for near-term recession risk, we continue to see S32 as attractively priced today.
Detractors from Performance
Collin’s foods (CKF) experienced a ~25% share price fall in the wake of the release of the H1’23 financial results during the month. While the profit for the first half of the year broadly met expectations, CKF’s downgraded margin expectations for the full year. Australian margin expectations were downgraded to 15-16% from 16-17% and European margins are now expected to decline by 2-3% compared to the 1-2% decline initially expected. CKF also expects a slower recovery in margins from current low levels. There was also an impairment of the emergent Taco Bell store network which, while disappointing, is immaterial for the valuation. While this near-term earnings downgrade is disappointing, we note it is solely due to cost pressures and that the top line of the business, indicative of demand, remains robust. Cost pressures should, we believe, ease in time and with pricing initiatives expected to support margins. Crucially, management has not altered their long-term profitability expectations for the business. We remain attracted to CKF’s long term growth profile through store expansion and have used this share price weakness to increase our position in the company.
October, 2022
Equities had a strong month during October 2022 on the speculation that central banks are nearing the peak of policy tightening which lifted sentiment in share markets. The MSCI Developed Markets (DM) Index rose 7.5%, and the S&P 500 gained 8.1% in local currency terms. The S&P/ASX 200 gained 6.0% during the month as investors responded to a more dovish than expected RBA’s 25bps hike in the cash rate to 2.60%. This was reflected in Australian bond markets, as the Australian 10-year yield moved down by 13bps to 3.76%. Meanwhile US yields continued their upward trend, rising 28bps to 4.07%, however speculation of a potential pivot in the Fed's policy path supported risk sentiment. On a sector basis, Financials was the strongest performer, while REITs and Energy sectors also outperformed in Australia. The Consumer, Materials and Health Care sectors were the worst performers.
During the month ended October 2022, the Lazard Australian Equity Fund returned 6.3% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 6.0%.
Contributors to Performance
Following a 16% rise in AMP’s share price over the September quarter, October saw a further 15% gain in the share price to $1.26. The company released a quarterly trading statement late in the month, which showed 2.6% mortgage growth in the September quarter and a reduction in funds under management outflows compared to the previous corresponding period. The stock also benefitted from positive sentiment towards improving net interest margins across banking businesses. At the closing price the discount to NTA per share had narrowed to ~8%. Following the 33% rise in the shares since mid-year, AMP remains attractively priced, but no longer within the top 30 most attractive stocks on our value rank. We continue to expect further buybacks and debt repayment over 2023.
September, 2022
The S&P ASX 200 fell -6.2% in September 2022 as investors priced in one of the most aggressive rate hiking cycles since the 1990s from the RBA. Global Equities also struggled on the back of global recession fears and an increasingly hawkish US Federal Reserve (‘the Fed’), with the S&P 500 closing the month down -9.2% in local currency terms. Bond markets also reflected a hawkish outlook, as the Australian 10-year yield sold-off by 29bps to 3.89% following the widely expected RBA's 50bps hike to 2.35% on 7 September 2022. On a sector basis, Materials was the strongest performer, while Energy, and Health Care also outperformed in Australia. The Utilities, REITs and Information Technology sectors were the worst performers.
During the quarter ended September 2022, the Lazard Australian Equity Fund returned 1.5% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 0.4%.
Contributors to Performance
AMP’s share price rose 16% over the September quarter, well ahead of the benchmark, despite an overall disappointing operational 1H22 result, the loss of two wholesale property funds (and thus contingent future earn-out payments from Dexus) and weak markets. As we noted in the past, close to half of AMP’s value is the excess cash held by the company, which makes AMP a much lower beta stock than in the past and less cyclical than suggested by the common focus on the wealth business. The September quarter did see the start of the first buyback tranche of $300m, which may have assisted sentiment. As at the Q3 2022 closing price of A$1.10 per share, AMP continued to trade at a close to 20% discount to NTA. At such discounts, on-market buybacks are not just EPS, but also NTA per share accretive, and we expect the further capital management in 1H23. The company will also retire corporate debt. AMP’s shares are no longer in the top 20 of our stock ranks but remain absolutely and relatively undervalued at a 19% discount to NTA.
Detractors from Performance
Costa was a material underperformer during Q3 2022 falling by 22%. The share price experienced an initial leg down in July this year when it was announced that wet weather had impacted the quality of the citrus crop which means a higher proportion will be sold at lower price points. This will likely lower current year earnings although we don’t foresee the impact to persist beyond 2022. The full year profit result on the 8 of August was well received by the market with recently commissioned assets, the Monarto Mushroom facility and tomato Glass House 4 at Guyra, showing progress towards achieving the investment case. A greater emphasis on return on capital was also well received with the shares rising through August. The shares experienced another sharp fall on the 21 of September when CEO Sean Hallahan announced he was leaving the company. As far as we have ascertained, this early and unexpected departure was not related to business performance but personal factors impacting the CEO. Costa has been a disappointing position in the portfolio for some time now. We do see positive underlying trends and opportunities to improve profitability. While former CEO and current board member Harry Debney will act as CEO, we look forward to the appointment of a new Chief Executive who can articulate how Costa will improve performance.
August, 2022
The S&P/ASX 200 closed higher by +1.2% in August 2022 driven by a resilient reporting season where results impressed in a tough environment and outperformed the Developed Markets. Global Equities struggled in August, as hawkish commentary from the Federal Reserve's annual Jackson Hole symposium softened investor sentiment. The S&P 500 lost ground with a fall of -4.1% in local currency terms. Locally, following the RBA's 50bps hike to 1.85% on 3 August 2022, bond markets showed investors pricing a more hawkish outlook, as the Australian 10-year yield sold-off by 54bps to 3.60%. On a sector basis, Energy was the strongest performer, while Materials and Communication Services also outperformed in Australia. The REITs, Consumer Staples and Information Technology sectors were the worst performers.
During the month ended August 2022, the Lazard Australian Equity Fund returned 3.4% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 1.2%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2022-08.pdfJuly, 2022
Global equities rebounded in July 2022, driven by a positive US reporting season and US GDP contraction which softened investor expectations of the steepness of future rate hikes. The MSCI Developed Markets Index rose (+8.0%), driven by a strong month for the S&P 500 which gained (+9.2%) in local currency terms. The S&P/ASX 200 gained +5.7% over July, benefiting from the expectations of a less hawkish Federal Reserve and rising Mining and Energy stocks. On a sector basis, Information Technology was the strongest performer, while REITs, and Financials also outperformed in Australia. The Materials, Energy and Utilities sectors were the worst performers. The RBA's July meeting hiked the cash rate by 50bps to 1.35%, which was widely expected. This came after larger and earlier than expected hikes of 50bps in June, and 25bps in May. Hence, rates are now further above their pre-COVID peak (0.75%), and the highest level since 2019. During the month ending July 2022, the Lazard Australian Equity Fund returned 3.5% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which returned 5.7%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2022-07.pdfJune, 2022
Following a brief rally in May 2022, global equity markets continued to fall in June as concerns over rising inflation levels, fuelled by higher oil and commodity prices, labour shortages, and ongoing supply chain disruptions weighed on investor sentiment. Australian shares also lost ground in June, with the S&P/ASX 200 falling -8.8% over the month and finishing the 2022 financial year at a loss for only the third time in the last ten years. Central banks have broadly acted in a coordinated fashion to fight inflation, with 45 banks raising rates thus far in 2022, including a 50 basis point rate hike to 0.85% by the Reserve Bank of Australia (RBA). This tightening of monetary policy saw Australian 10-year yields selling off to 3.66%. Against this backdrop, the Utilities and Energy sectors were the strongest performers in Australia over the quarter, whilst the IT, Real Estate and Materials sectors were the worst performers.
During the quarter ended June 2022, the Lazard Australian Equity Fund returned -6.7% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which declined -11.9%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2022-06.pdfApril, 2022
April 2022 proved a weak month for global equities, as rising inflation fears fueled concerns of a slowdown in economic growth. The S&P/ ASX 200 declined -0.9% relatively outperforming the developed markets and the S&P 500 which fell (- 8.7%) in local currency terms over the month. Bond markets saw material moves as Australian 10-year yields sold-off 30bps to 3.12% as investors priced in aggressive rate hikes beginning at the RBA's May 2022 meeting. On a sector basis, Utilities was the strongest performer while Industrials and Consumer Staples also outperformed in Australia. The Information Technology, Materials and Consumer Discretionary sectors relatively underperformed. During the month ended April 2022, the Lazard Australian Equity Fund returned 1.2% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which declined -0.9%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2022-04.pdfMarch, 2022
The ASX 200 gained +6.9% in March 2022, marking a strong month for Australian equities which was driven by a rally in IT and Energy stocks, as global markets rose on news of peace talks between Russia and Ukraine. On a sector basis, Information Technology was the strongest performer, while Energy and Materials also outperformed in Australia.
The REITs sector relatively underperformed along with the Health Care and Consumer Discretionary sectors. The Australian Federal budget for 2022-23 announced on 29 March 2022 continued the trend of several recent updates which showed a virtuous cycle of very large fiscal stimulus, which reflected the upward momentum seen in both the economy and labor market. Strengthening rate hike outlooks saw material bond selloffs, with Australian 10-year yields surging 69bps to 2.83%. Brent Oil moved up the US $7 to US$108/bbl on continuing geopolitical tensions restricting supply. Iron Ore climbed to US$153/Mt as markets expect robust restocking demand post-COVID-19.
During the quarter ended March 2022, the Lazard Australian Equity Fund returned 12.2% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 2.2%
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2022-03.pdfFebruary, 2022
Global markets struggled in February 2022, as geopolitical tensions saw investors reposition for an uncertain outlook.
The S&P/ASX 200 however remained resilient to the global environment, rising 2.1% in February 2022, off the back of a largely positive reporting season. On a sector basis, Energy was the strongest performer, while Consumer Staples and Materials also outperformed in Australia.
While the Technology sector underperformed the most, the Consumer Discretionary and Communication Services sectors also relatively underperformed. Commodity prices saw strong upward moves, particularly in Gold which lifted US$115 to US$1,910/oz as investors repositioned into safe-haven asset classes. Brent Oil also edged higher by US$10 to US$ $110/bbl as markets reacted to the impacts of sanctions on oil and gas exports. During the month ended February 2022, the Lazard Australian Equity Fund returned 6.8% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 2.1%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2022-02.pdfJanuary, 2022
After starting the year on the front foot, the ASX 200 lost ground over January 2022, falling a significant -6.4% in AUD terms as rapid bond yields prompted rapid rotations. Global equities fell sharply through January 2022 as investors braced themselves for tighter monetary policy from central banks. The ASX 200 also underperformed against the S&P 500 which dropped -5.2% during the month. On a sector basis, Energy was the strongest performer, while Utilities and Materials also outperformed. The IT sector underperformed the most, Health Care and Consumer Staples also relatively underperformed. During the month ended January 2022, the Lazard Australian Equity Fund returned -1.7% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which returned -6.4%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2022-01.pdfDecember, 2021
The ASX 200 rose 2.7% in December 2021 and ended the calendar year 2021 with a gain of 17.5%. Materials, Communication Services and Consumer Staples outperformed in Australia during December 2021 and the sectors which underperformed the most were the Energy, Financials and Information Technology. Another year has passed in which COVID-19 has monopolised headlines, with the new ‘Omicron’ variant spreading across the world since early December 2021. Despite the new highs in Australia’s COVID-19 case count, the prevalence of the less severe ‘Omicron’ variant compared to previous strains, is so far proving to be smaller economic drag. Markets, however, displayed persistent immunity to rising case rates, lockdowns, gummed up supply chains, inflation surprises and hawkish pivots from multiple central banks. Despite recent signs of a decline in consumer spending and activity data due to ‘Omicron’, global growth is expected to remain resilient and above potential.During the quarter ended December 2021, the Lazard Australian Equity Fund returned -2.9% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which returned 2.1%
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2021-12.pdfOctober, 2021
During the month ended October 2021, the Lazard Australian Equity Fund returned -2.2% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which returned -0.1%.
The AMP share price rose by around 10% over October 2021, mostly as a response to the share price fall in September 2021, which was driven by selling by U.S. fund Harris Associates. The company also released Q3 2021 cashflows and a brief trading statement, which was well received on the day. This positive response wasn’t so much due to great improvements, as it was due to the very low expectations in the market. The price thus returned to the lower end of the A$1.10 to A$1.20 range around NTA per share that it traded at over the last six months to 31 October 2021. AMP ended the month of October 2021 on a forward earnings yield of over 9% and a small discount to NTA, despite about 40% of the NTA not generating any net earnings at present. Exclusive of AMP Bank, the group trades on a about 60% of NTA, despite NTA being understated due to the book value of the China Life stake being well below market and the nonrecognition of the carry and co-investment gains embedded within some AMPC funds.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2021-10_en.pdfJuly, 2021
Global markets had a mixed result in Jul y 2021, as the Delta strain of COVI D-19 spread globally. The ASX 200 rose 1 .1% during the month of Jul y 20 21. Rio Tinto (RI O) marked the start of the August 2021 reporting season by announcing the largest ha l f yea r di vi de nd in Australian corporate history at US$ 9.1 bn. New South Wales and Victoria were locked down during J ul y 20 21 as the Delta strain continued to spread. Global bond yields raced as central bank commentary became dovish on the back of falling inflationary expectations. The Materials (+7 .1%), Industrials (+4 .2%), and Utilities (+1 .6%) sectors outperformed in Australia. The sectors which underperformed the most were the IT sector (-6 .9%), and Energy (- 2 .5%). COVID-1 9 cases global l y passed 196 million in J ul y 202 1; a material increase from the 18 1 million accumulative cases that had bee n re gis te red in June. As the Delta strain continued to spread, NSW extended lockdown by 4 weeks after an already protracted stay-at-home order until 2 8 August 2 0 21.
During the month, the Lazard Australia n Equity Fund returned 0 .9% (n et of W Class fees ), underpe rforming th e S&P /ASX 200 Accumulation Index which returned 1 .1%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2021-07_en.pdfJune, 2021
Global markets rose in June 20 21, including the ASX 200 which rose 2 .3%. The ASX 20 0 rose 24% this financial year, the strongest since the 1 980s. Des pi te strong economic performance e, there was a Growth rally in June 2021, assist ed by a pul l back in Global & Australian 10 Y bond yields. In Australia, the Information Technology (+13.4%), Communication Services (+5 .5%), and REITs (+5.5%) sectors outperformed the most. The Financials (-0.2%), Materials (+0.3%), and Health Care (+2 .2%) sectors underperformed the most. Overal l global COVID-1 9 cases passed 1 81 million n J June 20 21. The spread of the significantly more contagious Delta variant in countries such as India, Indonesia, the US, and Australia among others has been a matter of concern this month. Most parts of Australia had and have been placed under lockdown as the COVID-19 Delta stain continues to spread. Parts of Victoria, Queensland, New South Wales, and the Northern Territory have been placed
under lockdown as state government s attempt to stop the spread of the Delta variant During the quarter, the Lazard Australian Equity Fund returned 3 .9% (net of W Class fees ), underperforming the S&P /ASX 200 Accumulation Index which returned 8 .3%.
May, 2021
The ASX 200 rose by 2.3% in May 2021, led by the Financials (+5.7%), Consumer Discretionary (+3.5%), and Healthcare (+3.5%) sectors in Australia. The Information Technology (-9.9%), Utilities (- 6.6%), and Energy (-1.76%) sectors underperformed the most. The Australian Federal Budget on 11 May 2021 was materially positive for equities, as the announcement of AU$96 billion in stimulus over 5 years was significantly more than expected. The large injection of money into the economy should see a positive flow through to companies via more consumer spending and business investment. In fact, the biggest item in the Budget, at AU$20.7bn, was for tax breaks that benefit business. COVID-19 re-emerged in Victoria during the latter stages of May 2021.
In response to the growing COVID-19 cluster, the Victorian government announced a "seven-day circuit breaker lockdown,” from 27 May 2021 to 3 June 2021. The Victorian government announced a AU$250 million business support package to offset the negative impact of the lockdown on small businesses and casual workers. Overall global cases passed 170 million in May 2021, driven by the continuing COVID-19 situation in India. During the month, the Lazard Australian Equity Fund returned 2.5% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 2.3%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2021-05_en.pdfMarch, 2021
The S&P/ASX 200 Index rose by 2.4% in March 2021 and returned 4.3% in Q1 2021. The Consumer Discretionary (+7.0%), Utilities (+6.8%), and REITs (+6.6%) sectors outperformed and the sectors which underperformed the most were the Materials (-3.0%) and IT (-2.9%) sectors. On 31 March 2021, it was announced that Greater Brisbane will go into a three-day snap lockdown. The lockdown was in response to Queensland recording ten new cases of COVID-19, four of which were from community transmission. Despite recent cases, Australia wide COVID-19 remained relatively in control in March 2021. Australia's vaccination rate sits well behind many other nations due to vaccine delays, which has seen the federal government revise their predictions. Ever Given, a ship blocking the Suez Canal since 22 February was set free on 31 March 2021. The blocking of the Suez Canal reduced global trade by almost US$9 billion a day (12% of daily global trade). Experts believe at least 60 days will be required for supply chains which have already been struggling with COVID 19 related shortages to completely normalise. During the quarter, the Lazard Australian Equity Fund returned 6.2% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 4.3%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2021-03_en.pdfFebruary, 2021
The S&P/ASX 200 Accumulation Index rose 1.5% in February 2021. The Materials (+7.3%), Financials (+5.2%), and Energy (+2.4%) sectors outperformed and as expected in this rising yield environment, the longer duration Tech sector underperformed the most (-8.9%). The Utilities (-8.0%) and Consumer Staples (-4.6%) sectors also underperformed. The ASX 200 in February 2021 was a tale of two halves. In the first two weeks the focus was on results beats & misses. The market was rewarding stocks that beat due to COVID-19 tailwinds and punished stocks that missed due to COVID-19 headwinds. In the second half of February 2021, the focus was on the impact of rising bond yields on stocks. As a consequence, despite a strong reporting season, the ASX 200 underperformed and was dragged down by the sectors aforementioned sectors. Australian 10-year bond yields rose to 1.88% despite the RBA's commitment to yield curve control and forecast of no cash rate hikes until at least 2024. COVID-19 related restrictions ease throughout Australia, on the back of lower-case counts. Most recently, South Australia removed border restrictions towards Melbourne following the state’s ‘circuit breaker lockdown’, in response to a hotel quarantine related outbreak.
During the month, the Lazard Australian Equity Fund returned 3.3% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 1.5%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2021-02_en.pdfJanuary, 2021
The S&P/ASX 200 Accumulation Index rose by 0.3% during the month. Consumer Discretionary (+4.7%), Communication Services (+2.7%), and Financials (+2.2%) outperformed, whilst REITs (-4.1%), Industrials (-3.0%) and Healthcare (-1.8%) underperformed. COVID-19 news continued to dominate investor behaviour as global COVID-19 cases passed 100 million in January 2021. A slow rollout of the new vaccines coupled with the emergence of several new, more infectious strains added to anxiety and locked down the United Kingdom. On 31 January 2021, NSW marked its second week of zero locally acquired COVID-19 cases. Contrastingly, Western Australia announced a five-day period of emergency mobility restrictions after the reported detection of one case of the UK variant in the community. The United States saw a transition in Presidency as Joe Biden was sworn in as the 46th President of the United States on 20 January 2021, but only after a riot, and a second impeachment of former President Trump highlighted the sharp divide in the country.
During the month, the Lazard Australian Equity Fund returned -0.7% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which returned 0.3%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2021-01_en.pdfDecember, 2020
The S&P/ASX 200 Accumulation Index rose 1.2% in December 2020 and leading global peers for the quarter. The Materials sector was the clear top contributor in December 2020 (+1.7%), followed by Info Tech (+0.4%). Health Care (-0.6%) detracted the most from performance during the months. The ASX 200 rose in 2020, closing 1.4% higher at 6587 pts. Materials sector was the top contributing sector in 2020, followed by Info Tech. CY20 has been like no other, a year dominated by crisis and response.
The ASX 200 fell 36% peak to trough (and bounced ~50%) as containment measures and social distancing effectively stalled activity. Victoria's second-wave virus experience,in hindsight, marked the inflection of Australia's cycle response and recovery path. Durability was extended to crisis support, while growth stimulus was given a multi-period extension window. The introduction of two more vaccines to inoculate against COVID-19 provided increasing hope that the end of the global pandemic was in sight, despite the challenges in administration and a sharp increase in worldwide cases.
During the quarter, the Lazard Australian Equity Fund returned 16.2% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 13.7%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2020-12_en.pdfNovember, 2020
The S&P/ASX 200 Accumulation Index rose 10.2% in November 2020 led by cyclicals, recording its best month in 32 years. Markets rose on COVID-19 vaccine news, US election results on 3 November 2020 in which Biden was declared the 46th president elect of the United States and the Reserve Bank of Australia’s quantitative easing (QE)/rate cut related optimism.
On 3 November 2020, the RBA announced its new A$100bn QE program that over the next 6 months, they will buy $100bn worth of government bonds with maturities of 'around 5 to 10 years.' Alongside the QE program, the RBA also announced a rate cut, as they reduced the cash rate from 25bps to 10bps. In Australia, the value sectors, Energy (+28.5%), Financials (+16.1%) and Communication Services (+13.6%) outperformed, while the defensive Consumer Staples (-0.7%), Utilities (1.5%) and Healthcare (2.7%) underperformed.
During the month, the Lazard Australian Equity Fund returned 15.0% (net of W Class fees), outperforming the S&P/ASX 200 Accumulation Index which returned 10.2%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2020-10_en-unlocked.pdfOctober, 2020
The S&P/ASX 200 Accumulation Index rose 1.9% in October 2020 likely driven by Federal Budget related optimism. Information Technology, Financials and Consumer Staples sectors outperformed, while Industrials, Utilities and Materials sectors underperformed. The 2020 Federal Budget delivered a much larger than expected fiscal stimulus. The 2020-21 budget balance was downgraded to a record A$214bn (or 11% of GDP, the largest deficit since WWII). The combined fiscal stimulus (including State Governments) is now up to circa A$343bn or 17% of annual GDP over 4 years. This is among the world’s largest and compares with global stimulus totaling to circa 5% of global GDP in 2020. Global markets retreated through October 2020, driven by fading stimulus expectations, weak US tech results and rising COVID-19 cases. On 27 October 2020, Victorian Premier Daniel Andrews announced the reopening of Victoria from 112 days of lockdown. There are now no restrictions on Victorians for leaving their homes. Downward trend of COVID cases in Australia has led to reduction in border restrictions.
During the month, the Lazard Australian Equity Fund returned 0.3% (net of W Class fees), underperforming the S&P/ASX 200 Accumulation Index which returned 1.9%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/LazardAustralianEquityFund_FactSheet_2020-10_en-unlocked.pdfticker: LAZ0010AU
commentary_block: Array
factsheet_url:
release_schedule: Monthly
fund_features:
The Lazard Australian Equity Fund takes large active positions, holding generally 25 to 45 securities chosen for their potential to deliver absolute returns over the long term. It is a high conviction portfolio but key benchmark risks are also taken into consideration when constructing the portfolio. The Fund’s objective is to achieve total returns (including income and capital appreciation and before the deduction of fees and taxes) that exceed those of the S&P/ASX 200 Accumulation Index by 3% per annum over rolling three-year periods.
- Risk Aware: Focus on benchmark and absolute risk
- Disciplined: ‘Value’ Investment Approach Longer-term independent thinking
- Stability and Experience: Team together at Lazard for more than 18 Years
manager_contact_details: Array
asset_class: Domestic Equity
asset_category: Australia Large Value
peer_benchmark: Domestic Equity - Large Value Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund