September, 2023
Returns for the quarter were slightly below the peer group across the five risk profiles. Aiding returns was the Funds underweight to equities and bonds which both fell over the period. Detracting from peer relative returns, was the absence of unlisted assets such as private equity, unlisted infrastructure and property.
The Funds hold a large exposure to income generating investments such as cash and corporate bonds, whilst we are cautious on equity markets due to valuations and potential growth headwinds as a result of rising interest rates.
June, 2023
Returns relative the benchmark where mixed over the period. Aiding performance was the underweight to global fixed income with preference to Australian inflation linked bonds and cash. Detracting from performance was the underweight exposure to global equities with a preference for cash yielding investments. We believe equity markets are not an attractive proposition at this point given the headwinds to earnings, high valuations and an attractive alternative in fixed income and cash. Whilst we acknowledge equity markets may move higher over the shorter term, we believe a sustained move higher in prices requires robust earnings growth, in which this ingredient is missing from the market.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-june-2023-2-1.pdfMarch, 2023
Returns for the quarter were positive across all risk profiles, however lagged the peer group. Share markets rose strongly despite a weak earnings period, buoyed by improved global liquidity conditions. The Funds defensive positioning detracted from relative returns in which more speculative areas of the market performed strongly. Over the period the Funds initiated a new investment in Oaktree Distressed Debt Opportunities, this exposure will take advantage of any dislocations in markets if they eventuate, in which provides additional diversification while potentially increasing returns moving forward. We believe the Funds to be well setup for the market conditions presently and into the future. The Funds have little to no exposure in the troubled areas of commercial property, venture capital and private equity, in which the pricing of these investments are slow to reflective the changing market conditions. The Funds hold defensive exposures across equities, with overweights to strong cash flow, earnings certainty sectors such as health care and consumer staples. The Funds also have many diversifies such as gold, energy, bonds, currencies, agriculture and water, which is expected to provide a relative smoother return for investors moving forward. Further given interest rates rises over the past year, the yields on fixed income investments are now contributing materially to returns.
File:December, 2022
Returns for the December quarter were strong in absolute terms but lagged the Benchmark across the risk profiles as risk sentiment improved over the period. The Funds are underweight growth assets relative to the benchmark given the Team’s outlook for economic growth. Markets began pricing a higher probability of a lower terminal cash rate in the US following the November inflation print that surprised to the downside. This buoyed risk appetite as lower terminal rates are positive for valuations. However, the team remains cautious on the outlook for earnings and valuations remain elevated which has the Team more cautious on recent market optimism. Despite the rally, global equities finished the calendar year 18.1% lower. The Funds are well diversified and are positioned for a range of outcomes as central banks try to engineer a soft landing in their pursuit of reducing inflation.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-december-2022-1-1.pdfSeptember, 2022
Returns for the quarter ending September were negative in absolute terms but were stronger than the benchmark for all risk profiles. The investment team holds underweight exposures to growth assets relative to benchmark given the elevated volatility associated with high inflation and rising cash rates. This has benefitted Fund returns with equities and property underperforming overweight exposures such as Australian investment grade credit, alternatives, and cash over the 3-month period. The Team remains cautious on interest rate linked investments such as duration (bonds and high price multiple equities) and property. A low hedge ratio to the US dollar has also benefitted the Funds given the currency’s recent strength as forward indicators of growth soften and interest rate differentials grow making the greenback appealing to investors seeking higher yields.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-september-2022-1-1.pdfJune, 2022
Returns for the quarter ending June were negative in absolute terms given all assets except cash returned in the red. However, the Funds outperformed their relative benchmarks over the period. The Funds are significantly underweight growth exposures which have benefitted benchmark and peer relative returns. This has been a challenging environment for asset managers given rising bond yields have put downward pressure on all asset valuations. Under these conditions the team have taken advantage of higher yielding defensive assets in the Funds which will add to core income and within growth exposures have pivoted to assets with greater earnings certainty such as infrastructure.
Economic
For the quarter ended June 30, financial markets’ focus shifted from expectations of rising inflation to hawkish Central Bank policy and its potential to slow economic growth and inflation. Inflation continues to remain elevated and has broadened out to the services and core components of CPI. As a result, the policy response has been aggressive to bring supply/demand imbalances back to normal levels over time and asset valuations have been impacted due to rising discount rates. Asset returns have been poor for the 3-month period, Australian equities, as measured by the ASX 200 Index, returned -12.4%, and global equities on a currency hedged basis returned -15.1%, as measured by the MSCI World Index.
In the United States, the Federal Reserve has aggressively raised the federal funds rate 3 times since February opting to raise the cash rate by 75 basis points in June alone. A hike of this size has not been seen in over 25 years indicating the committee’s strong intent bring inflation down. The Fed dot plot, a survey of Fed members which is used to express forward expectations of the cash rate, shows no signs of slowing the pace of rate hikes either with the most recent dot plot indicating a federal funds target rate of 3.40% by year end which would mark 340 basis points of rate rises in calendar year 2022.
In Australia, the Reserve Bank has taken a similar stance in its attempt to bring inflation down locally. Year over year inflation is expected to grow to 7% by the end of 2022 which could mark the highest level of inflation since 1990. Current annual headline inflation sits at 5.1% in Australia. At time of writing, the market is pricing a terminal cash rate north of 3% which is expected to put borrowers under financial pressure as mortgage rates continue their ascent as cost of funding increases. The period ahead is shaping up to be one of further complexity as central banks try to walk a fine line between reducing inflation without significantly slowing economic growth.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-june-20221.pdfApril, 2022
After fees and expenses, the portfolio return of -2.55% (gross of fees return of -2.53%) in April outperformed the benchmark return of -2.97% by 42bps. At the end of April, the Fund's equity weight was -1.7% underweight relative to the benchmark as we further reduced our directional equity risk and made various tactical adjustments to our relative value trades over the month.
We retained our regional preference for UK which we took partial profits on and increased our Australian equity position to overweight. In addition, we entered an underweight to US equities and further reduced our exposure to European equities at the end of the month. We maintained our relative value trades such as long European banks versus European equities and US equal weight versus US equities. We maintained our sector preference for healthcare, financials, agriculture and energy equities while maintaining our long position in commodities and gold.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/187296627-1.pdfMarch, 2022
Returns for the period fell short of the Morningstar peer group. Driving the relative return was the lack of exposure to unlisted investments such as private equity, unlisted property, infrastructure and private credit. Given the index, low-cost nature of the Funds, unlisted investments are not currently invested in. Unlisted investments adopt less frequent valuations and hence they are not subject to short term market volatility.
Over the quarter we increased weights to Australian equities and global infrastructure, given the favourable dynamics for these asset classes. We have also reduced global credit exposure through our defensive sleeve due to our perception that credit spreads will move outwards.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-march-2022-1-5.pdfFebruary, 2022
Returns for the period fell short of the Morningstar peer group. Driving the relative return was the lack of exposure to unlisted investments such as private equity, unlisted property, infrastructure and private credit. Given the index, low cost nature of the Funds, unlisted investments are not currently invested in. Unlisted investments adopt less frequent valuations and hence they are not subject to short term market volatility such as the events of January. Over the month active tilts away from interest rate sensitive investments such as fixed government bonds and exposures to gold both benefited the Funds.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-february-2022-2-1.pdfJanuary, 2022
The majority of risk profiles underperformed the Morningstar peer group over the period. Driving the relative return was the lack of exposure to unlisted investments such as private equity, unlisted property, infrastructure and private credit. Given the index, low cost nature of the Funds, unlisted investments are not currently invested in. Unlisted investments adopt less frequent valuations and hence they are not subject to short term market volatility such as the events of January. Over the month active tilts in emerging markets and underweight positions in interest rate sensitive investments such as fixed government bonds both benefited the Funds.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-january-2022-3.pdfDecember, 2021
Over the December quarter every risk profile outperformed their respective Morningstar peer group. Additive to relative performance was the Funds underweight exposure to rate sensitive assets and overweight to inflation linked bonds. An overweight to the growth side of the ledger, also benefitted returns as global developed equities returned 7.9% over the period.
Detracting from returns was a slight overweight to Emerging market equities. Emerging markets have trailed developed world equities significantly since March 2021. The divergence is due to China holdings in the index which have been negatively impacted by government interventions. The measures are targeted at anticompetitive practices conducted by dominant technology platforms in China and a controlled slowdown in credit growth due to fears of excessively valued dwellings. The recent actions from the Chinese government are aimed at creating a more sustainable pathway to growth, by reducing household debt and encouraging fair competition.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-december-2021-2.pdfNovember, 2021
The Funds on aggregate performed in line with the peer group of over the month. Aiding performance was the Funds foreign exposure in which given the falls in the Australian dollar, buffeted equity market weakness. Given falls in bond yields over the period, positioning in inflation linked bonds and Australian government bonds both added to returns. Looking forward, we believe the Funds are well positioned with a good blend of growth drivers (global technology companies) as well as inflation protection (inflation linked bonds and gold) and downside protection (government risk free securities, foreign currency exposure).
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-november-2021-2.pdfOctober, 2021
Returns for the month ending October were mixed with Defensive and Conservative risk profiles underperforming their relative peer groups while Balanced through to High Growth profiles fared better relative to their peers. October was difficult for fixed income investments due to rising bond yields. Inflation expectations picked up in October and bonds sold off as CPI data remains elevated indicating some of the transitory inflationary forces will persist for longer than expected. Pleasingly, global developed world equity exposures benefitted the funds with corporate earnings exceeding expectations driving equities higher over the month.
October was a mixed month for asset returns. On the growth side of the ledger, developed world equities (measured by the MSCI World Ex Australia index) returned 1.7%, as corporate earnings were stronger than expected. As of writing, US corporates have reported double digit earnings growth despite fears of rising inflation and pressure on profit margins. Conversely, fixed interest investments came under pressure due to rising bond yields. Central banks’ stance that higher inflation is largely transitionary was challenged by the bond market in October as selling resulted in yields moving higher. Annual CPI prints have risen to levels that are now within or above target bands of many central banks (2-3%). Higher energy prices, housing costs and supply chain constraints have played a role in driving expectations for further tapering of bond purchases and cash rate movements earlier than previously thought. Australian bonds, as measured by the Bloomberg Ausbond Govt 0+ Year Index, returned -3.6% in October.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-october-2021-2.pdfSeptember, 2021
Over the quarter the majority of index funds marginally underperformed the Morningstar peer group. Detracting from relative performance was the Funds overweight exposure to emerging markets and inflation linked bonds. Emerging markets have trailed developed world equities significantly since March of this year. The divergence largely relates to China holdings in which Chinese equities have been negatively impacted by government interventions in capital markets, a controlled slowdown in credit growth and fears of property led slowdown, given the collapse of Chinese property developer Evergrande. The recent actions from the Chinese government are aimed at creating a more sustainable broad growth path, by reducing household debt and limiting corporate monopolies.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-september-2021-2.pdfAugust, 2021
All Bendigo Index Funds outperformed the Morningstar peer group over the month. Contributing to returns was the Funds bias to growth assets over defensive, in which equity markets on aggregate performed strongly, particularly high growing companies such as technology stocks. Detracting from relative performance was the Funds’ overweight exposure to emerging markets and inflation linked bonds. Emerging markets have trailed developed world equities significantly since March of this year. The divergence largely relates to China holdings in which Chinese equities have been negatively impacted by the Chinese government intervention in capital markets and further the appreciation of the USD which is a negative drag on emerging market economies.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-august-2021-4.pdfJuly, 2021
Returns for the month of July were strong across the risk profiles as every major asset class returned in the black. Peer relative performance continues to be strong for the funds. Global equities outperformed domestic equities given better than expected quarterly earnings results. Offshore US equity positions buoyed returns given the recent strength of the US dollar. An overweight to gold and inflation linked bonds also benefitted the funds as yields fell while inflation expectations were largely unchanged over the month.
Quarterly earning updates took centre stage in July, as investors were able to see the impact of many parts of the globe reopening on companies’ profits and revenues. The latest quarterly results have been strong and above expectations with the largest 500 companies in the US, represented by the S&P 500 Index, reporting double digit sales growth and earnings almost double the amount they were in the same period a year ago. Noting the year-ago period was characterised by lockdowns, creating a low base of comparisons.
Regulatory bodies in China made headlines in July following the actions taken against DiDi (ride hailing service in China) and the private education sector. China cited data protection and national security reasons for its suspension of new user registrations for DiDi. In the same month, the cost of private education in China was put under the microscope as authorities noted these services were charging unsustainably high prices. These actions followed anti-competitive sanctions placed on large dominant companies that were deemed to be abusing their market power at the expense of smaller competitors in recent months. It appears China is seeking to balance its objectives of growth and prosperity for many rather than few.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-july-2021-2.pdfJune, 2021
Over the quarter investment markets produced high positive returns, resulting in great outcomes across the portfolios. The Funds outperformed the Morningstar peer group over the quarter and over the financial year. Given the strength of the rebound from the Covid lows in March 2020, returns for the financial year ranged from 6.7% for the defensive portfolio up to 28.4% for the high growth. Positioning in Australian inflation linked bonds over fixed coupon bonds benefited the Funds. Inflation linked bonds offer protection within the portfolio against rising inflation and will outperform fixed coupon bonds when inflation rises faster than market interest rates. Detracting from performance was overweight positions in emerging markets which underperformed developed world equities.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-june-2021-2.pdfMay, 2021
Returns for the month ending May were strong across all risk profiles as every major asset class had positive returns. Inflation expectations rose over the month, while bond yields remained stable. This resulted in strong returns for the Funds allocation to gold and Australian inflation linked bonds. The Funds maintain a bias towards Australian equities given the large weighting to resource companies and banks, in which resources continue to be supported by strong global demand, and banks which are supported by strong credit growth.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-may-2021-5.pdfMarch, 2021
Risk assets continued their strong run through the three months ending March 31. Twelve months on from the lows of March 2020, markets have been buoyed by oversized global fiscal and monetary stimulus efforts and vaccine rollouts. Economic conditions have rebounded, and several economic prints are now at all-time highs, a reflection of the success of efforts made to negate the adverse financial impacts of economic lockdowns during 2020.
Around the globe, forecasts of economic growth for the next 12-to-24-month periods have been upgraded. The IMF expects the world economy to expand 6% in 2021, up from the 5.5% it had forecast in January. This would represent the fastest expansion for the global economy in IMF records dating back to 1980. In 2022, the IMF predicts, international economic growth will decelerate but maintain above average growth of 4.4%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-march-2021-1.pdfDecember, 2020
From both a peer relative and absolute return perspective, the Index suite of Funds performed strongly over the quarter. Risk assets across the board all rose sharply, with tilts in favour of emerging markets coupled with an underweight to global infrastructure, proving beneficial. Over the one year period the standout performer was the Bendigo Defensive Index Fund, in which returned over 3% higher than the Morningstar peer group and was the highest returning fund within its Morningstar peer group and the Bendigo index suite of products. Driving performance was the movement away from fixed bonds into inflation linked bonds through the late March and April market recovery. Recently the Funds have added an alternatives asset class with the intention of including an exposure to gold, in which we believe adds significant diversification benefits, in particular inflation risk protection. Looking forward, we believe the Funds will be well positioned for any potential rise in inflation with a meaningful exposure to gold, inflation linked bonds and emerging markets.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-performance-report-december-2020-5.pdfasset_class: Multi-Asset
asset_category: 61-80% Growth Assets - Low-Cost Diversified
peer_benchmark: Multi-Asset - 61-80% Low-Cost Index
broad_market_index: Multi-Asset Growth Investor Index
manager_contact_details: Array
ticker: STL0034AU
release_schedule: Quarterly
commentary_block: Array
factsheet_url:
https://www.bendigobank.com.au/personal/investing/managed-funds/bendigo-growth-index-fund/#Reports
Latest performance reports
fund_features:
Bendigo Growth Index aims to deliver investment returns after fees in excess of 4% above inflation over a full market cycle (typically 7 to 10 years). The Fund primarily invests in growth assets with a small exposure to income generating assets.
structure: Managed Fund