March, 2023
hile most equity indices fell over the quarter, the severity and indeed cause of weakness, varied across regions. Rate rise concerns weighed disproportionally on US markets given their higher multiples with the NASDAQ and S&P500 down 9.1% and 4.9%, respectively. Geographic proximity to hostilities alongside economic exposure to Russia/Ukraine appeared to be the only determinant of performance in Europe. With that, the German DAX was the worst performer, down 9.3%, followed by the CAC40, down 6.9%, while the UK FTSE actually finished up 1.8%. In Asia, US de-listing friction, ongoing economic softness, and geopolitical tensions saw the Shanghai Composite fall 11% while Japan’s Nikkei225 was lower by 3.4%.
Quarterly performance also varied significantly on a sector basis. The absolute standout was Energy, up 30% as supply risks and more robust demand saw oil prices rally 40%. Broader commodity price inflation also helped Materials, up 1.5%, while Utilities benefitted from risk-off positioning to finish up 0.8%. In contrast, Consumer Discretionary, Telco and IT all finished down more than 10%. There were plenty of drivers with waning consumer confidence and margin pressure weighing on Consumer stocks, while rate rises, and a few disappointing results impacted the Telco and IT sectors.
The AUD finished up 3% against the USD courtesy of commodity price strength with the Bloomberg Commodity Index up 25%. VIX finished the quarter largely unchanged at 19, having reached a high of 30 in early March following Russian’s invasion of Ukraine. Yields on 10-yr US Treasuries closed at 2.39%, up 88bps since the beginning of the year.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/0346-TAL-Quarterly-MAR22-Currency-Hedged-FA3-1.pdfMarch, 2022
While most equity indices fell over the quarter, the severity and indeed cause of weakness, varied across regions. Rate rise concerns weighed disproportionally on US markets given their higher multiples with the NASDAQ and S&P500 down 9.1% and 4.9%, respectively. Geographic proximity to hostilities alongside economic exposure to Russia/Ukraine appeared to be the only determinant of performance in Europe. With that, the German DAX was the worst performer, down 9.3%, followed by the CAC40, down 6.9%, while the UK FTSE actually finished up 1.8%.
In Asia, US de-listing friction, ongoing economic softness, and geopolitical tensions saw the Shanghai Composite fall 11% while Japan’s Nikkei225 was lower by 3.4%. Quarterly performance also varied significantly on a sector basis. The absolute standout was Energy, up 30% as supply risks and more robust demand saw oil prices rally 40%. Broader commodity price inflation also helped Materials, up 1.5%, while Utilities benefitted from risk-off positioning to finish up 0.8%. In contrast, Consumer Discretionary, Telco and IT all finished down more than 10%. There were plenty of drivers with waning consumer confidence and margin pressure weighing on Consumer stocks, while rate rises, and a few disappointing results impacted the Telco and IT sectors. The AUD finished up 3% against the USD courtesy of commodity price strength with the Bloomberg Commodity Index up 25%. VIX finished the quarter largely unchanged at 19, having reached a high of 30 in early March following Russian’s invasion of Ukraine. Yields on 10-yr US Treasuries closed at 2.39%, up 88bps since the beginning of the year.
Against this backdrop, the Fund performed well delivering a total return for the March quarter of 4.10% while the 12 month return was 12.96%. This has been achieved with substantially less market risk.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/0346-TAL-Quarterly-MAR22-Currency-Hedged-FA3.pdfSeptember, 2021
Another consequence of rising government bond yields was significant underperformance in rate sensitive, growth equities. This is something of a twist to the usual risk-off playbook as slowing economic prospects usually see investors bidding up for ‘growth’. Given the outsized concentration of growth equities in US markets, it is therefore unsurprising that both the NASDAQ and S&P500 meaningfully underperformed in September, falling 5.3% and 4.8% respectively.
Despite the weakness in the last month, the NASDAQ and S&P500 were broadly flat for the quarter. However, performance in US small caps was weaker with the S&P600 Small Cap Index down 3.1% for the quarter. Major European bourses were also largely flat for the quarter with the FTSE100 up 0.7%, the French CAC up only 0.2% and the German DAX down 1.7%. In Asia, the Nikkei225 was the key standout for the quarter, up 2.3% and remains a stock market we see as offering good value. The Chinese Shanghai Composite was also resilient in the face of growing headwinds, down only 0.6% for the quarter.
On a sector basis, Materials was the worst performer for the quarter, down 6.2%, as industrial production cuts in China weighed on demand and prices for some hard commodifies. In contrast, Financials was the best performing sector on a quarterly basis, up 1.6%, driven by higher long-term rates and a resumption of dividends by European banks. Other sectors which finished the quarter in positive territory included Info Tech, Health Care and Energy
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/0286-TAL-Quarterly-Sep21-Hedged-3.0-1.pdfJune, 2021
Consistent with this dynamic, US markets performed strongly during the quarter with the NASDAQ and S&P500 up 9.5% and 8.2%, respectively. Performance in US small caps was more modest, with the S&P600 Small Cap Index up 4.2%. In Europe, the French CAC was the standout, up 7.3%, followed by the UK FTSE and German DAX, up 4.8% and 3.5% respectively. Asian markets were also mixed, with the main Chinese bourse up 4.3% while the Nikkei 225 finished down 1.3%. Unsurprisingly, Tech was the outperformer during the quarter, finishing up 11.3% with most of this strength coming through in the last month. Telco and Healthcare were also strong, up ~9%, while Energy was not far behind, up 7.8%.
On the other hand, Industrials, Utilities, Staples, Materials and Finance sectors, were all lower through the month of June. Financials were particularly weak, down 3.5% in June, as some banks flagged the prospect of lower loan growth and trading revenues and pressure on margins from lower bond yields as earnings headwinds over the next few periods.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/60ed61944eaa7678ce761e76_0248-TAL-Quarterly-Jun21-Hedged-5.0.pdfMarch, 2021
US stocks rose, with the S&P 500 up 5.8% over the quarter. The NASDAQ underperformed, up only 2.8%. The S&P 600 Small Cap Index, which was up 30.8% in Q4 2020, had another very strong three months, up 17.9%. The broad European Index, the Stoxx 600, was up 7.8% while Germany and France both did well with the DAX up 9.4% and the CAC up 9.3%. In Asia, Japan again stood out, with the Nikkei 225 rising 6.3%. China’s Shanghai Composite was down -0.9% - the weakest of the major indices.
Energy, Financials and Industrials were the best performing sectors globally. Sectors that underperformed were Consumer Staples, Utilities and Tech. This is the second quarter in a row that Energy and Financials have led. Tech’s appearance as an underperformer, in this case as the worst performer, is a rarity but may occur more frequently if the market continues to demonstrate an appetite for Value.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/6072a5d56a2f2739ebfc190a_MARCH21_TALARIA_Quarterly_Hedged_v2.pdfDecember, 2020
The Fund paid a December 2020 quarterly distribution of 1.40 cents per unit taking its 12-month income return to 6.71%. The biggest stock contribution to the portfolio came from Ambev, which we focus on in the following section, followed by the oil and natural gas producer Canadian Natural Resources (CNQ).
Since the mid-2014 oil price downturn, CNQ’s management have proved themselves able to cut unit costs through efficiency and expansion. This has allowed the company to continue to pay their dividend, leaving the share on a prospective dividend yield of 5.5% at the end of a quarter when the stock rose some 50%. Given the strong reserve position the capex requirement is limited, and the majority of free cash flow should remain available for shareholder distributions or debt paydown.
Another positive contributor to performance in the period was US commercial property owner Brookfield Property Partners (BPY). As we write, BPY has received a takeover offer from parent company Brookfield Asset Management (BAM), valuing each BPY share at $16.50. This is a 15% premium to the last traded price and values the group at 0.61x Book Value. We note that the shares are currently trading above the offer price at ~$17, which may indicate that investors believe BAM will have to provide a ‘bump’ for shareholders to accept the offer. We will study the proposal closely, though bids such as this are a mixed blessing. On the one hand they deliver a short sharp boost to the share price, on the other hand they may not fully realise what we believe should be the upside.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/6008c07234964d82c987179e_DEC20_TALARIA_Quarterly_Hedged_v3.pdfasset_class: Foreign Equity
asset_category: Currency Hedged
peer_benchmark: Foreign Equity - Currency Hedged Index
broad_market_index: Developed -World Index
manager_contact_details: Array
ticker: WFS0547AU
release_schedule: Quarterly
commentary_block: Array
factsheet_url:
Reports & Disclosure Documents ==> Quarterly Report
fund_features:
Talaria Global Equity Hedged aims to deliver superior risk-adjusted investment outcomes over the medium to long term.
- The Fund is a high conviction, global equity portfolio of 15-45 shares managed by an experienced and aligned investment team.
- A structurally differentiated investment process produces additional sources of return to complement traditional capital gains and dividends.
- A rigorous investment methodology centred on growing real wealth through the provision of superior risk adjusted returns.
structure: Managed Fund