September, 2023
The Fund returned negative 0.79% for the month ending 30 September 2023, underperforming the RBA Cash Rate by 1.12%.
For the quarter ending 30 September 2023 the Fund returned 1.35%, outperforming the RBA Cash Rate by 0.33%.
Positive contributors to monthly returns included long positions in Incitec Pivot, Santos, and NextGen Energy. Detractors included long positions in Star Entertainment Group, CSL, and Tabcorp Holdings. We discuss each further in our commentary below.
POSITIVE CONTRIBUTORS
Incitec Pivot
Incitec Pivot shares outperformed in September on the back of a strong ammonia price. The ammonia price rallied ~50% in September, driven by higher European gas prices. Incitec Pivot upgraded FY2023 production guidance for its Explosives division, but downgraded guidance for the Fertilisers division. The company also confirmed that it remains in discussions to sell its Fertiliser business.
Santos
Santos shares outperformed during the month as the oil price rallied more than 10%. Santos also hosted an investor tour to its Pikka project in Alaska, which was attended by one of our portfolio managers. The Pikka project is progressing well. In our view, it has strong potential to be extended in the future at high returns.
NexGen Energy
Uranium project developer NexGen Energy shares advanced strongly during the month as the uranium price rose +15.5% to ~$70/Ib, levels not seen since February 2011. The strong uranium price was driven by supply disruption and positive sentiment that followed an industry conference in London, along with the re-emergence of financial buyers such as the SPUT ETF. The uranium market remains fundamentally undersupplied and we expect prices need to rise to >U$80/lb to justify building additional mines.
NEGATIVE CONTRIBUTORS
Star Entertainment Group
Star Entertainment Group shares underperformed during the month after undertaking an equity raise at a discount to its share price. The company also announced new $450 million debt facilities as part of a refinancing process. The capital raise and debt facility will together eliminate the casino operators large debt load and help fund the development of Star’s Queen’s Wharf casino in Brisbane.
CSL
CSL shares underperformed alongside most other healthcare names in September. There was no company specific news.
Tabcorp Holdings
Tabcorp Holdings underperformed during the month due to investor concerns around softness in the wagering market. UK peer Entain (owner of Ladbrokes and Neds) announced that its net gaming revenue was softer than anticipated. Despite the short-term softness, we expect the Victoria wagering license announcement later this year to be a positive catalyst for Tabcorp, driving future earnings upgrades.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-25.pdfAugust, 2023
The Fund returned 0.49% for the month ending 31 August 2023, outperforming the RBA Cash Rate by 0.14%. For the six months ending 31 August 2023, the Fund returned +7.15%, outperforming the RBA Cash Rate by 5.21%. While there remains significant work to do to return Fund performance to above our internal objectives, we continue to be encouraged by the turnaround in performance.
It remains a challenging backdrop for overall corporate profits given significant interest rate increases and sticky inflation. Despite this, we are seeing outstanding stock specific opportunities on the long and short side given significant dislocation in valuations across the market. We remain confident in the outlook for the portfolio to deliver meaningful positive returns over the medium term, irrespective of equity market movements.
Positive contributors to monthly returns included long positions in Estia Health, Domino’s Pizza Enterprises, and Azure Minerals. Detractors included long positions in ResMed, Alumina, and SEEK.
POSITIVE CONTRIBUTORS
Estia Health
Estia Health outperformed after final agreements were made for Bain Capital to acquire 100% of Estia’s shares for A$3.20 cash per share. This is an improvement on the A$3.00 cash per share bid Bain Capital made in March 2023 and represents a 59% premium to the 3-month volume-weighted average price prior to the announcement of the bid.
Domino’s Pizza Enterprises
Domino’s reported an FY2023 result which was in line with the market update it provided in June. The stock outperformed after Domino’s revealed it has seen same store sales growth of ~7% in Australia and Europe since 30 June 2023. The positive start to FY2024 indicates that the worst of the impacts from inflation and reduced customer counts may now be behind it.
Azure
Lithium explorer Azure Minerals outperformed after it revealed material exploration success and potential size at its Andover Lithium Project. This was followed by confirmation that Azure had received an indicative offer to acquire the company from its 20% shareholder and global lithium producer SQM.
NEGATIVE CONTRIBUTORS
ResMed
ResMed’s 4Q 2023 result disappointed the market as gross margin did not rise as expected. While this contributed to the share price fall, the larger factor was the rising risk associated with obesity drugs. One of the major obesity drugs, Wegovy, cited a 20% reduction in cardiovascular events in a study. While a sustained reduction in obesity levels across a large proportion of the population would have some negative impacts on ResMed’s business, we believe there are several complexities that are underappreciated. We believe the recent share price fall has been significantly overdone.
Alumina
Alumina shares underperformed after the company flagged higher costs as a result of mining in a low-grade area. We expect the business to be cashflow breakeven at current settings and the balance sheet net debt of $268 million is manageable. A key catalyst will be a return to mining high-grade bauxite areas in Western Australia post an Environmental Protection Authority review.
SEEK
SEEK shares underperformed after guidance for FY2024 earnings disappointed the market. While a reduction of new job listings was expected, SEEK flagged continued cost investment in the business through this period of cyclical softness. We are supportive of SEEK’s longer term approach to creating shareholder value.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-24.pdfJuly, 2023
The Fund returned 1.66% for the month ending 31 July 2023, outperforming the RBA Cash Rate by 1.32%.
For the six months ending 31 July 2023, the Fund returned +8.03%, outperforming the RBA Cash Rate by 6.20%. While there remains significant work to do to return Fund performance to above our internal objectives, we continue to be encouraged by the turnaround in performance.
It remains a challenging backdrop for overall corporate profits given significant interest rate increases and sticky inflation. Despite this, we are seeing outstanding stock specific opportunities on the long and short side given significant dislocation in valuations across the market. We enter FY2024 confident in the outlook for the portfolio to deliver meaningful positive returns over the medium term, irrespective of equity market movements.
POSITIVE CONTRIBUTORS
First Quantum Minerals
First Quantum Minerals outperformed following a 5% increase in the copper price through July. The company also reiterated that it expects to achieve the low end of its guidance range, implying a strong rebound in the H2 2023. It also expects to ratify its new agreement with the Panama government by the end of October. First Quantum is the Fund’s preferred pure-play copper exposure with a strong management team and medium-term brownfield growth opportunities.
Incitec Pivot
Incitec Pivot shares outperformed as the company confirmed it had received a number of approaches for the potential acquisition of its fertilisers business. The Board will evaluate any offers alongside the proposed demerger of the business. In addition, ammonia prices appear to have found a floor after falling ~75% since September last year.
AGL
AGL shares continued to outperform strongly following its June update on FY2024 earnings guidance and long-term capex intentions. Of the $20 billion of investment that AGL has earmarked to be spent on the energy transition, roughly half will be on AGL’s balance sheet, with only $4 billion to be spent between now and 2030. This capex profile enables AGL to pay out 50-75% of profits as dividends, providing a strong, sustainable yield for investors.
NEGATIVE CONTRIBUTORS
CSL
CSL shares underperformed ahead of a key trial for a product that competes with CSL’s Immunoglobulin (IG) franchise. Positive results from the trial mean that the product, manufactured by Argenx, will now compete with CSL across ~25% of the IG market. Our view is that CSL’s IG revenue growth outlook is only slightly impacted due to growth opportunities across the rest of the portfolio.
Estia Health
Estia Health underperformed after providing an update on the revised bid received from Bain Capital on 7th June 2023. The bid stands at $3.20 per share to acquire all the issued capital of Estia. The exclusivity period ended on 27th July and Bain Capital continues to engage in constructive discussions to progress the transaction. Estia is trading at a ~15% discount to the bid price as at the end of July.
Allkem
Allkem underperformed in July in sympathy with a falling lithium price. While the market remains focused on the upcoming merger with US-listed company Livent, the company continues to make excellent progress on its high-quality growth projects. During the month, Allkem achieved first production from its Stage 2 Olaroz project in Argentina.
June, 2023
The Fund returned 0.73% for the month ending 30 June 2023, outperforming the RBA Cash Rate by 0.41%.
For the quarter ending 30 June 2023, the Fund returned positive 3.67%, outperforming the RBA Cash Rate by 2.73%.
It was a pleasing finish to the financial year. The Fund has continued to build momentum over the past 9-months, following a challenging performance period in the first three quarters of CY2022. While we are encouraged by the turnaround, there remains significant work to do. We are determined to return Fund performance to above our internal objective of the RBA Cash rate plus 7% over the medium-term.
Despite a challenging backdrop for corporate profits due to higher interest rates and sticky inflation, we are seeing outstanding stock-specific opportunities on the long and short side. The narrow market leadership we have seen in equity markets (for example, seven stocks driving the majority of S&P 500 returns year-to-date) highlights the elevated opportunities for active management to identify mispriced stocks. We enter FY2024 confident in the outlook for the portfolio to deliver meaningful positive returns over the medium term, irrespective of equity market movements.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-22.pdfMay, 2023
The Fund returned 3.92% for the month ending 31 May 2023, outperforming the RBA Cash Rate by 3.60%. The S&P/ASX 200 Accumulation Index declined -2.53% during the month.
2022 was a challenging performance year as highlighted in Figure 1 below. But we remain confident in the outlook for the portfolio to deliver meaningful positive returns over the medium-term, irrespective of equity market movements.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-21.pdfApril, 2023
The Fund returned negative 0.97% for the month ending 30 April 2023, underperforming the RBA Cash Rate by 1.26%
Positive contributors to monthly returns included long positions in James Hardie Industries, Genesis Minerals, and Silk Laser Australia. Detractors included long positions in Star Entertainment Group, Mineral Resources, and The Lottery Corporation. We discuss each further in our commentary below.
POSITIVE CONTRIBUTORS
Newcrest Mining
Newcrest Mining outperformed during the month as it received a revised non-binding proposal from Newmont. The revised offer represented a total value ~11% above the previous offer. Subsequently, Newcrest granted Newmont exclusive due diligence until 11th May 2023.
Genesis Minerals
Genesis Minerals performed strongly over the month after renegotiating a deal with St Barbara to consolidate the gold-rich Leonora Province in WA. Under the new arrangement, Genesis Minerals will purchase St Barbara’s Australian assets for $600 million. This deal is far simpler than the prior merger arrangement, enabling the market to focus on the underlying value of the assets.
NEGATIVE CONTRIBUTORS
Star Entertainment Group
Star Entertainment Group shares underperformed in April after the company cut its previous FY23 earnings guidance by 15% due a deterioration in operating conditions. Star cited ongoing regulatory restrictions and a weakening consumer as the key drivers of the weaker performance. In response to the new challenges, Star announced implementation of a range of cost savings initiatives, including the elimination of five hundred full-time positions across the group.
Mineral Resources
Mineral Resources underperformed during the month due to weakness in global lithium prices and March quarter production volumes which missed consensus forecasts. The company has reset expectations for Lithium and Mining Services volumes resulting in downgrades to full year estimates. However, the outlook for lithium prices is beginning to improve. After a five month-long, 70% sell-off, China’s lithium spot prices appear to have stabilised and have moved up again in recent weeks.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-20.pdfMarch, 2023
The Fund returned 1.17% for the month ending 31 March 2023, outperforming the RBA Cash Rate by 0.88%. For the quarter ending 31 March 2023 the Fund returned negative 1.53%, underperforming the RBA Cash Rate by 2.34%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-19.pdfFebruary, 2023
The Fund returned 1.32% (after fees) for the month ending 28 February 2023, outperforming the RBA Cash Rate by 1.07%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-18.pdfJanuary, 2023
The Fund returned negative 3.94% (after fees) for the month ending 31 January 2023, underperforming the RBA Cash Rate by 4.20%.
In January, we saw a reversal of the trends that drove positive performance for the Fund in November and December 2022. Unfortunately, the reversal was sharp, offsetting the gains experienced in the previous two months. The key detractors were short positions in Growth and Consumer names. Sentiment around the trajectory of interest rates and China re-opening dominated headlines and share price movements in January. The exception was Energy, where we have long exposure, which sold off despite increased demand for oil as China re-opens. Gold also retraced its earlier gains as rate expectations eased, despite historically having an inverse correlation to rates (when rates fall the gold price typically rises).
We continue to see attractive opportunities in Gold and Energy names. Newcrest Mining and Santos are the two largest holdings in the portfolio. We believe the market is underappreciating the quality of both companies’ assets and their future earnings potential. Both Newcrest and Santos are trading at material discounts to our DCF valuations and global peers. Despite the January rally, we remain wary of consumer-exposed companies as we see heightened earnings risk due to higher costs, high inventory levels, and a constrained consumer.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-17.pdfDecember, 2022
The Fund returned 2.44% (after fees) for the month ending 31 December 2022, outperforming the RBA Cash Rate by 2.18%. The ASX 200 Accumulation Index declined -3.21% during the month.
For the quarter ending 31 December 2022, the Fund returned 0.88% (after fees), outperforming the RBA Cash Rate by 0.17%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-16.pdfNovember, 2022
The Fund returned 0.85% (after fees) for the month ending 30 November 2022, outperforming the RBA Cash Rate benchmark by 0.62%.
Our objective is to deliver positive returns over the medium term (rolling 3-years), irrespective of equity market direction. Whilst the underperformance over the past 12-months has been difficult, some of our strongest performance periods have followed challenging performance periods, and we have high conviction in our long and short portfolio positioning to deliver on our medium-term objectives.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-15.pdfOctober, 2022
The Fund returned negative 2.36% (after fees) for the month ending 31 October 2022, underperforming the RBA Cash Rate benchmark by 2.58%.
Our objective is to deliver positive returns over the medium term (rolling 3-years), irrespective of equity market direction. Whilst the underperformance over the past 12-months has been difficult, some of our strongest performance periods have followed challenging performance periods, and we have high conviction in our long and short portfolio positioning to deliver on our medium-term objectives.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-14.pdfSeptember, 2022
The Fund returned 1.16% (after fees) for September, outperforming the RBA Cash Rate by 0.98% and the ASX 200 which had a negative return of -6.17% for the month.
The past 9-months have been a challenging performance period for the Fund. It was pleasing that the Fund provided uncorrelated returns in September, a tough performance month for equities.
Historically, the strategy has provided good diversification from negative monthly equity market returns. Figure 1 below shows every negative ASX 200 market return since Strategy inception in 2015 in pink, from largest to smallest drawdown. The bars in green show the corresponding return of the Firetrail Absolute Return Strategy.
Historically, when the ASX 200 monthly return was negative, the Firetrail Absolute Return Strategy has delivered a positive return 58% of the time. On average, the Strategy delivered a positive return of +0.78% vs the ASX 200 average monthly drawdown of -3.38%, providing good diversification during monthly market drawdowns.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-13.pdfAugust, 2022
The Fund returned negative 2.01% for the month ending 31 August 2022, underperforming the RBA Cash Rate benchmark by 2.16%.
The major driver of negative performance was the portfolio’s exposure to small companies. Stock selection continues to play a key role in the performance of the fund.
Our objective is to deliver positive returns over the medium term (rolling 3-years), irrespective of equity market direction. Whilst the underperformance over the past 12-months has been difficult, some of our strongest performance periods have followed challenging performance periods, and we have high conviction in our long and short portfolio positioning to deliver on our medium-term objectives.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-12.pdfJuly, 2022
The Fund returned negative 5.13% for the month ending 31 July 2022, underperforming the RBA Cash Rate benchmark by 5.24%. Our objective is to deliver positive returns over the medium term (rolling 3-years), irrespective of equity market direction. Whilst the underperformance over the past 12-months has been difficult, some of our strongest performance periods have followed challenging performance periods, and we have high conviction in our long and short portfolio positioning to deliver on our medium-term objectives.
The long portfolio contributed positively to performance during July, driven by the strong performance of our high conviction small company positions. The short portfolio detracted from performance in the month, driven by short positions in bond proxies and global technology names.
Overall, the Fund remains well balanced in terms of thematic exposure. We continue to see companies exposed to the commodity and energy complex providing greater opportunities overall, particularly in an inflationary backdrop. This is reflected in the Fund’s value and cyclical tilt over more yield sensitive and growth sectors.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-11.pdfJune, 2022
The Fund returned negative 3.59% for the month of June, underperforming the RBA Cash Rate by 3.65%. For the quarter ending 30 June 2022, the Fund returned negative 5.53%, underperforming the RBA Cash Rate by 5.62%. It was a disappointing finish to a challenging financial year for Fund performance. Despite the challenging short-term performance, we remain confident in the outlook for the Fund to achieve our internal investment objective of outperforming the RBA Cash rate by 7% over the medium-term (3 years).
Looking at the past 3 years, the Fund has delivered 7.42% p.a. after fees, outperforming the RBA Cash Rate by 7.09% p.a. Over the same period, the ASX 200 returned 3.34% p.a. with significantly higher volatility than the Fund
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-10.pdfMay, 2022
The Fund returned negative 0.51% for the month ending 31 May 2022, underperforming the RBA Cash Rate benchmark by 0.54%.
POSITIVE CONTRIBUTORS:
Santos
Santos shares outperformed in May as the oil price rallied from US$100/bbl to US$117/bbl. During the month, Ministers from Saudi Arabia and Bahrain highlighted that refining bottlenecks would limit the ability of supply to meet demand even if more crude oil was pumped by producers. Restricted supply and solid demand will continue to put upward pressure on oil prices. This is positive for Santos.
Lynas
The price of Lynas’ main rare earth mineral, NdPr, rose 11% during May. While no stock specific announcements were made during the month, the company released an exploration update in early June. The update highlighted the size and scale of Lynas’ Mt Weld deposit in WA that underpins the company’s long-term growth plans. Lynas is currently mining at a depth of ~100m below surface. The current ‘life of mine plan’ extends to 200m. Recent drilling shows that the orebody extends ~600m below this.
NEGATIVE CONTRIBUTORS:
Newcrest
Mining Newcrest Mining underperformed during May. Rising inflation and higher interest rate expectations continue to negatively impact the price of gold and other precious metals. Newcrest also reported disappointing Q3 FY22 results during the month. Higher costs and a lack of improvement at Newcrest’s Lihir mine weighed on investor sentiment.
Megaport
Network-as-a-service provider Megaport underperformed in May on no fundamental news. The broader ASX 300 Information Technology index fell 8% in May with declines once again concentrated in small cap, non-profitable technology companies.
April, 2022
The Fund returned a negative 1.39% for the month ending 30 April 2022, underperforming the RBA Cash Rate benchmark by 1.40%.The long portfolio detracted from performance over the month, while the short portfolio contributed positively. Our tilt to small caps was a key driver of underperformance in the long portfolio.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-8.pdfFebruary, 2022
For the month, the Fund returned 0.11% outperforming the benchmark by 0.10%. Positive contributors to performance included long positions in Newcrest, Nufarm and Bluescope. Detractors included our overweight positions in Telix, Seek and Xero.
CONTRIBUTORS
Some of the standouts from February included:
• Nufarm was up 23% following Nufarm’s positive trading update. The company reported 36% revenue growth in the December quarter driven by price and volume. Nufarm’s investor day presentation also provided more detail on the medium-term growth opportunities in plant-based Omega 3 and low-carbon fuel (Carinata). These two products support Nufarm’s ambition to more than double revenues in its Nuseed division over the next 4-5 years.
• Bluescope was up 11% following increased indicators that US steel spreads are bottoming at a time when global steel supply is tightening. Bluescope also reported a broadly inline result yet doubled its buyback to c.$1bn. We expect a strong free cashflow profile and net cash position to underpin further buybacks over the next few periods.
DETRACTORS
Key detractors over the month included: Telix declined by 27% over the month. While we anticipated the capital raise, it was poorly timed and priced. As a result, the stock has since performed weakly. The raise will allow the company to pursue its significant R&D drug pipeline. Telix will commercialise their first FDA approved diagnostic product, Illucix, in the second quarter of 2022. Illucix is a targeted prostate cancer imaging agent that the company will distribute to imaging centres and hospitals throughout the US. The prostate cancer diagnostic market is estimated to be US$900m per annum.
• Seek dropped 8%. Seek reported 59% growth in revenues in the December half, driven by record job advertisement volumes in Australia and a shift by employers and recruiters towards more expensive ads. After the normal seasonal lull in December, Seek also flagged a strong return in January which gave management the confidence to upgrade FY22 EBITDA guidance by 10-15%. Unfortunately, due to the sectoral shift out of technology stocks, the strong result was not reflected in the share price with Seek underperforming in February.
January, 2022
The Firetrail Absolute Return Fund returned a negative 0.12% during January, underperforming the RBA Cash Rate benchmark by 0.13%. Positive contributors to performance included long positions in Santos, BHP and Amcor. Detractors included overweight positions in Megaport, Serko and James Hardie.
The Absolute Return Portfolio ended slightly down over the month, which is a pleasing result given the broader market sell-off amidst elevated volatility. The fund’s slight tilt to small caps hurt performance through the January market malaise, with the Small Ords underperforming the broader market by 300bps. Despite this, individual stock selection continues to play a key role in the performance of the Fund. Overall, we believe that the Fund remains well balanced in terms of its thematic exposure. We continue to see companies exposed to global growth and reopening providing greater opportunities overall. This is reflected in the Fund’s value and cyclical tilt over more yield sensitive and growth sectors.
Breaking it down further, the performance in the month was driven by the following:
• The long portfolio detracted 2.3% - mainly due to weakness in the small to mid-cap stocks within the portfolio.
• The short portfolio added 2.2% - Pleasingly both our fundamental shorts and risk shorts contributed to the positive performance.
December, 2021
The Firetrail Absolute Return Fund returned -0.23% for the quarter ending 31 December 2021, underperforming the RBA Cash Rate benchmark by 0.26%. For the month, the Fund returned -2.03%, underperforming the benchmark by -2.04%. Positive contributors to performance included long positions in Crown, Lynas and Oz Minerals. Detractors included an overweight position in APM Human Services, Santos and Serko
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-5.pdfNovember, 2021
The Fund returned a negative 1.30% for the month ending 30 November 2021, underperforming the RBA Cash Rate benchmark by 1.31%. Positive contributors to performance included long positions in Megaport, Lynas and Crown Resorts. Detractors included overweight positions in Serko, Virgin UK and APM.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-1-1.pdfOctober, 2021
The Fund returned a positive 3.18% for the month ending 31 October 2021, outperforming the RBA Cash Rate benchmark by 3.18%.
The Australian S&P200 benchmark closed little changed during October. A strong US lead and generally robust earnings updates through the early AGM season failed to offset the weakness in the large iron ore and energy names. Information Technology was the best performing sector up 2.1%, while Industrials were the worst, down 3.3%. The transitory versus persistent inflation debate continued through October. We saw macro inflation measures point to accelerating global prices. At the same time a number of central banks including Canada, announced they would bring forward expected rate hikes. Others such as the ECB continued to hold the fort on bond purchases, saying higher prices would begin to ease from 2022 as supply chain issues began to abate.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-4.pdfSeptember, 2021
The Fund returned positive 2.36% for the quarter ending 30 September 2021, outperforming the RBA Cash Rate benchmark by 2.33%. For the month of September, the fund returned positive 1.67%, outperforming the benchmark by 1.66%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-3.pdfAugust, 2021
The Firetrail Absolute Return fund returned a positive 3.46% for the month ending 31 August 2021, outperforming the RBA Cash Rate benchmark by 3.45%.
Companies held within the long portfolio performed strongly through reporting season, delivering positive returns of +3.8%. Value and cyclical orientated companies led the earnings upgrades. Top long contributors included Crown Resorts, Ardent Leisure, and Australian Clinical Labs. Detractors included Newcrest, Lynas and Santos. The Fundamental short portfolio also delivered positive returns of +0.3%. Positive Fundamental short contributors included companies within the materials and financials sectors. Risk shorts, which are used to hedge equity exposure risk, detracted -1.1% during the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-2.pdfJuly, 2021
The Firetrail Absolute Return fund returned negative 2.69% for the month ending July 2021, underperforming the RBA Cash Rate benchmark by 2.69%.
Whilst Fund performance over recent years has been strong, the past quarter has disappointed, impacted by the market’s sharp rotation away from cyclicals, toward quality and defensive companies. The COVID Delta variant has increased uncertainty in the near-term for economically exposed companies. However, we see material valuation and earnings upside potential in our cyclical portfolio positions and believe our conviction will reward investors with a medium-term view (as it has in the past). The portfolio is also overweight to globally exposed growth names in sectors such as technology and healthcare to balance our cyclical tilt.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report-1.pdfJune, 2021
The Fund returned negative 6.43% for the quarter ending 30 June 2021, underperforming the RBA Cash Rate benchmark by 6.45%. For the month of June, the fund returned negative 6.48%, underperforming the benchmark by 6.49%. The 2020/21 financial year was a great year for the Absolute Return Fund, with the Fund returning 17.10%, outperforming the benchmark by 16.95%.
It was another positive month for the Australian equity market through the June quarter, helping the index to its strongest year of growth since 2007. The benchmark S&P200 added 8% for the quarter and 24% for the financial year ending June 2021. The Information Technology and Consumer Discretionary sectors led the market through the June quarter, building on their market leading performance throughout the year. IT was up 12%, while Consumer Discretionary rose 12%, outpacing the market’s 8% gain. Energy (-3%) and Utilities (-6%) were the weakest performing sectors for the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Firetrail-Absolute-Return-Fund-Performance-Report.pdfMay, 2021
The Firetrail Absolute Return fund returned -0.79% for the month ending 31 May 2021, underperforming the RBA Cash Rate benchmark by 0.80%.Positive contributors to performance included long positions in Immutep, Newcrest and Crown Detractors included an overweight position in Incitec, Nufarm and Strike Energy.
The Australian Equity market continued its winning streak through May, despite starting the month on a more volatile footing. The S&P200 benchmark added 2.3%, taking calendar year to date gains to 10% for the Australian market. Large caps led the market higher, rising 2.9% for the month, while Small caps lagged eking out a 0.3% return. Financials were the best sector rising 6% in May, while yield sensitive sectors struggled, with IT down 10% for the month. The procyclical rotation that has benefited Value stocks continued, building on the outperformance relative to Growth since last November. On a 12-month basis, Value has outperformed growth by about 25%. Commodities led the charge, with iron ore topping $200/t, Gold and metals also rallied and coal recovered despite the Chinese restrictions on Australian coal imports.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/202105-Firetrail-Absolute-Return-Fund-Performance-Report.pdfApril, 2021
The Firetrail Absolute Return fund returned 0.86% for the month of April, outperforming the RBA Cash Rate benchmark by
0.85%. Positive contributors to performance included long positions in Independence, Airtasker, and Megaport. Detractors
included an overweight position in Lynas, Challenger and Incitec
December, 2020
The Firetrail Absolute Return fund returned 3.14% during December, outperforming the RBA Cash Rate benchmark by 3.13%. Positive contributors to performance included long positions in IGO Ltd, Immutep and Nuix. Detractors included long positions in Adore Beauty and Qantas, as well as being short Fortescue Metals.
Equity markets end on a high The Australian equity market built on the strong gains in November, rising a further 1% through end-December, and finishing 2020 down just 1.5%. Headlines throughout December were more mixed after the euphoria that followed the news of multiple successful Covid-19 vaccines in November. Vaccine approvals through December saw inoculations begin across several regions. Brexit was finalised. Whilst a new US$900 billion fiscal stimulus in the US finally passed Congress and the Senate by a wide margin.
However, there were also some offsets. Global Covid-19 cases continued to increase, with the discovery of a more contagious strain of the disease sending the UK into fresh lockdowns. Closer to home, an outbreak of Covid-19 in Sydney's Northern Beaches saw NSW impose new mobility restrictions over the holiday period, with domestic border closures/restrictions also re-imposed, negatively impacting some of the re-openers. MSCI Australia Value outperformed Growth by +2.8% through December, taking the Q420 run-rate to +17% over growth. Despite the strong finish, Value was unable to cover all the losses through CY20, closing 5% lower, whilst Growth finished 3.7% weaker over the 12-months to Dec-2020.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/202012-Firetrail-Absolute-Return-Fund-Performance-Report.pdfticker: WHT5134AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://firetrail.com/products/firetrail-absolute-return-fund/
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asset_class: Domestic Equity
asset_category: Australia Large Blend - Absolute Return
peer_benchmark: Domestic Equity - Absolute Return Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund
manager_contact_details: Array
fund_features:
The Fund aims to outperform the RBA Cash Rate over the medium to long term. The Fund is an absolute return fund which aims to generate positive returns in all market environments. The Fund is typically expected to be market neutral (net market exposure generally between 0% – 10%), which effectively means the Fund is constructed in a way where returns are not dependent on the performance of the underlying share market.