SUMMARY
The Fund returned +2.29% in January, outperforming the benchmark return of +1.16%.
The Fund returned +2.29% in January, outperforming the benchmark return of +1.16%.
The Fund returned +2.29% in January, outperforming the benchmark return of +1.16%.
The positive momentum that carried the global equity markets toward the end of 2020 spilled over into 2021. After a very strong start to the month, most equity markets gave up their gains as the month came to an end. Mixed economic data showing a short-term hit due to pandemic-related restrictions in most western countries, political unrest in the US, and slow dissemination of the COVID-19 vaccines coupled with the emergence of several newer more infections strains of COVID-19 hampered investor confidence. As a result, developed markets as measured by the MSCI World Index ended the month down 1% while emerging markets as measured by the MSCI Emerging Markets index ended in January up about 3%.
In the US, the transition of the presidency was marred by a riot at the Capitol building which resulted in the second impeachment of former President Trump. Political instability, soaring COVID-19 infection rates, and retail-driven ‘short squeezes’ added to the heightened volatility of the US equity market. Market sentiment improved after testimony from incoming Treasury Secretary Janet Yellen to the Senate Finance Committee that lawmakers needed to “act big” on fiscal stimulus, thereby raising hopes for substantial federal spending. In Europe, COVID-19 news continued to dominate investor behaviour as a slow rollout of the new vaccines coupled with the emergence of several new, more infectious strains added to the anxiety. The excitement in the equity markets about the last-minute Brexit 2020 deal was overshadowed by the UK’s restrictive measures to lock down the country due to soaring infection rates. Japanese equities followed the trend in global markets, traded higher in the first half of January, before falling to end the month flat. Having strengthened against the US dollar for most of 2020, the yen ended in January slightly weaker. Asia ex-Japan equities registered a strong gain as the global roll-out of Covid-19 vaccines and expectations for additional US fiscal stimulus boosted investor optimism. China, where domestic economic data remained firm, and Taiwan, which benefited from strong performance in technology names, led the region higher.
Individual stock selection was the main driver of the Fund’s outperformance in January while currency was a positive driver. Approximately 170 bps separated the top contributor and largest detractor. As of 31st January, the top 10 holdings accounted for approximately 33% of the Fund’s assets, with the largest position approximately 4.6% of the portfolio at the end of the month. Regional and sector exposure remained consistent month over month. The Fund has outpaced the benchmark 8 out of the past 12 months. Over the past year, the Fund’s upside capture has been 120.2% while the downside capture has been 99.0% vs. the benchmark generating approximately 5.2% of alpha.
The Fund added several new positions during the month. The largest was Arrow Global, a UK-based credit collections business. The company has undergone a transformation by creating an asset management business around its credit collection capabilities. We believe this strategy has the potential to create significant value over time, allowing the company to leverage its expertise in the credit space to serve customers and grow in an asset-light manner. The market has just begun to appreciate the firm’s strategy and the opportunity it has created and as a result, has been approached with an offer by private equity. Our hope is the company maintains its independence and continues to create value for shareholders with its current direction. The Fund also added a rapidly growing orthopaedic implant business that operates in China and is listed in Hong Kong. We believe the company is well-positioned to capture significant growth in that market over time. The Fund exited its position in IWG, the office time-share business. While we do believe there is a significant opportunity to allocate capital in office real estate, we were concerned about persistent weakness in revenue of the core business.
CIO and Portfolio Manager
The Fund invests principally in small and midcap listed (or soon to be listed) global equities. Its investment objective is to obtain returns greater than the MSCI All Country World Index SMID Cap unhedged in Australian dollars (‘Index’) over rolling 3 year periods after fees. The Fund’s investment manager, Lizard Investors LLC, uses a value oriented investment approach that seeks to identify and invest in quality businesses that create significant value but are mispriced, overlooked, or out-of-favour. The investment manager believes that unique opportunities exist due to limited available research, corporate actions, or unfavourable investor perception.
1. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. No allowance has been made for buy/sell spreads. Please refer to the PDS for information regarding risks. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. Inception 1st April 2015.
3. Annualised standard deviation since inception.
4. Relative to MSCI All Country World SMID Cap index unhedged in AUD.
* For further information regarding fees please see the PDS available on our website.