SUMMARY
The Fund generated a -3.3% return in October. By way of comparison, the Australian stock market declined by -3.9%, whilst the (annual) return of the RBA cash rate plus 6% equated to approximately +0.8%. Calendar year to date, the Fund has achieved a return of +1.9%, which compares favorably to the Australian stock market at -0.04%, although following the recent overall market correction, is tracking below the cash plus 6% benchmark of +8.1% for the 10 months.
Recent months have proven to be a challenging environment for equities however we continue to believe that the Fund is well positioned to navigate the existing volatility and deliver on our objective of cash plus 6% in the medium term, given its defensive positioning and focus on businesses with solid balance sheets that are generating cash now. By month end the portfolio was generating a cash yield of 7% – which is to say if the companies that we are invested in meet our forecasts, they will generate an incremental 7% of the portfolio’s value in free cash over the next 12 months. Together with earnings growth and capital returns, this elevated cash yield underpins our medium term investment objectives.