SUMMARY
The Fund returned +7.32% in November, underperforming the benchmark return of +9.23%.
The Fund returned +7.32% in November, underperforming the benchmark return of +9.23%.
Global equity markets enjoyed one of the best single months of performance in the past several decades.
The announcement of three effective vaccines against the COVID-19 virus drove a risk-on mood in the equity markets and added fuel to the post-US election rally.
Investors were optimistic that the end of the global pandemic was finally within reach despite a sharp increase in global COVID-19 cases. Sectors that are expected to benefit more from the complete removal of COVID-19 restrictions next year outperformed. In the US, the presidential election was also largely decided, settling a significant amount of political uncertainty. Joe Biden emerged as the President-elect, while Republicans gained seats in the House and seem likely to hold on to the Senate. Markets saw this as a net positive as most major US indices were up double digits. European markets also riding the wave of optimism surrounding the news of the COVID-19 vaccine ended up higher, with sharp gains in France, Germany, Italy, and the United Kingdom. European markets appeared to look beyond the new lockdowns and restrictions that have hampered recovery in the manufacturing and services sectors. Asian equities outperformed other regions led by China, Australia, and New Zealand. Emerging markets, represented by the MSCI EM, were up over 9%. A weaker US dollar, which fell nearly 2% in the month, aided the rally in EM.
Individual stock selection was the main driver of the Fund’s underperformance in November while currency was a positive driver.
Approximately 91 bps separated the top contributor and largest detractor. As of 30th November, the top 10 holdings accounted for approximately 34% of the Fund’s assets, with the largest position of approximately 4% of the portfolio. Regional and sector exposure remained consistent month over month. The Fund has outpaced the benchmark 10 out of the past 14 months. Over the past year, the Fund’s upside capture has been 109% while the downside capture has been 95% vs. the benchmark generating approximately 3.7% of alpha.
Positive news regarding the effective COVID-19 vaccines quickly impacted the investment landscape. With a potential end to the pandemic now in sight, investors quickly re-evaluated many sectors, such as consumer discretionary and industrials, that had been under significant strain over the past several months. We were no exception. The Fund invested in two travel-related names, Wizz Air and On the Beach.
Wizz Air, a position held historically, is one of the largest airlines in Central and Eastern Europe. Wizz operates as an ultra-low-cost carrier, with significantly lower costs than most of its competitors and a superior business model. Wizz Air continues to take share in a segment in which they are already a market leader. Potential decrease in COVID-19 cases, due to the vaccines, combined with an easing of travel restrictions across Europe will equate to increased travel over the next year.
On the Beach Group is a UK-based online travel agent that focuses on beach and short-haul holidays primarily targeting customers in the UK. The Company’s technology platform and business model has enabled it to grow quickly and increase its market share. We also believe that an easing of travel restrictions in the New Year will allow the company to pick up where it left off before the pandemic.
The Fund also made an investment in Aritzia, a Canadian apparel retailer that has had significant growth online and in their store base. The company’s investment in developing its e-commerce platform has yielded dividends, and its strong fundamentals and growing market share have made it an attractive investment opportunity.
The Fund sold out of the position in Kruk, a debt collecting company based in Poland, after disappointing fundamental performance over the last several years. Similarly, the Fund exited its position in Equiniti after management was not initially forthright about its reliance on interest rates to drive profits.
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.