SUMMARY
The Fund returned +2.94% in January, outperforming the benchmark returns of +2.77%.
The Fund returned +2.94% in January, outperforming the benchmark returns of +2.77%.
Global equity markets started the month off strong thanks to a number of factors.
The January 15th signing of the “Phase One” trade agreement between the U.S. and China removed some uncertainty from the market, lifting investors sentiment on global economic growth. This news coupled with strong economic data helped send U.S. equities to record highs. The market rally was unfortunately short lived. Fears of a potential military conflict following an American drone strike that killed Iran’s top general, Qasem Soleimani, and the news of the spreading coronavirus stoked global economic fears and affected stocks in a broad cross-section of industries worldwide. Global equity losses gained steam over the month as the continued outbreak stoked concerns about global growth. Emerging market equities, measured by the MSCI EM, declined ~4.7% on the month, posting their worst monthly return since August 2019. By comparison, most U.S. and other developed markets indices fared better but on the most part did not escape negative territory.
Individual stock selection was the main driver of the Fund’s performance in January. Approximately 135 bps separated the top contributor and largest detractor. Over half of our holdings positively contributed last month despite the large pullback in the second half of the month. As of 31 January, the top 10 holdings accounted for approximately 39% of the Fund’s assets, with the largest position approximately 4.7% of the portfolio.
The fund was active in adding several new positions in January. We initiated several new positions in Canadian oil services companies, after meeting with multiple management teams. These businesses all facilitate drilling or production for oil and gas companies. The sector has gone through a long, protracted negative capital cycle and the industry has consolidated dramatically. The remaining players all have limited need for capital expenditure, double digit free cash flow yields and management teams that are well aligned with shareholders (in fact all have seen management teams buy shares personally). On top of this, no new capacity is coming into the industry. We have invested across five businesses in the space. We understand the risks of a global slow down associated with the coronavirus but view this as an opportunity to invest in good companies rather than a structural problem.
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.