Alphinity Australian Equity aims to outperform the S&P/ASX 300 Accumulation Index after costs and over rolling three-year periods. Alphinity is an active core Australian equities manager who seeks to identify opportunities across market cycles. Alphinity believes that a company’s earnings growth and expected earnings growth ultimately drive its share price performance and that there is a systematic mispricing of individual shares over the short to medium-term due to under-or-over estimation of a company’s earnings ability.
The Fund performed in line with the market in June, and across the June quarter. The best contributors were global insurer QBE, pallet pooler Brambles, and advertising platform carsales.com; not owning resource giants South32 or Rio Tinto also added some value.
Offsetting these however were holdings of resource giant BHP and medical device maker Fisher & Paykel Healthcare, while not owning high tech companies Xero and WiseTech detracted from returns.
The upcoming August reporting season should provide further insights into the extent of the economic slowdown the RBA has tried to orchestrate since the current interest rate tightening cycle started in May last year. The portfolio remains well exposed to companies that have seen better-than-average positive earnings revisions over the last several months. While there is always a risk, especially late in the cycle, that investors look beyond the current earnings environment and focus on a potential future earnings recovery, in our view it is unlikely that we have arrived at that point yet. A more decisive change in monetary policy, a pivot to a more expansive fiscal policy or a more significant fall in earnings that resulted in a “this is as bad as it gets” argument would typically precede such a change in investor sentiment.
For now, however, strong current operational performance should continue to be well rewarded. We see this as being achieved by a mix of portfolio holdings that also reported well in February – companies like Brambles, QBE, Steadfast, Medibank, Orora and Woolworths – as well as some newer positions in companies that have managed through a challenging industry environment and have come through at the other end in a good position to benefit as headwinds ease.
Last month we wrote about building materials manufacturer James Hardie being one of those companies. Despite going through a potentially destabilising management change last year, and even though US mortgage rates have ticked up again, the company appears to have stabilised and be back to delivering above-market volume growth.
What is Alphinity Australian Equity Alphinity Australian Equity is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Large Growth Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Alphinity Australian Equity has Assets Under Management of 37.16 M with a management fee of 0.9%, a performance fee of 0.00% and a buy/sell spread fee of 0.4%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the Alphinity Australian Equity has returned 2.31% in the last month. The previous three years have returned 7.81% annualised and 13.32% each year since inception, which is when the Alphinity Australian Equity first started.
How is risk measured in this investment product?
There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Alphinity Australian Equity first started, the Sharpe ratio is NA with an annualised volatility of 13.32%. The maximum drawdown of the investment product in the last 12 months is -3.84% and -44.75% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product?
Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Alphinity Australian Equity has a 12-month excess return when compared to the Domestic Equity - Large Growth Index of -1.68% and -0.36% since inception.
Does the investment product produce Alpha over its Peers?
Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Alphinity Australian Equity has produced Alpha over the Domestic Equity - Large Growth Index of NA% in the last 12 months and NA% since inception.
What are similar investment products?
For a full list of investment products in the Domestic Equity - Large Growth Index category, you can click here for the Peer Investment Report.
What level of diversification will Alphinity Australian Equity provide?
Alphinity Australian Equity has a correlation coefficient of 0.98 and a beta of 0.9 when compared to the Domestic Equity - Large Growth Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers?
For a full quantitative report on Alphinity Australian Equity and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Alphinity Australian Equity with the ASX Index 200 Index?
For a full quantitative report on Alphinity Australian Equity compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the Alphinity Australian Equity to do my own analysis?
To sort and compare the Alphinity Australian Equity financial metrics, please refer to the table above.
Has the Alphinity Australian Equity been independently verified by SMSF Mate?
This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
How can I invest in Alphinity Australian Equity?
If you or your self managed super fund would like to invest in the Alphinity Australian Equity please contact Level 2, 5 Martin Place, Sydney NSW 2000 via phone +61 133 566 or via email info@challenger.com.au.
How do I get in contact with the Alphinity Australian Equity?
If you would like to get in contact with the Alphinity Australian Equity manager, please call +61 133 566.
Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the Alphinity Australian Equity. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - March 31, 2023 The Fund performed a little better than the market over the March Quarter. The material contributors over the period were quite diverse: gaming company Aristocrat Leisure, health insurer Medibank Private, petrol distributor Viva Energy, packaging company Orora and pallet pool operator Brambles, although these were partially offset by our position in National Australia Bank and not owning gold miner Newcrest.
Performance Commentary - September 30, 2022 The Fund underperformed the market a little in the September quarter. Positions in lithium producer IGO, health insurer Medibank Private, safety app 360; not owning gold producer Newcrest or gas pipeline APA also helped. The main detractors from returns were Goodman Group, Orora, and not owning lithium play Pilbara Resources, coal miner Whitehaven Coal, and diversified resource companies South 32 and Mineral Resources.
We expect our focus on earnings leadership will steer us through the current difficult macro environment. This sees us positioned relatively defensively at the moment but still well diversified.
While overall earnings risk into 2023 still seems biased to the downside, and this is reflected in the current portfolio positioning, it is in our view important to not get too caught up in the macro and to remain focused on individual company opportunities as well as sectors where the earnings outlook is more positive than a cursory top-down approach might suggest.
Performance Commentary - June 30, 2022 The Fund outperformed the market in the June quarter and over the financial year. Positions in petrol distributor Viva Energy, health insurer Medibank Private and global insurer QBE contributed nicely, while not owning financial services company Block Inc (Afterpay) continues to be a boon. On the negative side however was being underweight toll-road company Transurban.
For the financial year, the biggest contributor was not owning Block, followed by good returns from energy exposures Viva (petrol) and Woodside (gas). Miner Lynas Rare Earths also did well, as did QBE. The negatives were much smaller in magnitude, the only meaningful one being not owning Sydney Airport, which was subject to a takeover bid late last year.
Performance Commentary - March 31, 2022 The Fund performed in line with the market in the March quarter. The largest contributors were its holdings in diversified resource companies BHP and South 32, gas companies Santos and Woodside Petroleum, and not owning tech exposures Xero and Block. Offsetting these however were holdings in US building exposures Reliance Worldwide and James Hardie Industries, pathology company Sonic Healthcare, gaming machine maker Aristocrat Leisure, and industrial property developer Goodman Group which fell largely thanks to rising bond yields.
Performance Commentary - June 30, 2021 The final quarter of the 2021 financial year saw the Australian market (ASX300 including dividends) continue its upward march, returning 8.5%. Since the initial Covid panic in March 2020 there has been only one negative month, September 2020. Economic news in Australia continued to be positive with unemployment falling back to pre-Covid lows and job vacancy statistics suggesting further improvement lies ahead. While a Covid flare-up late in the quarter puts some risk around the durability of the recovery, we’ve been through lockdowns so many times now it appears that the market doesn’t fear its impact too much, notwithstanding the greater relative scariness of the Delta strain.
The year to June 2021 will go down as one of the better periods for the share market in recent years. At +28%, it ranks alongside some of the very best since the ASX300 was established three decades ago. The average annual return over that period has been 10.4%, with many more ups than downs.
Performance Commentary - March 31, 2021 In the March quarter, the market rose by a pleasing but unexceptional 4% (ASX300 including dividends). Thinking back to this time last year however, in March 2020, the market was in the process of having a full-blown panic attack about what a pandemic might do to the global economy, particularly to corporate earnings which are the key drivers of share prices.
The ASX300 tumbled 37% in the four weeks from its late February 2020 high to a low in the last week of March, the shortest, sharpest bear market we have ever seen. 12 months on from that we are now starting to cycle those panicked times, resulting in some very large numbers showing up.
Performance Commentary - September 30, 2020 The Fund outperformed over the September quarter. The best contribution to returns came from industrial property play Goodman Group, copper miner Oz Minerals, iron ore miner Fortescue Metals, safety app Life 360, building materials maker James Hardie and not owning either gas producer Woodside Petroleum or infant formula maker A2 Milk. The only detraction of note was from not owning consumer credit provider Afterpay Touch.
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