The Investors Mutual Australian Share Fund provides exposure to an actively managed portfolio of quality Australian shares listed on the ASX. The Fund aims to provide to provide a rate of return (after fees and expenses and before taxes) which exceeds the return of the Fund’s Benchmark on a rolling four-year basis.
The Australian Share Fund had a disappointing quarter, down -2.9%, lagging the benchmark’s -0.8%. The main reasons for the poor relative performance were a strong energy sector, where we are underweight, and a weak quarter by the gaming sector, where we are overweight, as well as disappointing performances by key stocks CSL and Telstra.
Global sharemarkets declined in the September quarter as bond yields rose sharply and investors finally seemed to believe that the Fed and other central banks will keep interest rates ‘higher for longer’. Most markets fell, with the MSCI World Index down -2.4% and the NASDAQ down further, -4.0%, reversing some of its impressive recent gains.
Local markets took a lead from overseas, with the ASX 300 down -0.8 for the quarter. Energy was the strongest sector, buoyed by soaring oil prices, mainly driven by supply cuts from Saudi Arabia and Russia. Healthcare was weakest, dropping -9.0%, as rising 10-year bond yields disproportionately affected its higher valuation multiples.
Many of the fund’s holdings performed well over the quarter including Orica, Suncorp, TPG Telecom, Nine Entertainment and Metcash. Stocks which held back performance included CSL, as explained below, and Telstra which dropped -8.5%, despite posting a strong result, as shareholders reacted negatively to the news it intends to retain its infrastructure business, Infraco. We believe this decision is sensible and in the long-term interests of shareholders.
During the quarter we opened new positions in Viva Energy and Resmed. We bought Viva at a 9% discount after Vitol, its largest shareholder, sold part of its stake. We believe Viva is well positioned in the petrol/refining industry that is structurally better since Covid, with a number of competitors exiting both fuel distribution and refining. Resmed fell 28% over the quarter on concerns that new GLP1 drugs, which are popular for weight loss, will reduce demand for its CPAP sleep apnea products. The market is pricing in a large drop in demand for CPAP devices, which we think is far from certain, hence we started building a position late in September.
Early in the quarter we trimmed our positions in Brambles and The Lottery Company as their share prices had appreciated significantly, and we added to Sonic and Charter Hall Retail REIT over the quarter on share price weakness.
What is Investors Mutual WS Australian Share Investors Mutual WS Australian Share is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Large Value 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 Investors Mutual WS Australian Share has Assets Under Management of 1.94 BN with a management fee of 0.99%, a performance fee of 0.00% and a buy/sell spread fee of 0.5%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the Investors Mutual WS Australian Share has returned -0.07% in the last month. The previous three years have returned 5.92% annualised and 10.88% each year since inception, which is when the Investors Mutual WS Australian Share 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 Investors Mutual WS Australian Share first started, the Sharpe ratio is NA with an annualised volatility of 10.88%. The maximum drawdown of the investment product in the last 12 months is -4.45% and -40.31% 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 Investors Mutual WS Australian Share has a 12-month excess return when compared to the Domestic Equity - Large Value Index of -4.28% and -0.69% 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. Investors Mutual WS Australian Share has produced Alpha over the Domestic Equity - Large Value 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 Value Index category, you can click here for the Peer Investment Report.
What level of diversification will Investors Mutual WS Australian Share provide?
Investors Mutual WS Australian Share has a correlation coefficient of 0.96 and a beta of 0.96 when compared to the Domestic Equity - Large Value 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 Investors Mutual WS Australian Share and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Investors Mutual WS Australian Share with the ASX Index 200 Index?
For a full quantitative report on Investors Mutual WS Australian Share compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the Investors Mutual WS Australian Share to do my own analysis?
To sort and compare the Investors Mutual WS Australian Share financial metrics, please refer to the table above.
Has the Investors Mutual WS Australian Share 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.
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Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the Investors Mutual WS Australian Share. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - August 31, 2023 The Fund was down -0.7% in August, in line with the benchmark ASX 300 which was down -0.8%
Reporting season dominated financial news in August, with mixed results overall. In general, businesses with strong market positions and balance sheets, like those in our portfolios, navigated the difficult economic conditions better.
Several of our holdings were up strongly after reporting better than expected results, including Brambles, Medibank and Ampol. Telstra posted a strong result but dropped on the news it intends retaining its infrastructure business, Infraco. We believe this decision is sensible and in the long-term interests of shareholders.
Reporting season showed that trading conditions remain mixed. Consumer demand is slowing but is still above pre-Covid trends. Inflation has reduced, but significant rises in electricity, gas, insurance premiums and wages mean the RBA can’t be complacent that inflation has been tamed. We continue to act cautiously, focusing on industry-leading companies with strong competitive advantages and recurring earnings that are likely to perform well in a range of economic conditions.
Performance Commentary - July 31, 2023 The Fund was up +0.9%, though it significantly lagged the benchmark ASX 300 which was very strong, rising +2.9%.
The Fund lagged the benchmark partly due to some holdings pulling back after strong recent performances, including Brambles, Aurizon and Telstra. Weaker relative performance was also due to a global rally in more speculative companies, for example unprofitable US tech rose +16% and a US-based ‘Meme ETF’ soared +20%.
Orica was up strongly as investors grew more optimistic about its growth outlook amid a strong month for commodities. Nine Entertainment also performed well, rising alongside other consumer-exposed companies. Aurizon had a poor month, falling -3% after an investor day in Darwin underwhelmed investors on short-term earnings, despite the company detailing a positive longterm growth strategy.
Despite euphoria around a possible ‘soft landing’, many companies face headwinds. Consumer demand is slowing but is still above pre-Covid trends. Inflation has reduced, but significant rises in electricity and gas, insurance premiums, and services wages mean inflation must still be contained. We continue to act cautiously, focusing on industry-leading companies with strong competitive advantages and recurring earnings that are likely to perform well in a range of economic conditions.
Performance Commentary - June 30, 2023 The Australian Share Fund had a solid quarter, returning +1.4%, ahead of the benchmark’s +1.0%. This took the Fund to a solid return for the full financial year of +11.0%. While this is a good annual return it was disappointingly behind the benchmark’s strong return of +14.4%, although this is not unexpected given the significant outperformance by resources companies over the year.
Global markets had a very strong quarter with the MSCI World Index up +6.7%, led by the Nasdaq, +13%. The gains were partly driven by optimism that the rate-rising cycle was near its end, as well as excitement about AI after US chipmaker Nvidia significantly upgraded its forward guidance. This caused a narrow-focused rally, driving markets higher.
The ASX 300 lagged global markets, rising +1.0% for the quarter, as the strong lead from overseas markets was tempered by somewhat unexpected RBA rate hikes which made investors more cautious. Information Technology was by far the strongest sector, rising +18.4% as tech stocks rallied in line with overseas markets. Materials were weaker in line with lower commodity prices and consumer facing sectors also struggled as interest rates continue to bite.
The Fund benefitted from strong performances from Aurizon, as explained below. IAG and Suncorp also were also up significantly amid continuing good trading conditions for the insurance sector. Premiums are increasing significantly (adding to inflation pressures), and investment income is benefitting from higher rates.
CSL was disappointing over the quarter, falling after its guidance for FY24 was below the optimistic consensus. Currency translation has had a large impact and margins are likely to recover more slowly than many were expecting. Amcor also fell after it downgraded its outlook due to food and beverage companies destocking as well as weakening demand from end customers.
We used share price weakness to increase our positions in Charter Hall Retail REIT and Fletcher Building and heightened share prices to trim our positions in IAG and exited Southern Cross Media after an attractive off-market offer from ARN Media at a 42% premium to the share price at the time.
Performance Commentary - May 31, 2023 The Fund was down -1.4% in May, though ahead of the benchmark ASX 300, which dropped -2.5%.
Many of our key holdings performed well during the month. Our relative performance was buoyed by our low exposure to consumer discretionary retailers, which fell heavily due to the interest rate rise which took some investors by surprise. Aurizon performed strongly for the fund, up 4%, continuing its recent rise as haulage volumes improve. Tabcorp also performed well, up 9%, as confidence increased in its Victorian licence renewal.
Amcor had a poor month falling 8% after it downgraded its outlook due to weakening packaging volumes.
Economies still face significant issues, setting a challenging backdrop for companies. Consumer demand has slowed but is still robust compared to pre-Covid trends. Inflation is proving persistent, with wage gains and house prices ticking up. Further interest rate rises are probable. We continue to act cautiously, focusing on industry-leading companies with strong competitive advantages and recurring earnings that are likely to perform well in a range of economic conditions.
Performance Commentary - April 30, 2023 The Fund was up +2.1% in April, ahead of the benchmark ASX 300, which rose +1.8%.
The main reasons for the Fund’s better relative performance were strong performances by many of our key holdings, as well as a poor month for the large iron ore miners which we remain cautious of due to their cyclicality.
Brambles was up 6% in April, after improving its pricing and margins and so upgrading guidance. Telstra rose too after a positive shareholder response to its price rises. Medibank Private, Orica and CSL also performed strongly.
The Lottery Corporation had a disappointing month, dropping slightly after smaller jackpots impacted revenue.
The continuing sharemarket strength implies a belief in a painless retreat from high inflation as well as an early easing of interest rates. There are risks to this scenario, with inflation only likely to fall with consumer belt tightening and a rise in unemployment. The companies in the fund are well-established with competitive advantages and recurring earnings, making them more resilient and likely to perform well in a range of different economic conditions.
Performance Commentary - March 31, 2023 The Australian Share Fund performed well over the quarter, +3.0%, slightly lagging the benchmark’s +3.3%.
The MSCI World Index was up +7.2% for the quarter, similar to the prior quarter. However, it has been a more volatile ride. Markets rose strongly at the start of 2023, then fluctuated as investors’ fears about interest rates, inflation and a slowing global economy waxed and waned. Things came to a head in March as a US regional banking crisis unfolded and spread to Europe, then eased as regulators took steps to calm markets.
The ASX 300 lagged global markets, up +3.3%, with mixed performance at a sectoral level. Most sectors were up, with Consumer Discretionary strongest, up +10.8%, driven by investors’ willingness to take on more risk and some strong individual performances followed by Communication Services (up +9.5%) off the back of Telstra’s strong performance. Financial Services was the weakest, down -2.7%, on worries about the unfolding banking crisis and mortgage competition. Real Estate also was down slightly on concerns of falling commercial property values and rising interest rates.
The Fund benefitted from strong performances from Telstra, Brambles, Medibank and The Lottery Corporation after they announced strong first half FY23 results. Sonic Healthcare also performed well, rising as it reported strong underlying earnings despite its overall revenue dropping as the Covid testing bonanza faded.
Aurizon’s performance held the fund back over the quarter as it announced lower-than expected earnings due to poor weather. Amcor was also down as it reported declining packaging volumes in some categories. We believe the issues for both stocks are temporary and we are confident in their long-term prospects.
We used share price weakness to increase our positions in Aurizon, Sonic Healthcare and Tabcorp and heightened share prices to trim our positions in The Lottery Corporation and Newscorp.
Performance Commentary - February 28, 2023 The Fund was up slightly in February, +0.3%, well ahead of the benchmark ASX 300, which dropped -2.5%.
The main reasons for the Fund’s better relative performance were resilient performances by many of our holdings, as well as a sell-off in the Resources companies, where we remain cautious.
Many of the Fund’s key holdings rose strongly after announcing positive results in reporting season including Brambles, Medibank and The Lottery Corporation. Aurizon had a disappointing month, sold down after it reported a drop in earnings due to poor weather which affected the amount of coal transported during June to December 2022.
Global markets were weaker during February as inflationary concerns resurfaced and bond markets sold off. We continue to position the Fund in well-established, profitable companies that are well-positioned to perform well in these uncertain economic conditions, while staying alert to any opportunities that the current market volatility brings.
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