Realindex Australian Share-Class A (FSF0976AU) Report & Performance

Realindex Australian Share Value returned -3.56% (net of fees) during May, versus the S&P/ASX 200 benchmark which returned -2.53%.

Value stocks underperformed Growth stocks by 1.5% over the month (S&P Australia BMI Value -3.5% vs. Growth -2.0%). Over the past year, Growth has outperformed Value by 1.4%, while on a five year basis Growth has outperformed Value by 0.5% p.a., providing a longer-term performance headwind.

The RBA continues to maintain its restrictive monetary policy, navigating its narrow path to the 2-3% target range. Growth in the March quarter was lacklustre, with concerns over rising rents’ impact on inflation while consumer sentiment declined, particularly among renters. On the other hand, job market confidence remains relatively robust.

Australian markets traded lower over the month with disappointing earnings from major banks, mixed economic data, and a surprise increase in local interest rates. Financials and Materials struggled, while retailers reported a slowdown in sales and a deteriorating near-term outlook. However, the Information Technology sector surged, led by Xero and Life360.

From a sector perspective, the largest detractor was stock selection within Materials in particular Metals and Mining, resulting in an impact of -36bps to performance. Whereas, the largest contributor was the overweight to Consumer Staples and Utilities. The largest stock level detractor was the underweight to CSL Limited which detracted -25bps while the largest stock level contributor was the overweight to Ampol Limited. Overall, fund performance was largely in line with the Value benchmark.

The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (35.3% discount), price-to-cashflow (24.5% discount), and price-to-book (9.7% discount), as well as a dividend yield higher than the benchmark (21.9% premium).

Realindex Australian Share Value returned +1.25% (net of fees) during April, versus the S&P/ASX 200 benchmark which returned +1.85%.

Value stocks outperformed Growth stocks by 1.7% over the month (S&P Australia BMI Value +2.7% vs. Growth +1.0%). Over the past year, Value performance has been in line with Growth, but lagged on a five-year basis by 0.5% p.a. providing a longer-term performance headwind.

The Australian share market ended the month mildly higher. Information Technology (+4.8%) and Financials (+3.3%) sectors performed well, while the Materials sector fell by 2.6% due to a 16% drop in the iron ore price. Consumer confidence increased in April due to the RBA’s decision to pause on an interest rate increase, but confidence remains largely weak. The unemployment rate is 3.5%, and the inflation rate is 7.8% as of March 2023.

The portfolio’s overweight allocation to the Materials sector resulted in a large detraction from performance, from both a sector allocation and stock selection effect. In particular the portfolio’s 2.2% average overweight to Fortescue Metals detracted 20bps of performance, as did the overweight to BHP Group, detracting 8bps. Compounding the poor performance was the portfolio’s underweight to the Health Care sector. More specifically, the underweight allocation to CSL resulted in a 13bps detraction.

On the flip side, the portfolio’s overweight to the Financials sector was positive for performance with the portfolio’s overweight allocation to three of the four big four banks (ANZ, Westpac, NAB) contributing positively to performance.

The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (33.7% discount), price-to-cashflow (23.2% discount), and price-to-book (8.8% discount), as well as a dividend yield higher than the benchmark (19.5% premium).

Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 30 April 2023 unless otherwise noted.

Realindex Australian Share Value returned -2.17% (net of fees) during February, outperforming the S&P/ASX 200 benchmark which returned -2.45%.

Value stocks outperformed Growth stocks by 1.6% over the month (S&P Australia BMI Value -1.9% vs. Growth -3.5%). Over the past year, Value has beaten Growth with Value outperforming by 5.2%, but lagged on a five-year basis by 0.4% p.a. providing a longer-term performance headwind.

February marked a sharp reversal from the gains in January as investors weighed the possibility of stickier inflation and higher bond yields. The labour market softened as unemployment rose marginally to 3.7% while consumer confidence fell by -6.9% according to the Westpac Consumer Confidence Index. The Reserve Bank of Australia’s hawkishness continued in February with a 25bps increase, with further expectations of rate hikes over the months ahead. Retail sales jumped by 1.9% month-on-month for January with volumes still 12% above pre-pandemic levels, whilst house price declines have levelled off. At the sector level, Utilities (+3.4%) and Information Technology (+2.7%) held up, whereas the Materials sector fell (-6.6%), driven largely by Metal and Mining companies.

The fund outperformed for the month, driven by strong stock selection alpha within the Materials sector. In particular, the underweights to Lithium miners paid off (Pilbara +5bps; Allkem +4bps and Core Lithium +2bps). While, the largest detractor was the underweight to Industrials. The largest stock level contributor was the overweight to Helia Group Limited and the largest stock level detractor was the overweight to AMP Limited.

The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (33.6% discount), price-to-cashflow (24.3% discount), and price-to-book (11.3% discount), as well as a dividend yield higher than the benchmark (18.7% premium).

Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 28 February 2023 unless otherwise noted.

Realindex Australian Share Value returned +5.35% (net of fees) during January, versus the S&P/ASX 200 benchmark which returned +6.23%.

Value stocks underperformed Growth stocks by 2.4% over the month (S&P Australia BMI Value +5.2% vs. Growth +7.6%). Over the past year, Value has beaten Growth with Value outperforming by 7.7%, but lagged on a five-year basis by 1.2% p.a. providing a longer-term performance headwind.

The Australian share market had a strong start, posting a +6.2% increase for January. This growth was largely due to the positive outlook on China’s reopening. While investors hoped for inflation to remain contained, stronger than expected CPI print (+8.4% year-on-year to December) by the Australian Bureau of Statistics dashed any hopes for a pause in the Reserve Bank of Australia’s rate hikes. Our markets largely mirrored US equities which also rallied in January on the back of positive investor sentiment, easing labour costs and cooling inflation.

Most sectors rose over the month with Consumer Discretionary (+9.9%), Materials (+8.9%) and REITs (+8.1%) leading the pack while, Utilities fell by -3.0%.

Value struggled throughout the month, with selection alpha detracting from performance across most sectors. From a sector perspective, the largest contributor was the underweight to Health Care and the largest detractor was the overweight to Financials.

Our overweights to Australia and New Zealand Banking Group and Whitehaven Coal and was a performance drag detracting 0.25%, this was cushioned by our underweight to CSL which added 0.15%. Lithium miner Pilbara rallied 26.7% over the month, which further detracted 0.10% to performance, whilst our overweight to Incitec Pivot also detracted 0.10%.

The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (32.2% discount), price-to-cashflow (25.3% discount), and price-to-book (13.5% discount), as well as a dividend yield higher than the benchmark (19.2% premium).

Realindex Australian Share Value returned +7.23% (net of fees) during November, outperforming the S&P/ASX 200 benchmark which returned +6.58%.

Value stocks underperformed Growth stocks by 2.2% over the month (S&P Australia BMI Value +4.6% vs. Growth +6.8%). Over the past year, Value has beaten Growth with Value outperforming by 14.2%, but lagged on a five-year basis by 0.6% p.a. providing a longer-term performance headwind.

The Australian share market continued to rally in November resulting in a 6.0% increase over a 3 month horizon. Inflation has shown signs of easing, with the Australian Bureau of Statistics showing a slowdown in CPI from 7.3% to 6.9% in the twelve months to October. Housing, food and transport exhibited the greatest price movements. This was also reflected globally, with inflation stabilizing in the US and Eurozone. During the month, all sectors posted positive performance; we saw strong performance in Utilities (+20.9%) and Materials (+16.3%) and weaker performance in Communication Services (+2.1%).

From a sector perspective, the largest contributor by far was the overweight to Materials and the largest detractor was the overweight to Consumer Staples. Specifically, stock selection within Metals and Mining contributed positively to the fund’s performance by 0.54%. The largest stock level contributor was the overweight to Origin Energy Limited, which contributed 0.35%, and the largest stock level detractor was the overweight to Elders Limited.

The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (33.6% discount), price-to-cashflow (25.7% discount), and price-to-book (16.0% discount), as well as a dividend yield higher than the benchmark (21.3% premium).

The Realindex Australian Shares Fund returned +5.57% (net of fees) during October, versus the S&P/ASX 200 benchmark which returned +6.04%.

Value stocks outperformed Growth stocks by 4.8% over the month (S&P Australia BMI Value +8.2% vs. Growth +3.4%). Over the past year, Value has beaten Growth with Value outperforming by 11.8%, but lagged on a five-year basis by 0.5% p.a. providing a longer-term performance headwind.

The Australian share market rebounded in October after falling significantly in September, and remains largely flat over a 3 month horizon. Inflation continues to be a problem, with the September quarter headline number at 7.3%. Due to this, the Reserve Bank of Australia continues to tighten policy, albeit at lower 25bps increments. Consumer confidence continues to be muted and the property market remains downbeat due to rate hikes. During the month, we saw strong rebound performance by Financials (+12.2%), REITs (+9.9%) and the continued performance by Energy (+9.5%). On the other hand, Consumer Staples (-0.2%) and Materials (-0.1%) performed largely flat.

From a sector perspective, the largest detractor was the overweight to Materials and the largest contributor was the underweight to Health Care. Specifically, stock selection was a headwind within the Materials sector with the overweight to Fortescue Metals Group Ltd being the largest stock level detractor, detracting -31bps. The largest stock level contributor was the underweight to CSL Limited.

The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (32.5% discount), price-to-cashflow (25.6% discount), and price-to-book (17.9% discount), as well as a dividend yield higher than the benchmark (22.4% premium). Note: Percentage figures in parenthesis show total return in Australian dollars for the month ending 31 October 2022 unless otherwise noted.