Alphinity Global Equity Performance Review | News

What is the Alphinity Global Equity fund?

The Alphinity Global Equity Fund offers a select portfolio of leading global companies identified as undervalued as they enter an earnings upgrade cycle. Highly diversified across countries, sectors and currency.

Fund provides access to global opportunities and diversification not readily available to individual Australian investors.
A united and deeply experienced team of global portfolio managers each with over 20 years in the industry.
A disciplined process finding quality businesses with strong earnings that are under appreciated by the market.
An actively managed concentrated portfolio of 30-45 of our best ideas, highly diversified across sectors and regions.

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Latest News & Updates For Alphinity Global Equity

Alphinity Global Equity Fund Commentary September 30, 2023

The rapid rise in bond yields in the recent quarter had an impact across equity markets and happened against a backdrop of mixed macro signals. The resilient US labour market and apparent bottoming of both US manufacturing PMI as well as the global earnings cycle, all indicate that the economic growth outlook is certainly stronger than feared earlier in the year. They also point to a growing cyclical recovery in stock markets. Nevertheless, risks from the lagged, cumulative impact of Fed rate hikes remain, and elsewhere macro data has been more mixed, and we’re observing an unusually wide range in market forecasts for economic growth in 2023-24. So, while the growth outlook is certainly stronger than feared at the start of the year, visibility into 2024 remains low.

Corporate earnings reflect a similar picture.  With fears of an imminent recession abating, negative revisions have slowed significantly and in fact inflected slightly positive recently.  The second quarter reporting season was better than expected, with beats, both by number and magnitude, higher than normal.  Forward guidance remained more cautious, driving mixed price responses, however despite this, earnings expectations for both 2023 and 2024 have edged higher. For example, EPS revisions for ‘23/’24 earnings are +0.3%/+0.6% over the last three months, which is a notable improvement from the previous negative trend of -2% to -3% per quarter. 

READ HISTORICAL PERFORMANCE COMMENTARIES

Product Snapshot

Performance Review
Product Overview
Peer Comparison
Product Details

Performance Review

Fund Name	Last Month ? Returns after fees in the most recent (last) month).	3 Months Return ? Returns after fees in the most recent 3 months.	1 Year Return ? Trailing 12 month returns.	3 Years Average Return ? Average Annual returns from the last 3 years.	Since Inc. Average Return ? Average (annualised) returns since inception	1 Year Std. Dev. (Annual) ? The standard deviation (or annual volatility) of the last 12 months.	3 Years Std. Dev. (Annual) ? The average standard deviation (or annual volatility) from the last 3 years.	Since Inc. Std. Dev. (Annual) ? The average standard deviation (or annual volatility) since the fund inception.	1 Year Max Drawdown ? The maximum drawdown in the last 12 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.	3 Year Max Drawdown ? The maximum drawdown in the last 36 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.	Since Inc. Max Drawdown ? The maximum drawdown since inception - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Alphinity Global Equity	-2.01%	-0.37%	25.04%	9.76%	12.85%	11.7%	13.19%	11.65%	-3.92%	-18.61%	-18.61%

Product Overview

Fund Name	APIR Code ? A Product Code is unique a identifier code issued by a group or governing body, to reference products in a large group. For an example, APIR codes are commonly used for Funds and Ticker codes are commonly used for Securities such as ETFs and Stocks.	Structure ?	Asset Class ? An Asset Class breakdown provides the percentages of core asset classes found within a mutual fund, exchange-traded fund, or another portfolio. Asset classes (in microeconomics and beyond) generally refer to broad categories such as equities, fixed income, and commodities.	Asset Category ? An Asset Category is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset categories (or a sub-asset class) are made up of instruments which often behave similarly to one another in the marketplace, looking down to the Asset Category level is important if looking to build a diversified portfolio.	Peer Benchmark Name ? A Peer Index (benchmark) refers to a peer group of investment managers who have the same investment style or category. It is used to compare the performance of one manager to their peer group, which makes it simpler for investors to choose between the vast number of investment managers.	Broad Market Index ? A Market Index (benchmark) refers to a hypothetical portfolio of investments that represents a segment, asset or category of an investable market. Market Indices are used to benchmark managers performance, to assist their style reliability and ability to provide excess returns.	FUM ? Funds/Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company.	Management Fee ? A management fee is a charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise for selecting finanical products and managing the portfolio.	Performance Fee ? A performance fee is a payment made to an investment manager for generating positive returns. This is as opposed to a management fee, which is charged without regard to returns. A performance fee can be calculated many ways. Most common is as a percentage of investment profits, often both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.	Spread ? A spread can have several meanings in finance. Basically, however, they all refer to the difference between two prices, rates or yields. In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity. This is known as a bid-ask spread.
Alphinity Global Equity	HOW0164AU	Managed Funds	Foreign Equity	Large Blend - Fundamental	Foreign Equity - Large Fundamental Index	Developed -World Index	79.11 M	1%	0.41%	0.5%

Peer Comparison

Fund Name	Peer Index Name ? A group of individuals who share similar characteristics and interests are called peer groups. Peer group analysis is an essential part of assessing a price for a particular stock in investment research. The emphasis here is on making a comparison, meaning that the peer group constituents should be more or less identical to the company being examined, especially in terms of their main business and market capitalization areas.	12 Months Excess Return ? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.	Excess Return Annualised Since Inception ? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.	12 Months Alpha ? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over 12 months. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.	Alpha Annualised Since Inception ? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market annualized since inception. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.	12 Months Beta ? Rolling 12Month Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).	Beta Annualised Since Inception ? Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).	12 Months Tracking Error ? 12Month Tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark over the last 12 months. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.	Tracking Error Since Inception ? Since Inception tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark since inception. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.	12 Months Correlation ? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.	Correlation Since Inception ? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Alphinity Global Equity	Foreign Equity - Large Fundamental Index	6.47%	1.87%	NA%	NA%	NA%	1.05	6.56%	4.75%	0.84	0.91

Product Details

Fund Name	Verifed by SMSF Mates	Manager Address	Phone	Website	Email
Alphinity Global Equity	Yes	Level 2, 5 Martin Place, Sydney NSW 2000	+61 133 566	https://www.challenger.com.au/personal	info@challenger.com.au

Product Due Diligence

What is Alphinity Global Equity

Alphinity Global Equity is an Managed Funds investment product that is benchmarked against Developed -World Index and sits inside the Foreign Equity - Large Fundamental 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 Global Equity has Assets Under Management of 79.11 M with a management fee of 1%, a performance fee of 0.41% and a buy/sell spread fee of 0.5%.

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Historical Performance Commentary

Performance Commentary - August 31, 2023

Continued resilience in US economic data and a notable drop in inflation have together raised hopes that the US Federal Reserve (Fed) is done hiking rates and that a ‘soft landing’ for the US economy is achievable. At the same time after over two years of steady deceleration, the latest US manufacturing Purchasing Managers Index (PMI) of 47.6 appears to be recovering from trough levels historically associated with cyclical recovery.  These are all encouraging signs. Nevertheless, risks from the lagged, cumulative impact of Fed rate hikes remain and elsewhere data has been more mixed.  China continues to struggle with a deepening property crisis and recent growth and inflation data in Europe has also been somewhat disappointing.  So, while the growth outlook is certainly stronger than feared at the start of the year, visibility into 2024 remains low.

Corporate earnings reflect a similar picture.  With fears of an imminent recession abating, negative revisions have slowed significantly and in fact inflected slightly positive recently.  The second quarter season was better than expected, with beats, both by number and magnitude, higher than normal.  Forward guidance remained mostly cautious, driving mixed price responses, however despite this, earnings expectations for both 2023 and 2024 have edged higher. For example, EPS revisions for ‘23/’24 earnings are +0.3%/+0.4% over the last three months, which is a notable improvement from the previous negative trend of -2% to -3% per quarter.  At a sector level, dispersion is relatively wide and mixed from a cyclical perspective.  Materials, Energy, Real Estate and Health Care all sharply negative, while Consumer Discretionary, IT Hardware & Semiconductors and Communication services have seen positive revisions.

So far this year, leadership has rotated back to growth stocks and away from defensives sectors such as Utilities, Real Estate and Consumer Staples.  A notable feature has been extremely narrow leadership breadth, with the socalled ‘magnificent seven’ group of mega-cap growth stocks, which make up ~27% of the S&P 500 market capitalisation, having delivered ~72% of the YTD return through to end August (albeit an improvement from 112% at the end of May 2023).  There has also been strength in some cyclical industry groups recently including Autos, Semiconductors, Retail and Capital Goods, which have responded positively to better-than-expected growth and rising bond yields.  This is a complicated and challenging backdrop for financial markets, with clear and sustained earnings leadership remaining elusive. 

Activity during the month was mostly stock specific. We initiated a new position in Novo Nordisk following positive trial results and higher conviction about the long-term potential for their obesity drugs to also address other comorbidities.  We also added a position in Ferrari, a high-quality luxury automobile manufacturer with limited cyclicality.  Fortinet and Keysight both reported broadly in-line results, however order/billings trends and guidance for both were unexpectedly weak.  Earnings recovery is uncertain and consequently we exited both positions.

Overall, the portfolio remains well-positioned in strong growth stories, combined with some flagship defensives.  We have recently added to our cyclical exposure where we have established stock-specific, fundamental earnings conviction; however, the portfolio overall remains relatively less invested in cyclical stocks.  The investment team is again travelling widely overseas to meet companies across different sectors and geographies as the earnings cycle continues to evolve. 

Performance Commentary - July 31, 2023

Economic data has improved recently, with GDP expectations rising, resilient labour markets, strong consumption, inflation beginning to fall, and financial markets generally responding well to tighter financial conditions. We continue to see potential risks from the lagged, cumulative impact of Fed rate hikes, but we are also aware that some normally reliable economic indicators are already at low levels and the outlook for growth appears somewhat better than many feared at the start of the year. The US manufacturing Purchasing Manager’s Index (PMI) peaked well above 60 in 2021, and after a two-year downcycle it is now at ~46; while deep in contractionary territory this is approaching levels which have historically been associated with cyclical bottoms.

From a corporate earnings perspective, and after a similar nearly two-year period of negative revisions, there also appears to be some early signs of stabilisation. The second quarter reporting season has so far been better than expected with beats, both by number and magnitude, higher than normal. Nevertheless, generally cautious forward guidance has met with mixed price responses and muted earnings revisions. For example, consensus earnings expectations for both 2023 and 2024 have barely moved over the last three months (+0.1% respectively), although flat estimates are a marked improvement from the previous negative trend of -2% to -3% per quarter. Meanwhile, underlying sector dispersion is relatively wide. Materials and Energy have seen significant negative revisions reflecting lower commodity prices, while Consumer Discretionary, Communications and Tech Hardware are amongst the sectors with positive revisions for both years. More defensive sectors like Property, Health Care and Consumer Staples continue to slip in relative earnings strength. While there are some encouraging signs, and the negative earnings cycle is relatively mature by historical standards, our stock analysis and recent research trips suggest it’s still too early to call a sustained turn in the earnings cycle.

Performance Commentary - June 30, 2023

Performance Commentary - May 31, 2023

Performance Commentary - February 28, 2023

The market outlook continues to be uncertain and volatile. Our central scenario remains a period of weaker economic growth and declining inflation, which should drive further downgrades to earnings expectations, and at least a pause in central bank rate hikes. However tail risks around this outlook remain, including stickier inflation and a higherthan-expected peak in rates. Consequently, market leadership remains unclear, with significant questions persisting around the ultimate magnitude of downside in both economic growth and corporate earnings.

Reported Earnings Per Share (EPS) in the US fourth quarter reporting season was broadly in-line with sharply lowered expectations, however concerns around the outlook for margins, and generally cautious forward guidance from management, have prompted analysts to continue lowering estimates for 2023. Global earnings consensus has fallen by – 1.8% over the last month and -3.1% over the last three months, with most sectors seeing negative revisions. Defensive sectors continue to mostly outperform, with Energy, IT Hardware and Materials experiencing the sharpest downgrades and Utilities, Financials and IT Software holding up relatively well. A full reset in the outlook for earnings continues to be one of the outstanding factors necessary to resolve new market leadership.

Overall portfolio positioning is largely unchanged, with our defensive flagship stocks remaining a key component, in combination with various specific growth stocks. Activity during the month was driven mainly by idiosyncratic factors. We chose to exit positions in Merck and Nestle, with both having performed relatively well in a difficult market environment, but where we view the risk-reward as increasingly unfavourable in the context of rising valuations and expectations. A new position was initiated in Airbnb, which is a leading, scalable, asset-light growth business trading at an attractive valuation. We also invested in Freeport McMoran as we expect strong operational execution and rising copper prices to continue driving positive earnings revisions.

Elsewhere we trimmed a long-held position in American Tower to reflect persistent rate headwinds and took some profit in Mercedes and LVMH after a period of particularly strong performance. Keysight and Chubb were also trimmed to recognise some emerging risks to earnings. We continue our focus on bottom-up, fundamental research, and are preparing for a range of potential future paths with a strong bench of new ideas.

Performance Commentary - January 31, 2023

The market outlook remains volatile, and after a tumultuous 18 months, further significant change is likely in 2023. A central scenario is a period of weaker economic growth and declining inflation, which should drive further downgrades to earnings expectations, and at least a pause in central bank rate hikes. Financial markets are already beginning to discount this outcome; however market leadership remains in flux given uncertainties around the downside in both economic growth and corporate earnings, the persistence of wage inflation, and the impact of Chinese re-opening.

During January, global earnings forecasts dropped by – 1.5%. Noticeably, the US reporting season has been weaker than usual, with forward guidance from many companies also disappointing. Over the last three months, global earnings revisions have -1.8%, with most sectors seeing downgrades. Previous leaders Technology and Communications are now clear laggards, and Energy is seeing accelerating downgrades due to the lower oil price, although some defensive sectors like Utilities, Real Estate and Consumer Staples are holding up relatively better. A reset in the outlook for earnings is one outstanding factor necessary to fully resolve new market leadership.

The overall portfolio positioning is largely unchanged, with our defensive flagship stocks remaining a key component, in combination with various specific growth stocks. Portfolio activity was limited during the month. We continued to trim a few stocks which have done very well and are seeing rising valuations and expectations, such as UnitedHealth and LVMH. We also trimmed Danaher on its current orderbook headwinds from postCovid normalisation, as well as Apple after a quarterly report showing market expectations on key consumer products are still a bit too high. We added to our position in Starbucks on signals that the re-opening of China and return-to-office trend in the US is setting the company up for a positive 2023. We continue our focus on bottom-up, fundamental research, and are preparing for a range of potential future paths with a strong bench of new ideas.

Performance Commentary - December 31, 2022

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Alphinity Global Equity (HOW0164AU) Report & Performance