Atrium Evolution Series — Diversified Fund AEF 9 (COL0031AU) Report & Performance

The Fund concluded the financial year on a strong note, achieving solid returns in the last quarter. The primary driver behind this performance was global equities, complemented by notable contributions from liquid alternatives and private markets.

Regarding growth allocations, our decision to overweight global equities compared to domestic equities continued to yield positive results. The standout performer during the quarter was the Hyperion Global Growth Companies Fund, which excelled due to its positioning in mega-cap US technology and consumer discretionary companies like Tesla and Amazon. These holdings played a crucial role in driving market performance during this period. However, it’s worth mentioning that in a market driven by a limited set of stocks, some of our global equity managers, such as Antipodes Global Long Only and Northcape Global Equities, lagged the broader index. On the contrary, our global small and mid-cap manager, Fairlight, outperformed its benchmark as underlying companies delivered solid revenue and earnings even in a slowing economy.

Additionally, our Global Equities mandate managed by Magellan delivered a strong performance in line with global markets throughout the quarter.

On the other hand, our listed global infrastructure exposure continued to lag due to rising real interest rates, which acted as a hindrance for long-duration assets.

In terms of domestic equity exposure, the performance was mixed during the quarter. The Atrium Equity Opportunities Fund fell behind its benchmark primarily because it had an overweight allocation to defensive sectors like Consumer Staples, Infrastructure, and Healthcare. Treasury Wine Estates and CSL were the key detractors during this period, with CSL announcing a slight downgrade to earnings. Pilbara Minerals added to relative returns and two recent additions, Carsales.com and Worley, were also positive contributors. The SGH ICE Fund delivered positive performance as smaller companies outperformed their larger equivalent after a period of underperformance.

Our liquid alternatives exposure made a positive contribution to our performance throughout the quarter and continues to fulfill its role as a portfolio diversifier. Notably, the Crown Diversified Macro Fund benefited from strong performances driven by its underlying trend-following strategies. Similarly, the P/E Global FX Alpha Fund performed well due to its long US dollar and short Yen positioning. On the flip side, our recently added Commodity Long/Short strategy faced challenges in an environment where macro and micro influences on prices conflicted.

The allocation to private markets within the portfolio has continued to meet our expectations with a number of positive revaluations over the calendar year. Given the backdrop of more difficult trading conditions in the sector (particularly commercial real estate), we remain diversified across sectors and geographies which in our opinion will position us favourably as asset values, particularly in lower-grade commercial properties in major East Coast capital markets, face increasing pressure.

As global markets continue to navigate an environment of rising interest rates and sticky inflation, the portfolios continue to be positioned well in this environment. Pleasingly, our liquid alternatives strategy continued to play the diversifier role while also delivering strong risk adjusted returns, with the majority of our managers positive for the month. The liquid alternatives allocation was the major positive contributor to performance over the month due to P/E Global FX Alpha benefiting from a long US dollar position, followed by trend and macro strategies performing well.

Offsetting the strong returns in Alternatives, Australian equities underperformed along with listed infrastructure. Global share managers allocations were marginally positive, outperforming the global share indices. Within our global equity sleeve, Hyperion Global Growth Companies was the standout yet again given the recent tech rally. Our exposure to Global Small and Mid-Cap equity manager Fairlight also delivered a positive return during the month, as quality equities overall continue to perform well. The Atrium Equity Opportunities Fund was a detractor from performance, with Treasury Wine Estates suffering from an earnings downgrade.

Global markets continued to climb despite global central bank rate hikes, regional bank failures in the US and looming recession worries. All of the Fund’s underlying sectors contributed positively to performance for the month, with global equities the standout. The majority of our equity managers outperformed their respective benchmarks over the month. Their focus on quality companies has been rewarded by markets in the last few months as investors sought safer havens with a global slowdown beckoning. Standout performers over the month included our global equity mandate managed by Magellan and the Northcape Global Equities Fund. Within liquid alternatives, it was pleasing to see the strong recovery amongst our trend following strategies as heightened volatility and dispersion between markets and sectors continued to enhance their opportunity set. The key driver of performance within the sleeve was the Crown Diversified Trend Access Fund, with positive drivers from positions in sugar and Yen.

The first quarter of 2023 has proven to be quite tumultuous, with bond markets in particular showing levels of volatility unseen in decades. While global equity markets finished the quarter higher, the risk of recession is rising as higher interest rates slow economic activity and corporate earnings.

The Fund was positive for the quarter on the back of the allocation to global shares, global credit, private markets and Australian shares. All asset classes contributed positively to performance over the quarter, with the exception of liquid alternatives which gave back some of the strong returns generated in 2022. Within our Growth allocation, global equities were a strong positive driver of returns with key standouts including Hyperion Global Growth Companies which delivered a stellar 30% return on the back of holdings in Tesla, Spotify, ServiceNow and Airbnb. The was complemented across our other global equity managers, all performing strongly with the pivot towards quality companies rewarded.

The Fairlight Global Small and Mid Cap Fund outperformed its respective benchmark by almost 5% in March alone. Offsetting this was our allocation to Australian equities which modestly underperformed the benchmark over the quarter. Key positive contributors included Woolworths, toll road operator Transurban, and Gold Miner Northern Star, while detractors included Domino’s which reported a weaker than forecast result. Within our Diversifiers allocation, the unprecedented volatility notably in the bond market caused many of our trend following strategies to rapidly adjust positions. Many of these strategies were positioned for a further bond sell-off, just as the regional banking crisis emerged in the US. This highlights one of the benefits of these strategies which is the ability to move to cash in an uncertain environment. On the other side of the ledger, our discretionary long short manager Zebedee Capital Partners performed well, helped by a welltimed European financials exposure, while our currency strategy P/E Global FX Alpha Fund and risk premia strategy Two Sigma Alternative Risk Premia also delivered positive returns over a very volatile quarter. Our private markets exposure continues to perform well and deliver strong risk adjusted returns. Our investment in refurbishing 388 Hay Street in the upmarket Perth suburb of Subiaco, has delivered positive results, with a large majority of the site now leased at substantially improved terms from an income and leasing profile perspective. This has delivered an uplift in asset valuation and will see capital returned to the Fund. The investment team have continued to focus on developing the pipeline of investments which we expect to crystalise within the next two quarters. These include opportunistic value add realestate projects, infrastructure assets and unlisted debt exposures.

The optimism of January gave way to realism in February, as markets digested news that inflation was “stickier” than first thought and that global central banks would need to lift interest rates higher than anticipated for a much longer period to rein in price growth. Whilst domestic equity and bond markets were lower for the month, the Fund was able to protect capital, highlighting the importance of genuine diversification. The contributors to performance included liquid alternatives and global equities, with the majority of our global equity managers delivering a positive return over the month. Positive contributors included P/E Global FX Alpha Fund, which benefitted from the sharp rise in the US dollar, and the Hyperion Global Growth Companies Fund which performed well on the back of a continued strong rise in Tesla. The main detractor to performance included the Atrium Equity Opportunities Fund, which was negatively impacted by both BHP Group and Domino’s exposure.

The Fund was positive in January as markets showed a significant bounce after a torrid 2022. The key driver of performance was equities, which performed exceptionally well as the case for an economic “soft landing” was revisited with inflation looking to have moderated globally. Investments within rates and credit as well as private markets also contributed to positively to performance, while our liquid alternatives exposure was the only detractor. Amongst our equity exposures, the Atrium Equity Opportunities Fund performed broadly in-line with the market, while the Hyperion Global Growth Companies Fund delivered more than 10% above benchmark for the month after a very strong rebound in both Tesla and Amazon.

Our allocation to global equities significantly outperformed the index, with the Antipodes Global Fund – Long continuing to perform exceptionally well. Within our diversifiers, a number of our underlying exposures gave back some of last year’s strong performance as markets aggressively rebounded. These managers had largely been positioned for a weaker macro environment which worked against them in January. Key detractors included the Crown Diversified Macro Segregated Portfolio and P/E Global FX Alpha Fund.