Perpetual Wholesale Split Growth Fund aims to achieve long-term capital growth through investment in a variable mix of Australian and international shares and other securities with lower risk than 100% exposure to either asset class; outperform a composite benchmark (before fees and taxes) comprising the S&P/ASX 300 Accumulation Index and the MSCI World ex Australia Accumulation Index (AUD) reflecting Fund’s allocation over 3-years. The Fund provide investors with 100% exposure to long-term growth opportunities across Australian and international shares.
Hess Corporation was a strong contributor to performance in the month on the back of rising oil prices. Further, Hess reported stronger than expected earnings for the quarter, driven by higher realised prices and greater production volumes. The stock has been a very strong performer over the last two years and although it has further upside, we did trim some of our position after these strong results as the stock had become a very large position in the portfolio. Oracle Corporation added to the strong relative returns in the month after underperforming in the prior month and handily outpaced its Information Technology peers.
Veering from its usual routine, the company announced mid-term financial targets (targets out more than three years), which were well received by the market and did result in a sell-side rating upgrade. With high single-digit to low double-digit revenue growth, operating leverage (from Cerner synergies + scaling investments in the cloud) pushing margins back to the mid-40s, and a business that is more macro resilient than most, we believe the Oracle’s risk/reward profile remains very attractive.
Our Chinese holdings Baidu, Inc. Class A and Alibaba Group Holding Ltd. detracted from performance, and not unexpectedly, given the challenges Chinese equities faced in the month. However, Baidu did come under additional pressure with the announcement of the U.S. rules about selling high-end chips to Chinese companies. Further, Alibaba has been challenged with concerns regarding its revenue growth that we believe are temporary. Despite the recent pressure, we continue to see a positive risk/reward profile for both these holdings. Seven & i Holdings Co., Ltd. detracted from performance in the month after posting in line results for the quarter. The move towards more cyclical stocks in the month was a headwind to performance and, with the strong performance in the prior months, the give back is not too surprising. Further, Seven & i raised its full year operating profit guidance which was not fully unexpected given the progress it is making in its North American operations, improvement in profits on gasoline sales and yen depreciation. We continue to see a compelling risk/reward profile and have maintained our holding accordingly.
What is Perpetual Wholesale Split Growth Fund Perpetual Wholesale Split Growth Fund is an Managed Funds investment product that is benchmarked against Multi-Asset Aggressive Investor Index and sits inside the Multi-Asset - 81-100% Diversified 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 Perpetual Wholesale Split Growth Fund has Assets Under Management of 39.95 M with a management fee of 1.16%, a performance fee of 0 and a buy/sell spread fee of 0.135%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the Perpetual Wholesale Split Growth Fund has returned -0.38% in the last month. The previous three years have returned 10.57% annualised and 10.18% each year since inception, which is when the Perpetual Wholesale Split Growth Fund 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 Perpetual Wholesale Split Growth Fund first started, the Sharpe ratio is NA with an annualised volatility of 10.18%. The maximum drawdown of the investment product in the last 12 months is -2.34% and -36.43% 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 Perpetual Wholesale Split Growth Fund has a 12-month excess return when compared to the Multi-Asset - 81-100% Diversified Index of -0.91% and 0.15% 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. Perpetual Wholesale Split Growth Fund has produced Alpha over the Multi-Asset - 81-100% Diversified 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 Multi-Asset - 81-100% Diversified Index category, you can click here for the Peer Investment Report.
What level of diversification will Perpetual Wholesale Split Growth Fund provide?
Perpetual Wholesale Split Growth Fund has a correlation coefficient of 0.95 and a beta of 0.88 when compared to the Multi-Asset - 81-100% Diversified 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 Perpetual Wholesale Split Growth Fund and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Perpetual Wholesale Split Growth Fund with the Multi-Asset Aggressive Investor Index?
For a full quantitative report on Perpetual Wholesale Split Growth Fund compared to the Multi-Asset Aggressive Investor Index, you can click here.
Can I sort and compare the Perpetual Wholesale Split Growth Fund to do my own analysis?
To sort and compare the Perpetual Wholesale Split Growth Fund financial metrics, please refer to the table above.
Has the Perpetual Wholesale Split Growth Fund 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 Perpetual Wholesale Split Growth Fund. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - September 30, 2022 Seven & I Holdings Co., Ltd. is a global retailer with market leadership in convenience stores. The shares outperformed during the period, driven by continued earnings strength, and management has now upgraded guidance multiple times this year. The company is benefitting from market tailwinds such as higher fuel margins, as well as currency benefits, in addition to company-specific initiatives such as strict cost discipline and achieving synergy milestones post the acquisition of Speedway.
We remain constructive on the shares, especially as management has renewed its focus on capital discipline and corporate governance reforms, which we view as additional upside drivers. Hess Corporation, a global independent oil and gas producer, boosted relative performance as its operations in Guyana continued to deliver. Recent discoveries have increased the resource base and production proceeds are starting to contribute to overall cash flow. Management reactivated its share repurchase in order to return this excess cash to shareholders, in addition to dividends.
The valuation remains attractive ahead of the continued ramp-up in Guyana asset growth potential as well as its other production areas, including the Bakken and Gulf of Mexico. Rheinmetall is well positioned to benefit from a material step-up in defence spending following the invasion of Ukraine. This transformation of the growth outlook drove very significant outperformance in the first half of the year with the stock nearly doubling. The stock then underperformed in the third quarter as it gave back some gains and momentum cooled, with some large orders expected for 2022 deferred to 2023. The strong growth outlook remains intact, however, and the valuation is attractive at less than 8x 2023 EV/EBIT. National Grid plc detracted from performance as Utility stocks failed to provide downside protection against the backdrop of higher interest rates.
Further, within the UK and across Europe, governments have talked about using pricing caps, which could impact profitability. We believe that the move down in National Grid is more macro driven versus any issue with its underlying fundamentals and, looking through this macro-overhang, we believe the company continues to offer a compelling risk/reward opportunity over the long term.
Performance Commentary - August 31, 2022 Air Products and Chemicals, Inc. reported EPS +13% and $.01 ahead of consensus while reiterating guidance. This is the second quarter of steady results without the Europe gas cost or project timing noise seen earlier, which is leading to renewed interest in the company given its defensive secular growth profile. Further, with the passing of the Inflation Reduction Act, the climate provisions within the bill are expected to be a net benefit to Air Products. Despite falling oil prices in August, Hess Corporation contributed positively to performance in the month as the company reported better-than-consensus results. Further, Hess continues to be a solid story in the Energy sector as the Guyana asset growth will drive cash flow and earnings higher. The company has one of the best compounding stories in the Energy sector, with at least +20% CAGR for the next 4-5 years.
Aptiv PLC was challenged in the month given the negative market sentiment on cyclical stocks. In August, the company noted it expects second-half margins of 10%-10.5%, which is below expectations of 12% but well ahead of the previously realized margins of 5%-7%. Further, given the strong bounce from its lows in July, a pullback from the strong performance in this environment was not unreasonable. We continue to see the stock trading at very attractive valuations with high upside potential. Rheinmetall AG detracted from performance in the month despite reporting numbers in line with expectations. The primary cause of the shortfall appears to be that the company is expected to push its defence order intake further out. Consequently, Rheinmetall now expects 2023 defence revenue to grow -21%, which is at the lower end of its prior guidance. The stock continues to trade at an attractive valuation, and we remain positive on the name.
Performance Commentary - July 31, 2022 J.B. Hunt Transport Services, Inc. contributed positively to relative returns despite what appears to be a tougher economic environment. Driven by strong pricing in intermodal, the company reported strong results in the month, handily beating consensus earnings expectations. Company management continues to execute well on its long-term plan. Vertiv Holdings Co. Class A was a positive contributor in the month as it reported operating income of positive $13m, well ahead of guidance for a loss of $20m and well ahead of consensus. Most of the beat was driven by better price/cost than previously expected, by more aggressive pricing in the distributor channel (where lead times are shorter), and lower material inflation than planned. With the stock previously challenged by mispricing due to higher inflation, we believe we are at an inflection point whereby the company is getting better control of its pricing, which should benefit margins and earnings going forward. In a reversal from last month’s strong performance, Rheinmetall AG and BAE Systems plc detracted from performance. We view this as a pause due to the very strong performance over the last several months, as BAE reported strong results in the month with record order intake, better margin expansion, and an announced buyback. Rheinmetall published a brief guidance update, noting organic sales growth at the lower end of its previous guidance and expected operating margins >11%. There may be some weakness in its automotive division, which would not be surprising in this market environment, but the defence business remains strong. Rheinmetall rallied post guidance, potentially signalling investor relief. We continue to be constructive on both holdings. Allstate Corporation detracted from relative returns in the month, posting negative underwriting results for the quarter. Cost inflation in automobiles is challenging for Allstate, as higher costs to repair vehicles are outpacing the company’s ability to price policies higher in the near-term. Allstate began pushing prices higher at the end of last year, and we believe positive pricing will begin to accrue for Allstate in the next 12 months. Despite the pullback in performance, we remain positive on the stock.
Performance Commentary - August 31, 2021 KunLun Energy Co. Ltd. reported better-than-expected first half 2021 earnings in the month, which contributed to the strong relative performance. The results demonstrated the strong growth in the remaining business. The next leg up in the stock price will be from executing growth and improved profitability in the natural gas sales business that can reduce the stock’s valuation discount to peers. We continue to see positive indicators for further re-rating but are monitoring management actions to see continued progress towards their growth initiatives. Communication Services company Vodacom Group Limited continued to rally in August after posting a strong revenue update in late July. Additionally, Vodacom’s subsidiary in Kenya, Safaricom, continued to rally on optimism surrounding its planned entry into the Ethiopian market. The positive sentiment on Safaricom helped lift Vodacom’s share price as well.
The price of Coca-Cola Europacific Partners plc was down ~7% (JPY) in the month, with the market modestly up. There was nothing meaningful at a company level that would lead us to believe that this relative underperformance alters our investment thesis. Given the increase in COVID cases globally, we suspect market concerns over further re-openings and public gatherings has likely impacted the stock over the short-term. We continue to see a positive risk/reward profile
Performance Commentary - July 31, 2021 Oracle Corporation performed strongly in the month of July after reporting very strong results and a solid outlook in the month of June. Investors appear to be gaining confidence in the revenue acceleration driven by strength in the cloud business. In addition, the share repurchase program, which totalled $8b last quarter, was ahead of consensus estimates. Further, free cash flow continued to be strong and was also $1.4b ahead of consensus.
BAE Systems plc is a recent addition to the portfolio and was a top contributor in the month. Sentiment toward European defence has been weak recently, and BAE was trading close to a multi-year low valuation relative to the market. A private equity bid for listed U.K. defence peer, Ultra Electronics, in July at a 63% premium highlighted the undemanding valuation of the sector and helped improve sentiment. BAE also reported strong 1H21 results at the end of July, with profits and cash flow coming in better than expected. Further, company management announced an expected share buyback; having this confirmed was a net positive. Seven & I Holdings Co., Ltd. underperformed in the month of July after reporting earnings below consensus expectations. The miss was primarily attributable to non-core segments which are COVID sensitive – superstores, department stores, restaurants – and have been impacted by slower reopening.
We believe that as Japan improves their vaccination rollout and we see further re-openings in Japan and the U.S., we should see improvement in Seven & I’s share price. Hess Corporation underperformed in the month, primarily given concerns over economic growth and the impact on fuel demand/prices. The company reported results at the end of July, with earnings per share beating consensus estimates for the quarter.
Performance Commentary - February 28, 2021 SeaWorld Entertainment, Inc., a theme park operator, was up nearly 80% (JPY) in February on the back of positive fundamental improvements in the business. The company’s cost-cutting measures during the pandemic provide for strong profit growth going forward. Additionally, as of February, season pass sales for 2021 are only down 6% year-over-year from February 2020, highlighting that 2021 may return to normal sales levels with reduced costs. AMERCO, a moving and storage business, reported a blowout quarter in February.
Revenue was up 28% (10% ahead of consensus) and EBITDAR was up 78%. Earnings per share were ahead of consensus by 32%. Further, moving and storage revenues were up strongly in the quarter. Exelon Corp. is a utility services company. Despite posting positive results in February, Utilities stocks lagged the broader market in the month given the risk-on environment. Further, with record-cold weather in the south, including Texas, concerns around cost increases to deal with the widespread power outages in Texas, pressured the stock. Altice USA, Inc.
Class A is a cable/broadband operator. The company posted positive results in February with in-line guidance. There was some weakness reported within broadband revenue and, after a strong performance coming into February, the stock price failed to keep pace with the broader market in the month.
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