ASX:MAAT Monthly Performance Report

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Monthly Performance Report: September 2021

During the September quarter, the Fund rose 1.81% (after fees).  This compares to an increase of 1.71% for the S&P/ASX200 and 3.44% for the Small Ords. It was quite a volatile quarter with the portfolio down in July and September, despite being up overall.

As is typical for the portfolio, there were some significant changes made over the quarter with three of the Outlook2 holdings exited, and seven new holdings established.

The portfolio no longer holds Uniti Group Ltd (ASX: UWL) which was exited for a 175% gain over a year and a half. Towards the end of the quarter the portfolio increased short positions having identified stocks expected to have earnings disappointments. The portfolio remains relatively concentrated and has little exposure to Resources or Financials.

For the September quarter, the distribution per unit was $1.6c per unit and will be paid on 22 October 2021.

The highlight of the quarter was the results season in August, where 5 of the top 10 positions earnings announcements were positive for the portfolio, and only one against.  As is typical for the portfolio, there were some significant changes made over the quarter with three of the Outlook2 holdings exited, and seven new holdings established.

Major Contributors

The best contributor was Lovisa Holdings Ltd (ASX: LOV) which rose 18% on the day of its result[1] and increased in price by 32% over the quarter.  Lovisa is a vertically integrated jewellery retailer with a strong store roll out program.  It is a beneficiary of economies re-opening after COVID lockdowns, and we are certainly seeing that in its like-for-like sales numbers.

One of the only exposures to resources in the portfolio is Australian Strategic Materials (Holdings) Limited (ASX: ASM) which was a consistent performer, rising 31% over the quarter. ASM is a refiner of rare earths for metals which are the basis for important components in much modern technology. Importantly for Western economies, ASM will operate outside of Chinese rare earths supply chains which is of strategic value in the current geopolitical climate.

The next best contributor was the short position in AGL Energy Ltd (ASX: AGL) the energy generator and utility retailer. We had established the short following the announcement by AGL that it would separate its business, to exclude the coal based power stations. Over the course of the quarter AGL fell 36%.  We have since covered this position.

Major Detractors

The biggest detractor was Electro Optic Systems (ASX: EOS) a business that uses lasers for tracking and communication. EOS fell 15% on the day of its result and 21% for the quarter[2]. We expect multiple positive announcements from EOS over the next 12 months regarding cash receipts, additional contract wins and progress on external funding of the SpaceLink project.

People Infrastructure Ltd (ASX: PPE) is a labour-hire company whose operations have been somewhat effected by COVID. While its result in August beat expectations it has been overshadowed by the impact of the Delta variant and was down 16% for the quarter. It sits on a modest valuation profile but has good underlying organic growth (ex COVID) and has also been achieving growth by acquisition. We expect a strong recovery in PPE as the Australian economy emerges from lockdowns given the reported vaccination rates.

[1] https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02411832-3A573806?access_token=83ff96335c2d45a094df02a206a39ff4

[2] https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02414414-2A1319534?access_token=83ff96335c2d45a094df02a206a39ff4

Monthly Portfolio Metrics

Outlook Stocks (Long)17 Positions: 76%
Outlook Stocks (Short)1 Positions: -2%
Event, Pair and Group (Long)3 Positions: 9%
Event, Pair and Group (Short)2 Positions: -5%
Cash22%
Gross Exposure91%
Net Exposure78%

Return Summary Since Inception1(after all fees)

Since Inception (p.a.)6.79%
1 Month-3.19%
3 Months1.81%
6 Months
FYTD1.81%
1 Year
3 Years
5 Years
Cumulative6.79%

1Inception date of Fund is 28 May 2021.

Fund Strategy

The Monash Absolute Active Trust (Hedge Fund) ASX:MAAT seeks to implement the investment strategy by investing in Australian equities (long and short).

The investment strategy is Benchmark Unaware and there is no predetermined asset allocation; rather, the Fund only invests when suitable opportunities are identified. As such, asset exposures may vary significantly over time and without notice.

The Fund seeks to only invest in compelling opportunities. To identify these investment ideas, Monash Investors primarily employs fundamental, bottom-up company research and the judgement of its experienced portfolio managers.

Portfolio Analytics Since Inception

Sharpe Ratio0.67
Sortino Ratio1.21
Standard Deviation (p.a.)16%
Positive Months63%
Maximum Drawdown-29%
Avg Gross Exposure90%
Avg Net Exposure79%
Avg Beta0.65
Avg VAR1.2%

Invest with us

We would welcome you as a co-investor in the Fund.

This information is issued by Monash Investors Pty Limited ABN 67 153 180 333, AFSL 417 201 (“Monash Investors”) as authorised representatives of Winston Capital Partners Pty Ltd ABN 29 159 382 813, AFSL 469 556 (“Winston Capital”) for the provision of general financial product advice in relation to the Monash Absolute Active Trust (Hedge Fund) ASX:MAAT ARSN 642 280 331 (“Fund”). Monash Investors is the investment manager of the Fund. The Trust Company (RE Services) Limited ABN 45 003 278 831, AFSL 235 150 (“Perpetual”) is responsible entity of, and issuer of units in, the Fund. The inception date of the Fund is 28 May 2021.

The information provided in this document is general information only and does not constitute investment or other advice. The content of this document does not constitute an offer or solicitation to subscribe for units in the Fund or an offer to buy or sell any financial product. Accordingly, reliance should not be placed on this document as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation. Monash Investors, Winston Capital and Perpetual do not accept liability for any inaccurate, incomplete or omitted information of any kind or any losses caused by using this information. Any investment decision in connection with the Fund should only be made based on the information contained in the disclosure document for the Fund. A product disclosure statement (PDS) issued by Perpetual dated 14 April 2021 is available for the Fund. You should obtain and consider the PDS for the Fund before deciding whether to acquire, or continue to hold, an interest in the Fund. The Target Market Determination (TMD) for the fund is available here.

Total returns shown for the Fund have been calculated using exit prices after taking into account all ongoing fees and assuming reinvestment of distribution. No allowance has been made for taxation Past performance is not a reliable indicator of future performance. Comparisons are provided for information purposes only and are not a direct comparison against benchmarks or indices that have the same characteristics as the Fund. Reference to Target Distributions, is a target return only. There is no guarantee that the Fund will meet its investment objective. The payment of a quarterly distribution is a goal of the Fund only and neither Monash Investors or Perpetual provide any representations or warranty (whether express or implied) in relation to the payment of any quarterly cash income. The Trust reserves the discretion to amend its distribution policy

Past performance is not a reliable indicator of future performance. Comparisons are provided for information purposes only and are not a direct comparison against benchmarks or indices that have the same characteristics as the Fund.

Monash Investors, Winston Capital and Perpetual do not guarantee repayment of capital or any particular rate of return from the Fund and do not give any representation or warranty as to the reliability, completeness or accuracy of the information contained in this document. All opinions and estimates included in this document constitute judgments of Monash Investors as at the date of this document are subject to change without notice. Perpetual is not responsible for this document.

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