Monthly Performance Report: December 2022
In December, the Fund fell 4.26% (after fees). This compares to a decrease of 3.21% for the S&P/ASX200 and a fall of 3.73% for the Small Ords. The relative performance of the portfolio this month was hampered by a lack of exposure to the gold and REIT sectors, which rose strongly.
There was no bad news announced by any of our larger holdings, but a few of them fell by double digit amounts regardless, in the weak market. On the other hand we did benefit from our shorts in Lithium producers.
2022 was a very tough year for investors, with central banks rapidly increasing interest rates in response to their concerns over inflation. Near the start of the year we wrote that higher growth stocks, small caps and low liquidity stocks tend to underperform with such conditions. This proved to be truer than we hoped, as reflected in the one year total return of the Small Ordinaries being negative 18.4%.
We continued to see bad news regarding the consumer in December, which has led us to pre-emptively trim by a further third our holdings in retailers. It’s not that we think our companies are doing poorly, they are outstanding businesses, but the combination of reasonably high valuations and emergent earnings headwinds indicate attractive entry points remain further on the horizon.
Right now the market headwind for the retail sector is very strong. Indeed during the year we managed to make investors’ money at times by shorting retail stocks when we could find businesses that also had their own specific problems.
Recently we have also profitably shorted Lithium producers. See below for more details on this.
The selling from trimming our holdings and adding shorts has continued to increase the proportion of net cash held in the portfolio which now stands at 37%, which is towards the top of our usual range. It is also indicative that compelling long investments, at attractive valuations, are currently harder to find than usual.
This reduces our exposure to further falls in the market and leaves us well positioned to take advantage of the inevitable re-emergence of mispriced opportunities.
The boom in Lithium prices has given us the opportunity for what we expect will be a relatively briefly held short in Lithium producers.
Over the course of 2022 the spot price of Lithium surged well ahead of any sort of reasonable medium to long term sustainable level, given how quickly projects can get up. This can be seen from the broker forecasts, where they expect dramatic price falls over the next few years.
The rising Lithium price has also been dragging up the share prices of Lithium producers. We have been diligently waiting for the first signs of weakness in the Lithium price. It was our expectation that a falling Lithium price would stall the desire of investors to buy Lithium producer shares, which would result in very significant share price falls.
We took a cautious approach, which has paid off. Putting on a small short when recently the price of Lithium at an auction fell, and then building on the short as the price continued to fall in subsequent days and weeks. Our shorting position is still not large, and it was not all put on at the peak in their stock prices, but at the end of December we are up over 10% on average on these short positions. We will look to close these shorts out as the price of Lithium stabilises.
Return Summary Since Inception1(after all fees)
|Since Inception (p.a.)||9.96%|
1Inception date of Fund is 2 July 2012.
The Monash Absolute Investment Fund ARSN 606 855 501 (Fund) seeks to implement the investment strategy by investing in a diversified portfolio of predominantly Australian equities (long and short), with overseas assets expected to average no more than 5% over time.
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
|Standard Deviation (p.a.)||16%|
|Avg Gross Exposure||91%|
|Avg Net Exposure||79%|
Monthly Portfolio Metrics
|Outlook Stocks (Long)||13 Positions: 59%|
|Outlook Stocks (Short)||1 Positions: -2%|
|Event, Pair and Group (Long)||2 Positions: 18%|
|Event, Pair and Group (Short)||4 Positions: -11%|
Key Fund Information
|Management Fee||1.2813% p.a.|
|Performance Fee||20.5% above the RBA Cash Rate + 5% with High Water Mark|
|Distributions||Quarterly , targeting 1.50% p.a. of NAV each quarter|
|Morningstar Category||Alternatives Strategies|
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Important Information This document is prepared and authorised for release by Monash Investors Pty Limited ABN 67 153 180 333, AFSL 417 201 (“Monash Investors”) as authorised representatives of Sanlam Private Wealth Pty Ltd ABN 18 136 960 775, AFSL 337 927 (“Sanlam”) for the provision of general financial product advice in relation to the Monash Absolute Active Trust (Hedge Fund) ARSN 642 280 331 and Monash Absolute Investment Fund ARSN 606 855 501 (“Funds”). Monash Investors is the investment manager of the Funds. 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 Funds. A Product Disclosure Statement (“PDS”) together with a Target Market Determination (“TMD”), both issued by Perpetual, is available for the Funds at www.monashinvestors.com. You should obtain and consider the PDS and TMD for the Funds before deciding whether to acquire, or continue to hold, an interest in the Funds. The Funds are appropriate for investors with “High” and Very High”” risk and return profiles. A suitable investor for the Funds is prepared to accept high risk in the pursuit of high growth with a medium to long investment timeframe. Investor should refer to the TMD for further information. The information provided is general information only and is not intended to provide you with financial advice, it does not consider your investment objectives, financial situation or particular needs. You should consider your own investment objectives, financial situation and particular needs before acting upon any information provided and consider seeking advice from a financial advisor if necessary. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. No company in Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital. You should not base an investment decision simply on past performance. Past performance is not a reliable indicator of future performance. Returns are not guaranteed and so the value of an investment may rise or fall. Total returns shown have been calculated using using NAV 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 Funds. Reference to Target Distributions, is a target return only. There is no guarantee the Funds will meet its investment objective. The payment of a quarterly distribution is a goal of the Funds 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 Funds reserves the discretion to amend its distribution policy.
The rating issued 09/21 APIR MON0001AU is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec). Ratings are general advice only, and have been prepared without taking account of your objectives, financial situation or needs. Consider your personal circumstances, read the product disclosure statement and seek independent financial advice before investing. The rating is not a recommendation to purchase, sell or hold any product. Past performance information is not indicative of future performance. Ratings are subject to change without notice and Lonsec assumes no obligation to update. Lonsec uses objective criteria and receives a fee from the Fund Manager. Visit lonsec.com.au for ratings information and to access the full report. © 2021 Lonsec. All rights reserved.
The rating contained in this document is issued by SQM Research Pty Ltd ABN 93 122 592 036 AFSL 421913. SQM Research is an investment research firm that undertakes research on investment products exclusively for its wholesale clients, utilising a proprietary review and star rating system. The SQM Research star rating system is of a general nature and does not take into account the particular circumstances or needs of any specific person. The rating may be subject to change at any time. Only licensed financial advisers may use the SQM Research star rating system in determining whether an investment is appropriate to a person’s particular circumstances or needs. You should read the product disclosure statement and consult a licensed financial adviser before making an investment decision in relation to this investment product. SQM Research receives a fee from the Fund Manager for the research and rating of the managed investment scheme.
The Zenith Investment Partners (ABN 27 103 132 672, AFS Licence 226872) (“Zenith”) rating (assigned MON0001AU June 2021) referred to in this document is limited to “General Advice” (s766B Corporations Act 2001) for Wholesale clients only. This advice has been prepared without taking into account the objectives, financial situation or needs of any individual and is subject to change at any time without prior notice. It is not a specific recommendation to purchase, sell or hold the relevant product(s). Investors should seek independent financial advice before making an investment decision and should consider the appropriateness of this advice in light of their own objectives, financial situation and needs. Investors should obtain a copy of and consider the PDS or offer document before making any decision and refer to the full Zenith Product Assessment available on the Zenith website. Past performance is not an indication of future performance. Zenith usually charges the product issuer, fund manager or related party to conduct Product Assessments. Full details regarding Zenith’s methodology, ratings definitions and regulatory compliance are available on our Product Assessments and at http://www.zenithpartners.com.au/RegulatoryGuidelines