NEWS
25 Jun 2025 - The return you see, the risk you don't
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The return you see, the risk you don't Canopy Investors June 2025 It's not whether you're right or wrong, but how much money you make when you're right and how much you lose when you're wrong.George Soros (quoted by Stan Druckenmiller), The New Market Wizards: Conversations with America's Top Traders, 1994
Investing is the pursuit of a return in the face of an uncertain future. While every opportunity involves risk, the concept itself is often not well understood. What is, and isn't, risk?Historically, risk has often been proxied by share price volatility, likely because volatility is easily measured and readily observable. However, volatility is a statistical concept, measured on a backward-looking basis and often over a short time frame, whereas risk is fundamental and forward-looking. Volatile stocks are not necessarily risky if they can be expected to significantly appreciate in value over time. As Morgan Housel has previously noted, "Volatility is the price of admission. The prize inside [is] superior long-term returns. You have to pay the price to get the returns." Risk is also sometimes conflated with uncertainty. While related, they are not the same. All investments we make involve some degree of uncertainty--future product launches, management execution, competitive dynamics. But uncertainty is not risky if it is adequately reflected in the share price. Even less helpful is the view that risk equals deviation from a benchmark. While tracking error may increase an investment manager's career risk, it has little to do with investment risk. Chasing momentum stocks can seem smart as prices rise -- particularly when benchmarks are similarly skewed -- but this can be dangerous. Avoiding the easy money rollercoaster may increase tracking error while actually lowering risk. At Canopy, we define risk as the likelihood of permanent capital loss. That risk is shaped by two factors: the price we pay for an investment, and the future performance of the underlying business. Alternative historiesA key implication of the above is that while investment returns are readily observable, the risk taken to achieve them is not. In Fooled by Randomness (2001), Taleb introduces the concept of 'alternative histories' - the idea that what actually happened (in this context, a realised return) is only one sample path among many that could have occurred. He argues that our tendency to focus on realised success leads us to underestimate luck and overestimate skill, and by extension, to ignore risk. Figure 1 illustrates the path of alternative histories to a realised return outcome.
This dynamic likely explains much of the well-documented lack of persistence in investment manager returns: in strongly rising markets, the highest returns are often achieved by those who take the most risk, which may unravel when conditions reverse. Gottesman and Morey (2021) support this, showing that funds with high upside capture ratios (outperformance during rising markets) also tend to have high downside capture ratios (underperformance in down-markets). Howard Marks summarises the concept well in his 2015 memo 'Risk Revisited Again': "The celebrated investor is one whose actions yielded good results. Was she lucky or good? How much risk did she take? Since it's risk-adjusted return that counts, can we tell whether her return was more than commensurate with the risks borne or less than commensurate? I'm confident that the answers lie in skilled, subjective judgments, not highly precise but largely irrelevant ratios of return to volatility."
Our approachWith that context, our risk management process is designed to minimise the risk of permanent capital loss, while maintaining our exposure to listed companies:
While we have access to factor and volatility-based risk models, as noted above, they tend to measure backward-looking price movements rather than the probability of permanent capital impairment, and they are consequently less relevant to our risk framework. |
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Funds operated by this manager: |
24 Jun 2025 - Why invest in infrastructure
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Why invest in infrastructure Magellan Asset Management May 2025 |
What is infrastructure?Investing in infrastructure is about investing in the companies that provide essential services to society and that generate predictable long-term earnings. These assets include transportation, energy and utilities, communications and social infrastructure businesses. Why invest in Global Listed Infrastructure?Investing in global listed infrastructure offers unique advantages for investors. With over 350 infrastructure and utility companies available on global stock markets, these investments have the potential to provide reliable cash generation, inflation protection, and defensiveness in declining markets.
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Funds operated by this manager: Magellan Global Fund (Open Class Units) ASX:MGOC , Magellan Infrastructure Fund , Magellan Global Opportunities Fund No.2 , Magellan Infrastructure Fund (Unhedged) , Magellan Global Fund (Hedged) , Magellan Core Infrastructure Fund , Magellan Global Opportunities Fund Active ETF (ASX:OPPT)
Important Information: Copyright 2025 All rights reserved. Units in the funds referred to in this podcast are issued by Magellan Asset Management Limited ABN 31 120 593 946, AFS Licence No. 304 301 ('Magellan'). This material has been delivered to you by Magellan and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation. This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision about whether to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to a Magellan financial product may be obtained by calling +61 2 9235 4888 or by visiting www.magellangroup.com.au. The opinions expressed in this material are as of the date of publication and are subject to change. The information and opinions contained in this material are not guaranteed as to accuracy or completeness. Past performance is not necessarily indicative of future results and no person guarantees the future performance of any financial product or service, the amount or timing of any return from it, that asset allocations will be met, that it will be able to implement its investment strategy or that its investment objectives will be achieved. This material may contain 'forward looking' statements and no guarantee is made that any forecasts or predictions made will materialise. No representation or warranty is made with respect to the accuracy or completeness of any of the information contained in this material. Magellan will not be responsible or liable for any losses arising from your use or reliance upon any part of the information contained in this material. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Magellan. Further important information regarding this podcast can be found on the Insights page on our website, www.magellangroup.com.au. |
23 Jun 2025 - Performance Report: TAMIM Fund: Global High Conviction Unit Class
[Current Manager Report if available]
20 Jun 2025 - Hedge Clippings | 20 June 2025
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Hedge Clippings | 20 June 2025
Webinar How to get the most from Fundmonitors.com News | Insights Market Commentary | Glenmore Asset Management Investment Perspectives: Thinking about bonds.....and the local school play | Quay Global Investors May 2025 Performance News Bennelong Concentrated Australian Equities Fund 4D Global Infrastructure Fund (Unhedged) Bennelong Twenty20 Australian Equities Fund |
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20 Jun 2025 - Performance Report: Argonaut Natural Resources Fund
[Current Manager Report if available]
20 Jun 2025 - China's big charge: EVs, oil and the renminbi
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China's big charge: EVs, oil and the renminb abrdn June 2025 Since 1945, the exchange of dollars and oil has been a bedrock of the world's financial system. Oil runs north through the Suez Canal and south via the Straits of Hormuz. Greenbacks flow in the opposite direction. Oil is the lifeblood of economies, and they can't operate without dollars. But the world is changing. China has achieved global leadership in manufacturing, but the renminbi (RNB) has failed to come close to the dollar by any measure. Yet, where its currency ambitions might have failed, China seems poised to take the lead in clean energy. In 2025, leading global battery maker Contemporary Amperex Technology (CATL) launched a car battery that charges in 10 minutes. This is far faster than traditional electric vehicle (EV) batteries. The technology that underpins this leap forward continues to spread, with energy storage systems increasingly supporting grids powered by renewable energy. In the next century, the global energy exchange could switch, with sodium and lithium ions flowing one way, and the RMB flowing the other. Batteries powering the futureChina dominates battery and energy storage systems, enabling its grid to manage a significant amount of renewable energy input, around 31% of total production. Next year, solar is forecast to overtake coal as China's leading energy source. In 2024, Asia commissioned 24.7-gigawatt (GW) capacity of BESS (battery energy storage systems), with China accounting for 95% of that storage. This compares North America's 14.2GW and Europe's 2.4GW (including the UK) [1]. Then there's China's vast fleet of EVs. China bought 11 million of the 17 million EVs sold last year, dwarfing sales in every other market. Chinese cars offer high quality at low cost, attracting consumers worldwide. Chinese EVs can be up to three times cheaper than US or European models. China has overtaken Japan and Germany as the world's leading car exporter (see Chart 1). Chinese EVs can be seen on the roads all over Asia, Latin America and increasingly in Europe.
Chart 1: China has become the world's largest car exporter
Stock to watch - CATLContemporary Amperex Technology Co (CATL) is the leading light of Chinese EVs and battery technology supremacy. Holding a commanding 38% market share across all battery types, the company innovates at a startling pace. CATL spearheads industry technological advancements across various dimensions. Before 2016, lithium iron phosphate (LFP) batteries dominated China's passenger EV market due to their lower barriers to entry and costs compared to nickel cobalt manganese (NCM) batteries. Most top battery producers focused on LFP technology, but CATL was quick to see the potential in high energy-density batteries. It invested significantly in NCM technology, while industry peers prioritised cost reduction. This bold approach has cemented CATL's position as the global leader in the sector. Earlier this year, China's BYD Auto unveiled the super-fast charging 10c battery, which takes just 10 minutes to charge for a 400-kilometer (km) range. In response, CATL unveiled the Gen 2 Shenxing battery, offering the same charge but within extended 520km range. Last year, we visited one of CATL's new Chinese factories. The engineering prowess was impressive with much of the process automated, and batteries seamlessly floating along the production line. CATL recently listed on the Hong Kong Exchange, with the shares rising by 16% on the first day and giving the group a market capitalisation of USD166bn. Despite playing a pivotal role in the global transformation in energy and transportation, CATL still offers value and an attractive yield. The stock trades at 15x price/earnings and is expected to grow by 20% this year. With strong fundamentals, we think it can compound at 15% annually, while paying out 50% of its profits and offering a 2.8% yield. The future of EV batteries has arrived [2]. |
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Funds operated by this manager: abrdn Sustainable Asian Opportunities Fund , abrdn Emerging Opportunities Fund , abrdn Sustainable International Equities Fund , abrdn Global Corporate Bond Fund (Class A) |
19 Jun 2025 - Performance Report: Canopy Global Small & Mid Cap Fund
[Current Manager Report if available]
19 Jun 2025 - Performance Report: Cyan C3G Fund
[Current Manager Report if available]
19 Jun 2025 - The positive feedback loop we're expecting to see in emerging market economies?
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The positive feedback loop we're expecting to see in emerging market economies Pendal June 2025 |
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Uncertainty remains high in financial markets among participants and policy makers. This uncertainty is driven by global trade policy and how it will affect growth, inflation and ultimately interest rate decisions (and market expectations of those decisions). The International Monetary Fund now believes today's tariff-driven environment is more challenging than the COVID era. "[Early in the pandemic] central banks everywhere were moving in the same direction in the sense of easing monetary policy very quickly," IMF deputy Gita Gopinath said last week. "But this time around the shock has differential effects." Looking at previous cycles in emerging markets - especially considering the impact of a weaker US dollar and incoming capital flows - Pendal's EM team believes emerging markets are mostly in an extended period of cutting policy interest rates. We believe this will be supportive of emerging economies and emerging equity markets. Emerging markets cutting ratesLast year we saw rate cuts in many advanced economies as the 2022 inflation surge eased. But this year global central banks have been more cautious, either in their statements or the speed or extent of rate cuts. Why? Because volatility in trade policy creates significant uncertainty about growth and inflation.
In the emerging world, however, most central banks have continued cutting rates. The 19 independent central banks in the MSCI Emerging Market Index members (Greece uses the Euro and the four Arabian Gulf nations have USD pegs) have delivered 24 policy rate cuts and only four hikes in the first five months of 2025. (Of those hikes, three were in Brazil where economic growth remains very strong, and the other was in Turkey after three big cuts.) A clear patternThere is a clear pattern here. GDP growth forecasts for 2025 and 2026 have been revised lower in emerging Asia (and sharply lower in developed markets) but have held largely steady in EMEA and Latin America. Many of the central banks on hold are in emerging Asia - China, Taiwan, Malaysia - despite this region's more-challenging growth outlook. We believe this is because those countries - with their export-based economic development models and big current account surpluses - have been less sensitive to the strong US dollar in recent years, and have been able to keep interest rates lower than the current account deficit countries. For example, Taiwan had a 2024 current account surplus of 14.1% of GDP. Its central bank has been on hold at 2% for more than a year despite CPI inflation in the first five months of 2025 averaging 2.2%. By comparison, South Africa ran a 2024 current account deficit of 0.7% of GDP. Its CPI inflation averaged 3.1% in the first four months of 2025 - but the central bank started the year with policy rates at 7.75% and has been able to cut rates twice so far this year. What it means for investorsIn terms of portfolio positioning, we expect global investor concerns about US trade and economic policy to continue driving capital flows into emerging markets. We think this will be supportive of currencies, allowing stronger growth, lower inflation and faster/further rate cuts. This, we believe, is the principal trigger of a positive feedback loop we've seen in emerging economies in previous up-cycles. We prefer domestic-demand-driven emerging markets, with historically weaker current account balances and the ability to cut rates from higher real levels. We remain constructive on the asset class, and overweight Mexico, Indonesia, South Africa and Brazil. |
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Funds operated by this manager: Pendal MicroCap Opportunities Fund , Pendal Global Select Fund - Class R , Pendal Sustainable Australian Fixed Interest Fund - Class R , Pendal Focus Australian Share Fund , Pendal Horizon Sustainable Australian Share Fund , Regnan Credit Impact Trust Fund , Pendal Sustainable Australian Share Fund , Pendal Sustainable Balanced Fund - Class R , Pendal Multi-Asset Target Return Fund |
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This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at December 8, 2021. PFSL is the responsible entity and issuer of units in the Pendal Multi-Asset Target Return Fund (Fund) ARSN: 623 987 968. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient's personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com |
18 Jun 2025 - Performance Report: Argonaut Global Gold Fund
[Current Manager Report if available]
