NEWS
6 Feb 2025 - Long-Term Investors See Value in the Renewables Space
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Long-Term Investors See Value in the Renewables Space Redwheel January 2025 |
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Over the past few quarters, investors in the renewables power generation sector have pushed down valuations, questioning growth and return opportunities following a confluence of headwinds. However, while the stock market remains sceptical, we have seen private equity firms, utilities and renewables companies themselves conclude that valuations are now too attractive to ignore. We believe that this highlights the attractive buying opportunities that can currently be found in the renewable power space. Multiple actors are exploiting depressed valuations The sector had experienced a few years of cheap capital fuelling unabated growth for clean power as the market grew confident in perpetually declining cost curves of power generation equipment that would support attractive returns. Then, fast-rising interest rates, equipment cost inflation and falling power prices raised questions about returns and reduced confidence in renewables companies' capacity to grow and the value of that growth. More recently, we have seen private equity firms making takeover offers, utilities buying out minority owners or investing in listed renewable companies as well as management buying back their own shares. In terms of M&A, we have seen a number of transactions over the past year - see Figure 1. Some companies have been taken private, others have wholly merged into other entities, while others have seen significant minority stakes acquired. The chart clearly illustrates the premia to market valuations that private transactors are willing to assign to renewables companies. The appendix below provides more information on each transaction. 
Why is this happening and why are we seeing an acceleration over the past year? One can claim it is purely opportunistic with bidders taking advantage of short-term stock market dislocation. Indeed, some weakness in the first quarter of 2024 certainly offered an opportunity to motivated buyers. However, much value had emerged at the end of the third and beginning of the fourth quarter of 2023 and we have seen management activate buybacks throughout the last two years. As such, we believe that these buyers have found additional reasons for investment:
Strong fundamental support As much as the exact timing of the pick-up in M&A activity might be tactical, we believe that the rationale is much more fundamental and we would expect this trend to continue unless public markets recognize the mispricing of shares, based on current fundamentals and relative to the market. It is worth noting that Infrastructure private equity funds have raised substantial amounts of money in the past year with Macquarie European Infrastructure Fund 7 reaching EUR 8bn in commitments, Brookfield raising $28bn and KKR $6.4bn for its Asian Infrastructure Fund. We believe that a significant portion of this dry powder will be directed to buying more listed renewables companies should current market valuations persist. In the meantime, while renewables developers and operators continue to grow, they have also been frustrated by the lack of market recognition, with many companies launching share buyback programs. What is striking is that this happened in Europe and China, despite the fact that companies face totally different regulatory, contracting, interest rates and power prices environments. In our view, it reflects how top-down sentiment has affected the sector, providing a great opportunity to identify value. In conclusion, we are getting strong signals from multiple actors in the market that the renewables power generation sector is very attractively valued. This, in addition to rising momentum for electricity demand, should drive an upward adjustment to valuations of listed shares over time. Appendix: Recent offers for renewables companies Regarding full acquisitions, Antin (Private Equity) made an offer for Opdenergy (Spain) and KKR (Private Equity) made an offer for Greenvolt (Portugal) and Encavis (Germany). Brookfield (Private Equity) purchased Neoen (France), Energy Capital Partners (Private Equity) bought Atlantica Sustainable (US), EQT (Private Equity) bought OX2 (Sweden), Masdar (UAE-State Owned) bought Terna Energy (Greece), Tokyu Fudosan (Private) bought Renewable Japan (Japan) and a consortium of private investors announced a plan to take ReNew Energy (India) private. Iberdrola (Spain) offered to buy out the minority owners in Avangrid (US) and Tokyo Gas (Japan) took a 15% stake in Renova (Japan). |
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Funds operated by this manager: Redwheel China Equity Fund, Redwheel Global Emerging Markets Fund |
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Key Information
*Representative Portfolio The Representative Portfolio is Ecofin Global Renewables Infrastructure UCITS Fund, a sub-fund of Gateway UCITS Fund Plc, which is an umbrella investment company with segregated liability between funds authorised by the Central Bank of Ireland as a UCITS pursuant to the UCITS Regulations. Please refer to the Representative Portfolio's Fund Documents including the Prospectus, KIID & KID for more information. |
5 Feb 2025 - Responsible AI use in corporates with Jessica Cairns
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Responsible AI use in corporates with Jessica Cairns Alphinity Investment Management January 2025 |
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Jessica Cairns joins the Greener Way Podcast with Rose Mary Petrass to discuss the RAI Framework. With the rapid adoption of artificial intelligence, companies are facing growing pressure to ensure their AI practices are ethical, transparent, and aligned with environmental, social, and governance (ESG) principles. |
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Funds operated by this manager: Alphinity Australian Share Fund, Alphinity Concentrated Australian Share Fund, Alphinity Global Equity Fund, Alphinity Global Sustainable Equity Fund, Alphinity Sustainable Share Fund This material has been prepared by Alphinity Investment Management ABN 12 140 833 709 AFSL 356 895 (Alphinity). It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Any projections are based on assumptions which we believe are reasonable but are subject to change and should not be relied upon. Past performance is not a reliable indicator of future performance. Neither any particular rate of return nor capital invested are guaranteed. |
4 Feb 2025 - Australian Secure Capital Fund - Market Update
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Australian Secure Capital Fund - Market Update Australian Secure Capital Fund January 2025 CoreLogic's Home Value Index (HVI) recorded a 0.1% decline in December, the first national drop in nearly two years. This slight downturn capped a robust growth period from February 2023 to October 2024, where property values showed remarkable resilience despite high interest rates, cost of living pressures, and reduced borrowing capacity. The national decline was mirrored in the quarterly figures, with values also falling 0.1%, signalling a shift in momentum. Five of the eight capitals recorded declines between July and December, although Adelaide and Perth continued to perform strongly. Adelaide overtook Perth as the best-performing market in the December quarter, with values rising 2.1% compared to Perth's 1.9% and Brisbane's 1.3%. In annual terms, Australian home values rose 4.9% in 2024, adding approximately $38,000 to the median home value. The mid-sized capitals led the charge, with Perth (+19.1%), Adelaide (+13.1%), and Brisbane (+11.2%) achieving double-digit growth. However, Melbourne, Hobart, and the ACT recorded declines over the year, with values falling -3.0%, -0.6%, and -0.4%, respectively. Looking ahead, as highlighted in our market update above, anticipated rate cuts in 2025 should help stabilise the market, while a weaker Australian dollar may attract international investment, particularly in property. Regional markets, which outperformed the capitals with a 6.0% annual growth, are expected to remain a bright spot, driven by strong performances in WA, SA, and QLD. Property Values as at 31st of December 2024 |
3 Feb 2025 - Performance Report: ASCF High Yield Fund
[Current Manager Report if available]
3 Feb 2025 - Trump's TikTok Intervention
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Trump's TikTok Intervention Magellan Asset Management January 2025 |
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TikTok, one of the largest social media platform in the US along with Meta's Facebook and Instagram, has faced ongoing uncertainty regarding its existence in the US due to national security concerns under Chinese ownership. President Trump intervened in the Supreme Court's decision to ban TikTok in the US. Investment Director, Elisa Di Marco chats with Investment Analyst, Claire Britton reflecting on the implications of this intervention, the potential sale of TikTok, and its impact on the social media landscape, particularly for Meta. They discuss how Meta stands to benefit from the increased likelihood of a sale and the potential shifts potential shifts in user engagement and market dynamics.
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Funds operated by this manager: Magellan Global Fund (Hedged), Magellan Core Infrastructure Fund, Magellan Global Fund (Open Class Units) ASX:MGOC, Magellan High Conviction Fund, Magellan Infrastructure Fund, Magellan Infrastructure Fund (Unhedged) Important Information: Important Information: This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 ('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. 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'. Actual events or results or the actual performance of a Magellan financial product or service may differ materially from those reflected or contemplated in such forward-looking statements. This material may include data, research and other information from third party sources. Magellan makes no guarantee that such information is accurate, complete or timely and does not provide any warranties regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material. Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Magellan. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. 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. Any third party trademarks contained herein are the property of their respective owners and Magellan claims no ownership in, nor any affiliation with, such trademarks. Any third party trademarks that appear in this material are used for information purposes and only to identify the company names or brands of their respective owners. No affiliation, sponsorship or endorsement should be inferred from the use of these trademarks. 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. |
31 Jan 2025 - Hedge Clippings | 31 January 2025
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Hedge Clippings | 31 January 2025 This week's December quarter CPI number put a smile on the face of Jim Chalmers as he hit the airwaves to spruik his track record of dropping inflation, while keeping the economy afloat (just) and maintaining strong employment. Of course he was careful to mention that he wasn't trying to influence the independence of the RBA, although that's exactly what he was trying to do, as well as convince voters that he was a safe pair of hands for the next 3 years. To give him his due, Chalmers is a much more convincing advocate of the government's record than the Prime Minister, even if he is only responsible for Treasury and the economy. Albo continues to huff, puff and fluff, and if things don't go his way at the upcoming election, he might be retiring to his new $4 million beachside pad on the NSW central coast sooner than planned. You never know, that could have been part of his "Plan B" when buying it. Back to the December annual inflation figures: The figure of 2.4% annually certainly puts it well within the RBA's central band of 2-3%, even though their preferred measure of inflation, trimmed mean, still sat outside that at 3.2%, albeit down from 3.6% in September. Looking through the RBA's board minutes from their December meeting, their considerations for monetary policy would certainly seem to give them room to move on the 18th of February, with the only caveat that the government electricity rebates, which dropped electricity prices by 9.9% in the December quarter, and 25.2% over the past 12 months, are temporary. Be that as it may, the expectations are now well entrenched for a rate cut prior to the election - even if that's just the message Albo and his Treasurer, are desperate to convey. 2024 Fund Performance Tables: With over 900 managed funds in the fundmonitors.com database, across multiple asset classes, strategies, and peer groups, producing the list of "Top Ten" is always fraught with danger. Assuming funds' performance or returns are the preferred method, then allocation to asset class or peer group is essential to provide an "apples with apples" comparison. The next issue lies in the time period and track record of the particular fund universe. FundMonitors is as guilty as anyone for providing short term data - either by the month, YTD or over the past year - in spite of clear indications that managed funds should be considered for investing over at least 5 to 7 years. In spite of this at the start of each year, we publish the "Top Ten" list for each category, over the past 12 months. At the same time every fund, encouraged or as required by ASIC, will issue the warning that past performance is no guarantee of future performance. In spite of this, there isn't an analyst, advisor or investor, who doesn't (or shouldn't) consider each fund's track record before investing. The tables below, and our analysis, clearly show this when it comes to analysis of each fund's track record, the most recent 12 months performance is not the best predictor of longer term performance - say over 5 or 7 years: Taking Australian equity funds as an example, the top ten funds over one year performed exceptionally well against the ASX200's cumulative return of 11.44%. Table 1: Top 10 Australian Equity Funds over 1 Year, shown by RETURN over 1, 3, 5 and 7 years if applicable (plus 3 year Sharpe). However, if we "rank" those 261 funds over multiple periods to dovetail with suggested investment timeframes, 1, and particularly 3 year periods, don't necessarily correlate over all time frames: Table 2: Top 10 Australian Equity Funds over 1 Year, shown by RANK over 1, 3, 5 and 7 years (plus 3 year Sharpe rank). It is rare for any fund (but not impossible) to perform consistently in the Top 10 over all time periods and across differing market conditions, but taking the Top 10 over 7 years (in spite of ASIC's warning) shows a much higher correlation over all time periods: Table 3: Top 10 Australian Equity Funds over 7 Years, shown by RETURN over 1, 3, 5 and 7 years (plus 3 year Sharpe value). Table 4: Top 10 Australian Equity Funds over 7 Years, shown by RANK over 1, 3, 5 and 7 years (plus 3 year Sharpe rank). It is important to note that the funds in the 7 year Top 10 list, even if they dropped out of the Top 10 over 1, 3 or 5 years, significantly outperformed their ASX200 Benchmark's return of 11.44%, averaging 29.3% over 1 year. Fund Monitors' 2024 Annual Top 10 Fund returns and rankings analysis across all asset classes and peer groups will be available next week. To request a copy directly to your email inbox, please email contact@fundmonitors.com. News & Insights Global Matters: 2025 Outlook | 4D Infrastructure Airlie Australian Share Fund Quarterly Update | Airlie Funds Management December 2024 Performance News Digital Income Fund (Digital Income Class) Equitable Investors Dragonfly Fund Insync Global Capital Aware Fund TAMIM Fund: Global High Conviction Unit Class |
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31 Jan 2025 - Performance Report: Insync Global Quality Equity Fund
[Current Manager Report if available]
31 Jan 2025 - Performance Report: TAMIM Fund: Global High Conviction Unit Class
[Current Manager Report if available]
31 Jan 2025 - Performance Report: Equitable Investors Dragonfly Fund
[Current Manager Report if available]
31 Jan 2025 - Future Quality Insights: Pandemic Memories
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Future Quality Insights: Pandemic Memories Yarra Capital Management December 2024 From pandemic pups to investment peaks Like many other households during the global COVID pandemic, we welcomed a new resident into our home: a small furry pooch named Benji. As our eldest son was leaving the family nest, getting a dog was a shameless act of replacement. It is not that our son Jamie used to follow us around the house and beg for food (at least not all the time) but the sense of quiet at home when he moved away to university became even more acute during the pandemic lockdown. Like many, we found solace in the comfort, loyalty and affection that dog owners will understand only too well. For those of you wondering what relevance this has in an investment article, it might be worth noting that Benji is now approaching the ripe old age of four. Although still a puppy at heart, he is moving through his adolescent phase and entering the human equivalent of his 20s. He is in his prime, but not for much longer. In the next couple of years, the millions of pets around the world adopted during lockdown will start to reach middle age. As humans of a certain age know only too well, this is when medical bills begin to rise. In short, we believe that there is a coming boom in pet healthcare never seen before (if only my son had studied something practical like veterinary medicine). In our view, this boom will not only benefit veterinarians but also present opportunities for companies in the animal pharmaceutical industry -- a sector where we have been doing some additional research recently. As an investment team, this link between the pandemic and pet healthcare got us thinking about other industries that were impacted by COVID-related demand cycles. We were prompted to consider how this might be currently unfolding and whether it is creating opportunities for long-term investment. The first thing that struck us during our reflections was the apparent existence of a COVID-related cycle in human memory, which seems to hamper our attempts to remember certain parts of the past. This could be the continuation of an existing trend, although we could not quite remember. Have we been systematically outsourcing our memory to Google for the last 20 years? In my case, almost definitely. Are we about to outsource our imagination to AI? Very possibly. Psychologists attest that we remember events to which we attach emotions, like the pain of a stock investment that went wrong. So why is it so difficult to remember the details of the pandemic? Almost two years of our lives were turned upside down, yet we struggle to recall precisely what happened and when. According to one theory, we were overloaded with emotion during the pandemic as we grappled with stressful daily updates about death rates, lockdown rules and restrictions on liberty. Faced with such a daunting picture, the theory goes that it is much easier for us to simply forget. With the aid of Google and a bit of Chat GPT, it is possible to piece this tricky bit of history back together and remember the industries that were impacted the most. So here it is--the painful (though not exhaustive) top 10 or so activities we did or saw during lockdown. For those with a nervous disposition who still wish to forget, feel free to look away now...cue the music please Benji. Let us start with the things we saw more of...
Then the things we did less of...
While the examples above may seem somewhat light-hearted and anecdotal, the consequences of these demand cycles are still being felt in many cases. Take, for example, Mark Schneider, the outgoing CEO of Nestle, or Laxman Narasimhan, the recently ousted CEO of Starbucks. Both were leaders of multinational consumer brands who struggled to adapt to the post-COVID world of volatile inflation and shifting consumer preferences. In fact, the list of consumer-facing businesses struggling with these issues is extensive. Companies like Diageo, Remy Cointreau, LVMH, L'Oreal, Estee Lauder, Burberry, Kerry Group and Kering, to name a few, have all suffered sharp share price reversals after the pandemic. The virtuous cycle turned vicious, and while these companies will likely recover, the dismissal of otherwise talented executives with successful track records shows the difficulty of distinguishing between cyclical trends and structural changes. We are likely witnessing these consumer-facing industries going through a classic long-tailed inventory cycle. Investors, including ourselves in the case of Diageo, became overly optimistic about the trajectory of demand for luxury goods, cosmetics and spirits in the reopening phase of the pandemic. Investors appear to have mistaken a stimulus-fuelled acceleration in demand, further boosted by inventory restocking, as a structural shift rather than a cyclical one. Currently, it is possible that the reverse is starting to occur. As tighter monetary policy hurt consumption, an inventory destocking phase began. Weaker demand, inventory destocking and falling valuations could be creating a compelling long-term investment opportunity. However, we may need patience -- a virtue that is seemingly in short supply in this post-pandemic world. These consumer-facing companies will likely bounce back, just as those left in the wake of the 1990s tech bubble emerged as some of the leading stocks of the early 2000s. One industry that may be springing back to life is video gaming. After a pandemic-induced boom in gaming, growth rates naturally moderated in the aftermath. Sony, for example, saw their operating margin within its gaming division drop from over 10% to just 5%, causing its share price to stagnate while the rest of the Japanese equity market surged. However, demand is now recovering, as evidenced by Sony's most recent results, with the company posting a gaming operating margin approaching 14%. The gaming recovery has been further confirmed by positive earnings reports from Tencent's gaming division and sports-related software producer Electronic Arts. We should not forget that all cycles turn eventually. The medical device sector is another industry that experienced a COVID boom followed by a dramatic post-pandemic slowdown in the last few years. While we were busy consuming alcohol, buying luxury goods and playing video games during the pandemic, the pharmaceutical and biotech industries were spending record amounts on developing new drugs. This created an excess inventory in equipment used to discover and produce these new therapies. Companies like Danaher and Bio-techne have struggled to contend with high inventories in their key end markets and a moderation in demand. Fortunately, this trend appears to be turning a corner, with an observable acceleration in orders and shipments across the industry. This shift has been welcome news for the companies in which we are invested. Patience indeed seems to be a virtue. Finally, it would be an oversight not to mention politics, which was impacted the most by COVID. It is difficult to explain how a candidate who, while US President, suggested that COVID could be defeated by ingesting bleach, could subsequently be re-elected even after alleging that citizens were eating their neighbours' pets (I'll let you know when it's safe to come out from under the sofa Benji). Collective amnesia brought upon by COVID could have played a part; however, the shift in the US political landscape may have more to do with the impact inflation had on the real incomes of the lower-income households. Perhaps for the first time in recent history, the Republicans attracted majority support from less affluent voters, a sobering thought for Democrats reflecting on their last four years. The outlook for the post-election world remains uncertain. The impact of a truly "America first" policy could be far reaching. However, it appears that the tail risks of such a policy are inflationary rather than deflationary. As such, we feel more strongly than ever that investors should strive for a diversified global portfolio of quality companies that can thrive in an environment where the cost of capital may be higher than previously expected. Our collective experience of the pandemic reminds us that such an approach is a fairly good idea. |
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Funds operated by this manager: Yarra Australian Equities Fund, Yarra Emerging Leaders Fund, Yarra Enhanced Income Fund, Yarra Income Plus Fund |
