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| Manager Comments | As at March 31st, cash (including notes and preference shares) represented 32% of the Fund. The top five holdings by value were: DUET, ANZ Bank, News, Telstra and NAB. The largest positive contributors to the Quarter’s performance included NAB, News Corporation, ANZ, DUET Group, Seven West Media, Ainsworth Game Technology, Seven Group Holdings, Resmed and Myer Holdings. It is particularly pleasing that there were no detractors over the quarter. The Fund had an active March Quarter, acquiring several new holdings including Caltex, Fairfax and Speciality Fashion Group. In addition, the Fund deployed cash into existing holdings including Duet Group, Telstra, ANZ, Woolworths, Seven West Media and McMillan Shakespeare. The Fund’s exposure to non-Australian dollar earnings streams (inclusive of companies with global earnings profiles such as Resmed and News Corporation, NZ based companies and US dollar exposure) stands at 16.6%. The Fund continued its policy of maximising the cash or “near cash” rates available by acquiring several short dated hybrids at attractive rates. The Fund disposed of its holdings in CSL, Myer, Mastermyne Group and Amcom Telecommunications. The Fund also trimmed its holdings in Credit Corp, NIB Holdings and Tatts Group. While the consensus outlook for the global economy remains gloomy, tentative signs of economic recovery are beginning to emerge. Coordinated efforts by governments through a combination of rescue packages, “extremely loose” monetary policies and large stimulatory spending programs do appear to be having some positive effects. Given the extent of these wholesale efforts (that have included even the proverbial kitchen sink being thrown at the problem) one shudders to think what the implications of no reaction would have been. However, as pragmatic investors the Fund remains alert for those well managed companies with the business models and balance sheets to take advantage of the following dynamics - a) The US economy’s ability to consistently reinvent itself combined with the potential “game changer” of becoming energy self sufficient due to its recently accessible (and massive) oil shale reserves; b) The Chinese authorities efforts to reinvigorate (or at least stabilise) economic growth may be successful and c) The significant reduction in interest rates domestically may be creating a base for consumer confidence. |
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