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| Fund Overview | The overriding objective of the Concentrated Australian Equities Fund is to seek investment opportunities which are under-appreciated and have the potential to deliver positive earnings, while satisfying our stringent quality criteria. Bennelong's investment process combines bottom-up fundamental analysis together with proprietary investment tools which are used to build and maintain high quality portfolios that are risk aware. The portfolio typically consists of 20-35 high-conviction stocks from the S&P/ASX 300 Index. The Fund may invest in securities listed on other exchanges where such securities relate to ASX-listed securities. Derivative instruments are mainly used to replicate underlying positions and hedge market and company specific risks. |
| Manager Comments | Detractors over the December quarter included Aristocrat Leisure, Flight Centre, Corporate Travel Management and BWX Limited. Positive contributors included Costa Group and BHP Billiton. As at December 2018, the Fund's portfolio positioning was as follows - heavy orientation towards growth, heavy weighting in lower risk and defensively positioned businesses, underweight stance to cyclicals (particularly domestic cyclicals), no banks in the portfolio highlighting the Fund's index-unaware approach, significant exposure to offshore earnings (CSL, Aristocrat Leisure and Reliance Worldwide), overweight the resources sector, biased away from large caps relative to the benchmark and minimal exposure to leveraged balance sheets. Bennelong noted the sell-off throughout the December quarter came about with a shift in investor sentiment to one of 'risk-off', thus resulting in REITs, utilities, gold stocks and big-cap defensives such as Woolworths holding up well as investors sought safety. Importantly, they noted, company fundamentals mattered little. Bennelong believe safety (and returns) ultimately derive from company fundamentals, which include one's competitive position, balance sheet strength, cash-flow generation and growth prospects. They believe the risk-off sentiment will tire and fundamentals will ultimately win out. |
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