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| Fund Overview | Insync employs four simple screens to narrow the universe of over 40,000 listed companies globally to a focus group of high quality companies that it believes have the potential to consistently grow their profits and dividends. These screens are size of the company, balance sheet performance, valuation and dividend quality. Companies that pass this due diligence process are then valued using dividend discount models, free cash flow yield and proprietary implied growth and expected return models. The end result is a high conviction portfolio of typically 15-30 stocks. The principal investments will be in shares of companies listed on international stock exchanges (including the US, Europe and Asia). The Fund may also hold cash, derivatives (for example futures, options and swaps), currency contracts, American Depository Receipts and Global Depository Receipts. The Fund may also invest in various types of international pooled investment vehicles. At times, Insync may consider holding higher levels of cash if valuations are full and it is difficult to find attractive investment opportunities. When Insync believes markets to be overvalued, it may hold part of its resources in cash, or use derivatives as a way of reducing its equity exposure. Insync may use options, futures and other derivatives to reduce risk or gain exposure to underlying physical investments. The Fund may purchase put options on market indices or specific stocks to hedge against losses caused by declines in the prices of stocks in its portfolio. |
| Manager Comments | In May the Fund returned -1.90% after the cost of downside protection, outperforming AFM's Global Equity Index by +2.56%. Strong contributions from stock selection and a positive contribution from the increase in the value of the index 'puts' led to the Capital Aware Fund losing significantly less than the market. Positive highlights include Adidas, IDEXX Laboratories, Wirecard, Boston Scientific Corp and the London Stock Exchange. Detractors included Facebook, Apple, Booking Holdings, Constellation Brands and Tencent Holdings. The Fund continues to have no currency hedging as Insync consider the main risks to the Australian dollar to be on the downside. Insync's view is that current market conditions continue to reflect the trend in place since the GFC of low growth and low inflation. They believe if this trend continues then investing in a portfolio of high ROIC stocks benefitting from global megatrends should be beneficial. They noted their portfolio of companies is less dependent on the global economy to generate consistent profitable growth. |
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