Fund Objective: The Rivkin Australian Equity Fund aims to produce positive average annual returns while seeking to maintain a level of volatility lower than that of the S&P/ASX 200 Accumulation Index over the same investment period.

31 May 2020 Unit Price – A$0.9854

Welcome investors to the monthly update for the Australian Equity Fund (AEF) for May 2020. The AEF continues to recover from the February to March decline, with the NAV price gaining 4.09% during the month of May, ending at 0.9854. Despite back to back monthly returns in April and May, the AEF remains down for 2020, following a 37% decline for the ASX200 Index between February and March.

Monthly Commentary

As we stated in last month’s update, “we would imagine that economic data will continue to look very pessimistic over the coming months, however it is important to recognise the difference between backwards looking economic data, and stock market performance, which is always forward looking. Put another way, stock prices will bottom well before the economic data shows improvement.” We highlight this point, because equity markets continue to rally despite the economy lagging, with Australia all but guaranteed to enter a technical recession this year. On Wednesday this week, GDP figures released showed that the Australian economy contracted by 0.3% in the March quarter. Added to this, the protests, riots, and looting in the US are adding to the pessimistic mood, however equity markets are ignoring this for now.

Throughout the month we have made some changes to the composition of the portfolio, which we wish to discuss. The first of these is that we have made the decision to divest the Fund of our ‘defensive’ allocation in Resco Macro Credit Fund. We wish to emphasise that this is decision is not a reflection of our views on the current market environment in the short term, but more a longer-term strategic decision to transform the AEF to a 100% focused equity fund. Anyone interested in a defensive portfolio to complement their equity exposure, our Low Volatility strategy is available, with a link to the latest monthly report available here. Going forward, this 20% allocation will be deployed into ASX listed equities on a discretionary basis. It will be invested in ASX200 stocks that as an investment team, we feel are a compelling investment, and that fall outside the Quality and Momentum systematic strategies. As of the end of May, we have allocated 17.2% of FUM to this ‘bucket’, with a focus on larger cap names which we believe will benefit from the current recovery, including Macquarie Bank (MQG), BHP Group (BHP), and Charter Hall (CHC). Being discretionary, this portion of the fund will not always remain 100% invested.

The combined weighting of the ASX100 and ASX200 momentum strategies is currently 36% of FUM, up from 20.6% of FUM at the start of the month, as more and more uptrends begins to emerge. The allocation to quality is currently 37.4%, which leaves the fund with a cash weighting of 9.4% at present. The Fund is currently well diversified across the sectors, with the largest weightings to information technology (20.7%) and financials (19.9%). This is the highest weighting to financials since inception.

Notable performers over the past month include Evolution Mining (EVN, +20.37%), Appen (APX, +19.24%), and Fortescue Metals Group (FMG, +16.50%), while Ausnet Services (AST) and Saracen Mineral Holdings (SAR) were the worst performers, declining 6.57% and 6.39% respectively.

If you have any questions regarding the above or your investments with Rivkin in general, please call us on 02 8302 3605.

Performance

NAV Price Chart

Monthly Returns

Portfolio Composition

Sector Breakdown

Top 10 Stock Holdings

Strategy Weighting

Fund Description & Information

The Fund invests predominantly in listed Australian companies whose characteristics satisfy one or more of the strategies that occupy the portfolio. These strategies include: Momentum 100 & 200, being two discreet segments (ASX 100 & ASX 200 ex the ASX 100) of securities that are enjoying positive price trends; Quality, being companies with robust earnings profiles that are priced favourably versus their peers; In addition, approximately 20% of the portfolio is held in a defensive strategy, which offers non-equity style returns.

Important Disclaimer

The Rivkin Australian Equity Fund is available to wholesale investors only. Past performance is not a reliable indicator of future performance. The value of your investment may rise and fall, and you may not receive the amount originally invested.

Contact

Thomas Silitonga – Director, Rivkin Asset Management

thomas.silitonga@rivkin.com.au –  +612 8302 3605