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.

28 February 2021 Unit Price – A$1.0492

Welcome investors to the monthly update for the Australian Equity Fund (AEF) for February 2021. For the month of February, the AEF declined 0.94%, concluding with a NAV price of 1.0492.

Monthly Commentary

Equity markets were somewhat choppy through February and followed a similar path as what occurred in January, that being initial gains being negated by a swift sell-off into the end of the month. The ASX200 closed at the end of February at 6673.29, up 1.45%. While in the US, equities also sold off into month end, with the S&P500 closing at 3811.15 (+2.61%), after reaching a new all-time closing high of 3,934.83 mid-month. Technology stocks sold off more aggressively, evidenced by the performance of the Nasdaq100, which closed 0.12% lower in February, some 6.5% lower than the closing high for the month. For the month of February, the AEF declined 0.94%, concluding with a NAV price of 1.0492.

It was not just technology stocks, but ‘growth stocks’ in general which suffered the most through February. This was partially due to the recent surge in bond yields (interest rates), with the yield on the US 10-year bond gaining 33.6% in February, ending the month at 1.46%. While the level itself is not overly concerning, it is more the speed of the change that has caught some off guard. At current levels, the yield on the US 10-year bond has returned to pre-COVID-19 levels. The move higher in yields has been driven partially by increasing inflation expectations, which has been showing itself in higher commodity prices such as oil and copper. The link to equities is twofold, firstly as interest rates rise the cost of debt financing increases, and secondly, the effect on valuations decreases, as the discount rate used in discounting future cash flows is now higher. This tends to impact growth companies to a much higher degree compared to more defensive companies, such as banks, insurers, and telecommunication companies. All in all, however, we do not believe that current interest rate levels pose a significant problem for the broader economy, and more so, we believe that any surge in inflation is likely to be transitory until economies are weaned off government stimulus.

In terms of the current composition of the portfolio, we remain largely fully invested, with the cash weighting of the fund rising marginally from 3.2% to 5.0% over the month. Regarding the discretionary portion of the Fund, which can account for 20% of overall assets when fully invested, we made several changes in February, specifically closing out our position in Commonwealth Bank of Australia (CBA) and reducing our position in Australia and New Zealand Bank (ANZ). The capital from there sales was used to establish three smaller positions in Life360 Inc. (360), Family Zone Cyber Safety (FZO), and Race Oncology (RAC). Both 360 and FZO are technology-based companies, with 360 providing a family-based social network, with a focus of location sharing and safety, while FZO is a cyber security company focusing on child online safety. RAC on the other hand, is a biotech company, bringing a once forgotten cancer chemotherapy drug, Bisantrene, back into the clinic. The company has a clear corporate strategy, that being, to replicate the strong historical results of Bisantrene in a modern clinical setting, with the view of achieving a corporate transaction, either via a licensing agreement or sale. Our initial weighting to these investments is relatively small given their higher risk profile.

In terms of our quantitative strategies, the Quality strategy has suffered somewhat this month, underperforming Momentum. It has suffered from the rotation out of growth companies, particular technology based, with Appen (APX: -25.3%) and Kogan (KGN: -22.3%) the worst performers for the month. Momentum however benefitted from its large exposure to several commodity stocks, particularly iron ore, with Oz Minerals (OZL: +20.1%), Fortescue Metals (FMG: +10.6%), and Mineral Resources (MIN: 13.5%) all performing strongly throughout the month.

We remain mostly heavily invested in the consumer discretionary, information technology and materials sectors, while our top ten holdings account for 41.0% of our overall exposure. Please refer to the charts and tables below for full details.

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