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.
29 February 2020 Unit Price – A$1.0752
Welcome investors to the monthly update for the Australian Equity Fund (AEF) for February 2020. February stated off well, with the AEF registering a new all-time high in the second week of February. However, these early gains were more than reversed over the last week and a half of the month, with the ASX200 and global equity markets more broadly, selling off heavily. For the Australian Equity Fund, the NAV price ended the month of February at 1.0752, for a loss of -8.12%.
Monthly Commentary
The narrative surrounding the sharp decline in equities all centred around the increased spread of the Coronavirus, particularly outside of China, to countries such as Iran, Italy, and South Korea. While this may well lead to pressure on equities in the weeks ahead, global Central Banks have already been quick to respond, with the RBA cutting their benchmark rate by 25 basis points at their March meeting on Tuesday this week (RBA rate now at 0.50%), while the US Federal Reserve, after holding an emergency mid-month meeting, cut the Fed Funds rate by 50 basis points, to 1.25% (upper bound). In addition to the monetary policy response, a fiscal response from many major governments appears imminent, to reduce the impact on small businesses and supply chains. All in all, we believe that the impacts on the real economy, and in turn, financial markets will be relatively short lived.
While sharp declines in the valuation of an investment will always take an emotional toll, the history of equities is marked by slow and steady gains, punctuated by short sharp declines. The big problem is when such corrections lead to a fearful response to exit the market. This is one of the reasons that we implement a largely systematic investment approach, in particular as it relates to our overall exposure to the market. At month end, we remain largely fully invested, however should this correction in prices persist, the portfolio will start to build cash, to an upper limit of 40% of assets. Furthermore, it is important to remember that equity markets are consistently discounting the future, meaning that prices are most likely to bottom out well before the narrative improves. Put another way, once the Coronavirus is no longer on the weeknight news, we would imagine equity prices to be well off their respective lows, which means that those who make investment decision based on mainstream news will always be behind the curve.
Regarding specific stock performance over the course of the month of February, the declines were broad based, with only 27 of ASX200 stocks closing the month up. The top performers for the month were IDP Education (IEL, +19.6%), Cleanaway Waste Management (CWY, +11.3%), and Fisher and Paykel Healthcare (FPH, +10.1%), with the AEF holding positions in both IEL and FPH. The largest negative impacts on the Fund came from declines in Wisetech Global (WTC, -39.7%), EML Payments (EML, -31.2%), and Altium (ALU, -22.7%).
In terms of the current portfolio composition, we remain fully invested, with only a minor cash position of 0.90%. The technology sector remains our largest weighting at 24.7%, followed by healthcare and materials at 20.6% and 19.5% respectively. The exposure to healthcare was the largest change as compared to the end of January, jumping from 13.2% to the current weighting of 20.6%. The fund ended the month holding 35 individual stocks; the top 10 accounting for 29.9% of assets. In term of how the funds assets are allocated across the different strategies, we are allocated approximately 22% to the defensive strategy, and to both ASX momentum strategies, with a 32.1% allocation to quality.
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
