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 March 2020 Unit Price – A$0.8930

Welcome investors to the monthly update for the Australian Equity Fund (AEF) for March 2020. Despite some reprieve into month end, the ASX200 Accumulation Index declined sharply in March, falling 20.65%. Not surprisingly, the Australian Equity Fund also declined, yet less than the market which is a positive. For the AEF, the NAV price ended the month of March at 0.8930, for a loss of -16.94%.

Monthly Commentary

March was a tough month for equity markets, both locally on the ASX and in the US. An acceleration in the spread of the Coronavirus across the world has led to many governments introducing strict ‘social distancing’ measures, such as only leaving home for a necessary purpose, limiting gathering of two people or less in public, and in some countries closing schools. This has had a dramatic impact on many businesses, particularly those related to travel and tourism, and services such as restaurants, cafes, and retail.

Despite the strong fiscal response from many governments, including the Australian government, the reality is that many people have found themselves out of work in short order. This is evident in the US, where initial jobless claims spiked to 6.64 million people last week, which is more than 10 times the peak from the GFC of 2008-2009. Some economists in the US are already suggesting an unemployment rate of between 15% and 20%.

The situation both on the health front, and economically, is more positive in Australia. Despite reaching 5,116 confirmed cases, the rate of new infection is dropping markedly. Economically, the release of the Job Keeper assistance program, which could total $130 billion in total, should allow for many businesses to continue to retain staff on their books over the coming six months.

In terms of the portfolio, we made a discretionary decision to reduce our exposure to equities early in the month, irrespective of the natural process of the Momentum strategies building cash as the pool of available up trending stocks decreases. The portfolio started the month with a 76.9% allocation to equities, which has since reduced to 60.8% by month end. The remaining approximate 40% of the Funds assets is split, with a quarter allocation (9.6% of total FUM) to cash, and the remaining three quarters (29.6% of total FUM) allocated to a defensive macro credit strategy, which produces returns outside of equity markets.

More so, the composition of the portfolio has changed quite a bit. While we don’t make it a habit of overriding the stock selection generated by our quantitative rankings, we have used our discretion to exclude several companies which we deem to be at risk of not surviving the next six months. Furthermore, given the fact that the Momentum strategy holds the best performing stocks, measured on a relative basis over the past 6 – 12 months, we are now holding many more defensive names. This is evident when we look at the change in sector exposure, especially to Consumer Staples which has gone from 0% at the start of the month, to now account for 18.3% of stock investments, and Health Care which is now our largest sector weight at 23.1%. Moving forward, our allocation to equities is likely to reduce further still as the Momentum strategy reduces exposure, particularly if this decline persists.

While 2020 has started out as a turbulent year both in the real economy and across financial markets, the Australian Equity Fund is currently positioned rather defensively with 60/40 split between equities and defensive assets.

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