Fund Objective: The Rivkin Global Equity Fund aims to produce positive average annual returns while seeking to maintain a level of volatility lower than that of the MSCI World ex Australia 100% Hedged to AUD Index over the same investment period.
29 February 2020 Unit Price – A$0.9029
Welcome investors to the monthly update for the Rivkin Global Equity Fund (GEF) for February 2020. While the month started off well, a sharp decline over the final week of the month resulted in the GEF and global equity markets more generally, closing lower for the month of February. The NAV price for the Rivkin Global Equity Fund (GEF) declined 4.84% in February, finishing the month at 0.9029. A positive being that this decline was considerably less than the Index, with the MSCI World Ex Australia Index declining by 8.46% over the corresponding period.
Monthly Commentary
The reason for the sharp sell-off in equities has been largely attributed to the increased spread of the Coronavirus, particularly outside of China, to countries such as Iran, Italy, and South Korea. Central Banks have already responded with the US Federal Reserve cutting the Fed Funds rate by 0.5% to 1.25% in an emergency mid-month meeting. This is the first time that the Fed has seen the need for an emergency cut in over 10 years. More so, help on the fiscal front is also in the works, with President Trump due to shortly sign an US$8.3 billion package to help fight the virus. This has resulted in US equity prices rallying so far this week, to have already retraced approximately 50% of the prior decline seen at the end of February. While a complete retracement in short order is likely out of the question, buyers have clearly moved in over the past 3-4 trading sessions.
While sharp declines in the valuation of an investment will always take an emotional toll, the history of equity prices is marked by slow and steady gains, punctuated by short sharp declines. The key is not to get caught up in the short-term gyrations of the market to the detriment of a longer-term investment journey. 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.
In terms of the performance split between the momentum and quality strategies, although both were lower, the momentum strategy (-4.38%) held up relatively better, with Tesla (TSLA) and NVIDIA (NVDA) closing higher for the month. The Quality strategy was down -6.06% for the month of February, with gains in Biogen (BIIB, +11.7%) and E*Trade Financial Corp (ETFC, +6.3%) were more than offset by losses across most holdings. Shielding the portfolio was the 20% allocation to defensive, which was immune to the equity market declines.
Finishing with a look at the current portfolio composition, the GEF ended the month with 36 stock holdings. Both our Momentum and Quality strategies are largely fully invested, with a 21.7% weighting to ‘defensive’, leaving just 5.3% as cash. In terms of sector exposure, information technology and consumer discretionary remain the largest weights at 39.6% and 25.0% respectively. While not reflected in these end of month figures, the portfolio has since increased its cash weighting to approximately 15% this week, in response to the weakness in equity prices.
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 Global companies listed on developed market exchanges whose characteristics satisfy one or more of the strategies that occupy the portfolio. These strategies include: Momentum, being securities that are enjoying positive price trends; Quality, being companies with robust earnings profiles that are priced favourably versus their peers; and Defensive, being securities that provide a combination of characteristics including fixed income or high yield returns, negative or low short-term correlation to risk markets like equities or outcomes that we consider to be market-neutral. The Fund operates within the context of a rules-based framework that encourages a disciplined, long-term approach to equity exposure among developed global markets.
Important Disclaimer
The Rivkin Global 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
