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.

28 February 2021 Unit Price – A$1.0348

Welcome investors to the monthly update for the Rivkin Global Equity Fund (GEF) for February 2021. For February, the GEF declined slightly, with the Fund concluding with a NAV price of 1.0348, down 0.27% for the month.

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. In Australia, 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 February, the GEF declined slightly, with the Fund concluding with a NAV price of 1.0348, down 0.27% for the month.

It was not just technology stocks but ‘growth stocks’ in general that 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, 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. Secondly, equity valuations decrease as the discount rate used in discounting future cash flows is higher. This tends to impact growth companies to a much higher degree than 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 portfolio’s current composition, our quantitative momentum and quality strategies remain fully invested in the market. At the same time, we have reduced our discretionary portfolio by a small amount by closing out positions in Square (SQ), Microsoft (MSFT), and Enphase Energy (ENPH). The only addition to this portfolio throughout February was Caterpillar (CAT), a company that we would expect to perform strongly in an environment of strong infrastructure spending that is likely to result from continued government stimulus. Just over the weekend, it was announced that the US Senate had passed the US$1.9 trillion economic relief bill, albeit with some modifications. The cash weighting of the Fund currently sits at 6.0%.

With the US earnings season concluding, we have a revised set of financial numbers, which will flow through to our quality strategy rankings. To date, this has resulted in a reduction in information technology and health care stocks, which now comprise 26.8% and 15.0% of our portfolio respectively, in favour of consumer discretionary and industrials. Please refer to the tables below for our full sector weights and top 10 holdings.

Looking ahead, we have witnessed a noticeable lift in volatility over the past two to three weeks, something last seen throughout the September to October period last year. This appears to be nothing more than a typical corrective period that is part and parcel of equity market investing.

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