Category: Research

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ipo IPO Watch

Radiopharm Theranostics debuts on the ASX, raises AU$50M via IPO

Radiopharm Theranostics Limited issued 83.33 million shares at an offer price of AU$0.60 a piece, giving a market capitalisation of AU$152 million at the issue price.

The Offer comprises: 

(a) the Broker Firm Offer, which is available to Australian resident retail clients of Brokers who have been assigned a firm allocation of Shares by their Broker.

(b) the Institutional Offer, which is an invitation to Institutional Investors in Australia and a number of other eligible jurisdictions to apply for Shares; and 

(c) the Chairman’s List Offer, which is an invitation to selected Australian investors who have received an invitation from the Chairman or the Company to apply for Shares.

Use of funds

 (a) make payments under the Licence Agreements 

 (b) conduct research and development into other cancer targets

 (c) provide working capital; and 

 (d) set up commercial and academic collaborations.

Important dates

EventsDates
Prospectus dateThursday, 14 October 2021
Offer opensFriday, 22 October 2021
Offer closes Friday, 5 November 2021
Anticipated date of allotmentTuesday, 16 November 2021
Shareholding statements expected to be dispatchedFriday, 19 November 2021
Anticipated commencement of ASX tradingThursday, 25 November 2021

Subscription Status:  The shares of  Radiopharm Theranostics Limited  were oversubscribed.

Company Profile:

Formed in February 2021, the homegrown health care company focuses on the development of radiopharmaceutical products for diagnostic and therapeutic uses in areas of high unmet medical needs. The Company aims to become an industry leader in the development of radiopharmaceutical products, targeting some of the largest markets in cancer.

The Company has a balanced portfolio of four licensed platform technologies, with diagnostic and therapeutic applications in both pre-clinical and clinical stages of development, from some of the world’s leading universities and institutes such as Imperial College London and Memorial Sloan Kettering.

The portfolio comprises five Phase 2 clinical trials and two Phase 1 trials, which are underway along with five Phase 1 trials, which have been wrapped up across hospitals and medical centres globally. The clinical trials target a range of cancers including that of breast, lung, kidney, head & neck, pancreatic and brain.

( Source:  https://www.radiopharmtheranostics.com/)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
IPO Watch

Bootstrapped company Latent View debuts on exchange with 169.04% premium

Latent View Analytics is a pure-play data analytics services company in India that offers consulting services, data engineering, business analytics and digital solutions. Its IPO was open for subscription from November 10 to November12, 2021 with issue price-band ranging from INR 190-197 and lot size of 76 shares.

Latent View has received subscription for 572.18 crore shares worth Rs 1.12 lakh crore against its requirement of INR 600 Crores. It was oversubscribed by 338 times, much higher than the high-profile IPOs that were previously listed. The qualified institutional investors subscribed 145.48 times, Non-institutional buyers subscribed 850.66 times and retail investors subscribed 119.44 times.

The stock was listed on exchange on 23rd November 2021 at INR 530, which was a whopping 169.04% premium above its issue price. At the issue price, the company commanded a market capital of Rs 3,896 crore, which shot up to Rs 10,484.16 crore.

The proceeds from the IPO are expected to be used inorganic growth initiatives (to the tune of Rs 147 crore), investment in the subsidiaries (Rs 130 crore) and funding working capital requirements of a material subsidiary Latent View Analytics Corporation.

The company has never raised external capital and has been completely bootstrapped. It operates as per the age old traditions and finds it suitable for itself. Currently the promoters hold 68% of the total equity, which earlier was 80%. 

The company reported a CAGR of 3 per cent during FY19-21 but saw a 20 per cent growth in EBITDA and 24 percent in growth of PAT. Since the company’s existence, it has witnessed loss in only a single period i.e. in 2010 due to financial crisis.

About the company:

Founded in 2006, Latent View offers data analytics services, consulting, and data engineering solutions to customers across the banking, technology, industrial, and retail verticals, among others. In its 15 years of existence, the company has reported a loss only for one quarter, in early 2010. Viswanathan, an alumnus of IIT Madras and IIM Kolkata, is the founder of Latent View Analytics Ltd.

(Source: economictimes.com, Moneycontrol)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Funds Funds Research Sectors

Bennelong ex-20 Australian Equities Fund: distils returns of the 20 largest companies on ASX

The Fund is suitable for investors seeking to distill out the influence of the returns of the largest 20 listed companies on the ASX and looking to tilt towards growth. As a result, the fund invests in stocks outside of the top 20 subsets of the market but with at least a minimum of $250m market cap. The manager is more of a purist stock picker who seeks to invest in companies he feels are on a genuine earnings growth path and feels that such companies are not common and to find these companies requires thorough and focused bottom up research process.

Investment Team:

The BAEP investment team consists of Mark East: Chief Investment Officer and Portfolio Manager, Keith Hwang: Director, Quantitative Research, Neale Goldstone-Morris: Senior Investment Analyst, Strategy, Kieran Sisson, Doug Macphillamy, Brad Clibborn, Jack Briggs: Senior Investment Analyst and Todd Briggs: Investment Analyst

Key Highlights:

  • The manager conducts deep dive, bottom-up research on companies it invests in. With a thorough understanding of their stock positions, the manager takes high conviction and genuinely active bets relative to the benchmark.
  • The fund has been investing since 2009 – the immediate aftermath of the global financial crisis. Since then, there have been several periods where market volatility has tested the manager’s ability to generate returns while following their investment process.
  • The Fund’s focus on stocks outside of top 20 ASX listed companies provides investors an opportunity to diversify and distil growth from typical core domestic equity strategies that are heavily influenced by the performance returns of shares in the top 20 listed companies.
  • The team of eight experienced analysts includes the PM.
  • The fund’s macro analyst provides top down insights on the macro and guides the team to where the team should focus their research.

Downside Risks: 

• An economic recession in Australia/globally, leading to earnings recession

• Stock selection fails to yield alpha 

• Key man risk – the PM (Mark East) departs – given he has the ultimate responsibility of running the strategy

Investment Process:

  • From all of the stock listed on the ASX, BAEP applies a screen to derive an Investment Grade Universe from which to find investment opportunities. The filters include a market capitalisation of greater than $250 million, sufficient liquidity, an earnings track record.
  • Idea Generation aims to identify those stocks within the Investment Grade Universe that warrant particular attention, thereby focusing research efforts on the most prospective candidates. The ideas build up into the Focus List.
  • Stock analysis is extensive and includes quantitative and qualitative analysis including field research.
  • Portfolios are constructed on a stock-by-stock basis. The inclusion, sale and weighting of a particular stock is determined by reference to a number of factors
  • The portfolio is constantly monitored, tested and optimised with ongoing changes.

Performance:

Fund Positioning:

About Fund:

The Fund’s objective is to outperform the S&P/ASX 300 Accumulation Index excluding the portion of return attributed to the S&P/ASX 20 Leaders Index, by 4% p.a. after fees on a rolling 3-year basis. The Fund invests primarily in Australian shares with high quality business models, strong growth, and underestimated earnings momentum and prospects.

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Funds Funds

SPDR S&P/ASX 200 Listed Property Fund: Decent option for A-REIT investments in a competitive market

About The Benchmark

A sector sub-index of the S&P/ASX 200, this index tracks the performance of Australian real estate investment trusts (A-REITs) and mortgage REITs.

Fund Objective

The SPDR S&P/ASX 200 Listed Property Fund seeks to closely track, before fees and expenses, the returns of the S&P/ASX 200 A-REIT Index.

Process 

SLF aims to fully replicate the S&P/ASX 200 A-REIT Index. REITs are listed vehicles that own and operate property. REITs are required to pass on the majority of their income to investors to enjoy favourable taxation arrangements, and distributions are not franked. High payout ratios and an absence of franking mean that REITs typically offer a high headline yield relative to other stock market sectors. SLF is by far the longest running, with an FUM of AUD 650 million as at September 2021, which helps it to maintain trading levels far above most rivals. SPDR doesn’t participate in securities lending for Australian ETFs.

Portfolio

With the relatively short list of A-REIT names in the S&P/ASX 200, the portfolio is understandably concentrated. As at September 2021, the index consists of 24 holdings, with the top 10 accounting for over 85% of the total portfolio. The exposure to the largest current holding, Goodman Group, has ballooned significantly over the past five years to 27% from around 11%. Seeing that the index is relatively untouched by any reconstitutions, portfolio turnover is quite low at 5%. However, in case of an eventual entry or exit of the constituents, the concentrated index is susceptible to reconstitution, which may lead to a meaningfully altered portfolio.

Top 10 HoldingsWeight (%)
GOODMAN GROUP27.07
SCENTRE GROUP11.52
DEXUS/AU8.59
MIRVAC GROUP8.17
STOCKLAND7.98
GPT GROUP7.27
CHARTER HALL GROUP5.93
VICINITY CENTRES4.91
SHOPPING CENTRES AUSTRALASIA2.20
CHARTER HALL LONG WALE REIT2.06

Sector Allocation

Sub-Industry BreakdownWeight (%)
Diversified REITs34.79
Industrial REITs28.49
Retail REITs23.96
Office REITs9.46
Specialized REITs1.90
Residential REITs1.41

People

The Global Equity Beta Solution team that is responsible for managing this ETF has undergone a leadership transition recently. Effective September 2021, John Tucker has been appointed as the new chief investment officer, replacing Lynn Blake, who has taken retirement. Tucker is a State Street veteran who has been in multiple senior leadership roles within GEBS for the past 20 years. The ecosystem and structure of the investment team is well-defined, where research and trading functions are centralised and spread out globally; however, portfolio managers are based locally. Australia-domiciled passive products are managed by a core team of Tucker and four portfolio managers: Alexander King, Lillian Poon, Andrew Howson, and Elda Dong.

Performance

The fund has managed its tracking difference well, matching up to the benchmark after accounting for management fees. SLF has recorded a return of 6.54% since its inception in 2002. As at the close of 2019, the annualised five-year returns for the fund stood at an attractive 10.55%, outperforming the category returns of 9.87%. The rally was mainly driven by the strong returns of Goodman Group in the latter half of the five-year period.

Total Return1 Month3 Month6 Month1 Year3 Year p.a5 Year p.aSince Inception  p.a
Fund (%)0.384.2712.0730.259.578.636.54
Index (%)0.424.3812.3430.879.878.966.78

(Source: MorningStar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Dividend Stocks Shares

Cochlear reported solid FY21 results, with earnings up by 54%

Investment Thesis:

  • Attractive market dynamics – growing population requiring hearing aids, improving health in EM providing more access to devices such as hearing aids and relatively underpenetrated market
  • There remains a significant, unmet and addressable clinical need for cochlear and acoustic implants that is expected to continue to underpin the long‐term sustainable growth of COH
  • Market leading positions globally
  • Direct-to-consumer marketing expected to fast track market growth 
  • Best in class R&D program (significant dollar amount) leading to continual development of new products and upgrades to existing suite of products 
  • New product launches driving continued demand in all segments 
  • Attractive exposure to growth in China, India and more recently Japan 
  • Solid balance sheet position
  • Potential benefit from Australian tax incentive 
  • Subject to successful passage of legislation, the patent box tax regime for medical technology and biotechnology should encourage development of innovation in Australia by taxing corporate income derived from patents at a concessional effective corporate tax rate of 17%, with the concession applying from income years starting on or after 1 July 2022 

Key Risks:

  • Product recall
  • Sustained coronavirus outbreak which delays recommencement of hospital operations in China
  • R&D program fails to deliver innovative products 
  • Increase in competitive pressures 
  • Change in government reimbursement policy 
  • Adverse movements in AUD/USD
  • Emerging market does not recoup – significant downside to earnings

Key highlights:

  • COH reported strong FY21 results, with earnings (underlying NPAT) up +54% to $237m and within guidance of $225-$245m, despite Covid-19 impacted surgery activity recovering to varied levels across both developed and emerging markets
  • For FY22, it is expected to deliver net profit of $265‐285m, a 12‐20% increase on underlying net profit for FY21, based on a 74 cent AUD/USD
  • Sales revenue is expected to benefit from market growth, with a continuing recovery in surgery rates across many countries more affected by Covid
  • The management will continue their investment in market growth activities
  • Capex is expected to be ~$70‐90m for FY22 and includes around $20m related to a major process transformation and IT systems upgrade, a program that is expected to be a $100‐120m investment over the next four to five years
  • Effective tax rate is expected to decline to ~25% as a result of the introduction of changes to the R&D tax concession by the Australian government, with legislated changes to take effect from 1 July 2021
  • The Board is committed to maintaining the dividend policy which targets a 70% payout of underlying net profit
  • Record sales revenue of $1,493m, was up +10%, or +19% in constant currency (CC), driven by market share gains, market growth and rescheduled surgeries post Covid lockdowns
  • Implant units climbed +15% to 36,456 (developed markets up ~20%; emerging markets up ~10%), compared to FY19, implant units increased +7%
  • The Board declared final dividend of $1.40 which brings full year dividends to $2.55 per share, up +59% and equates payout ratio of 71% of underlying net profit, in line with COH’s 70% target payout
  • COH’s balance sheet position remains strong with net cash of $564.6m at year-end, improving from $457m in FY20

Company Description: 

Cochlear Ltd (COH) researches, develops and markets cochlear implant systems for hearing impaired people. COH’s hearing implant systems include Nucleus and Baha and are sold globally. COH has direct operations in 20 countries and 2,800 employees.

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Shares Small Cap

Nufarm’s Fiscal 2022 Cash Conversion and working capital moves favourable

Business Strategy and Outlook

Nufarm is a major producer of crop-protection products including herbicides, fungicides, and pesticides, selling into all major world markets. The company is leveraged to growing demand for crops for biofuels, and food from rapidly industrialising markets such as China and India. Growth should come from astute brand and offshore business investments and from a customer-service-focused strategy. However, the global crop-protection markets are competitive and earnings are cyclical, given a reliance on seasonal conditions. Sumitomo Chemical’s 16% investment in Nufarm endorses the quality of its global distribution. Collaboration broadens product portfolios and adds distribution in Asia.

Nufarm has a growing presence in North America and Europe. Sound sales momentum has been evident in North America and Europe. Several Chinese companies have previously expressed interest in acquiring Nufarm, but withdrew either because of too high a price demanded by the board, or because of reduced availability of debt. In 2010, Japanese company Sumitomo Chemical bought 20% of Nufarm, subsequently increasing its stake to 23% before diluting to 16%. The resultant collaboration should boost the performance of both companies, given little product portfolio overlap.

Financial Strength

Nufarm’s balance sheet is in great shape. In early April 2020, the company received AUD 1.2 billion net sale proceeds from major shareholder Sumitomo, for the sale of its South American crop protection and seed treatment operations in Brazil, Argentina, Colombia, and Chile. This significantly bolstered the finances at a very fortuitous time, coming mid coronavirus. Prior to this in January 2020, group net debt had stood at a whopping AUD 1.6 billion. Nufarm’s under-leveraged balance sheet remains a strength. Fiscal 2021 net operating cash flow rebounded strongly from negative AUD 398 million in the pcp to positive AUD 370 million. This reflects a focus on working capital management. It sees net debt down 40% to a modest AUD 173 million, leverage (ND/(ND+E)) of just 8% and net debt/EBITDA very comfortable at 0.5. Net working capital significantly improved post sale of the Latin American business and remains a focus with improved debtor collections, reduced inventory and foreign exchange translation.

Our AUD 7.00 fair value for no-moat crop protection company Nufarm. Underlying fiscal 2021 NPAT improved to positive AUD 61 million against an underlying loss of AUD 67 million in the pcp. NPAT in the fiscal second half was negligible at just AUD 0.7 million. On a full fiscal year basis, APAC revenue enjoyed a sharp turnaround, up 52% to AUD 858 million and segment EBITDA margin nearly doubled to 12.7%. Nufarm shares plunged 8.5% on the day of profit release, a strange response given an all-important strong cash flow performance. The fall may have been in reaction to a decline in salmon demand impacting sales of Omega-3 canola. But there is a long way to run on Omega-3, still in its infancy, and we are unconcerned.

Bulls Say’s

  • Nufarm benefits from potential strength in soft commodities markets. 
  • Nufarm has well-established distribution platforms in most major global agricultural markets. 
  • Product and geographic diversification helps reduce earnings volatility.

Company Profile 

Nufarm Limited is a global crop-protection company that develops, manufactures, and sells a range of crop-protection products, including herbicides, insecticides, and fungicides. Nufarm sells its products in most of the world’s major agricultural regions, and operates primarily in the off-patent segment of the crop-protection market. Nufarm operates along two business lines: crop protection and seed technologies.

(Source: MorningStar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Shares Small Cap

Huon reported results as expected; however earnings dented due to impacts of Covid

Investment Thesis:

  • HUO takeover price is $3.85. The Board have announced it believes accepting the offer is in the best interest of shareholders, absent any superior offer or independent expert advice.
  • Founding/major shareholders, Frances and Peter Bender, who hold ~53% of total shares, intend on voting in favour.
  • Growing consumer preference for natural and organic products, both in Australia and abroad, may see significant increase in salmon sales and therefore higher share prices. 
  • Number two player in the domestic market. 
  • With rational behaviour around pricing, the concentrated industry could benefit. 
  • Supportive salmon prices given disruption to global salmon supply. 
  • High barriers to entry (desired temperatures and regulatory licenses difficult to obtain). 
  • Given the complex nature of salmon farming HUO is unlikely to have its dominant position as an Australian salmon farmer ever seriously threatened.

Key Risks:

  • Takeover fails to proceed. 
  • Impact to production due to adverse weather conditions and diseases. 
  • Chemical coloring in salmon may lead to further negative publicity and undermine demand for salmon.
  • Cost pressures or cost blowout could deteriorate margins significantly given the large cost base relative to earnings (EBITDA). 
  • Irrational competitive behaviour (domestic and international markets). 
  • Negative media on the sustainability of the Tasmanian salmon industry.

Key highlights:

  • On an operating basis, EBITDA of $16.7m was in line with management guidance but declined -65% on pcp due to a -10% fall in the average price, made worst by an increase in production which caused a shift in the channel mix to spot export sales at materially increased freight costs.
  • NPAT decline of -$128.1m was a significant deterioration from $4.9m in the pcp.
  • Cash flow from operations was -$3.0m reflecting higher working capital requirements as freight costs doubled on pcp to $66m.
  • The two main contributors were the -12% fall in the average international salmon price in FY2021 compared to the previous year and the significant increase in freight charges due to limited access to international flights.
  • The impact of these were amplified by the commencement of Huon’s ramp up in production as part of its five-year strategy to expand capacity to meet future growth in domestic demand
  • The shut-down of international commercial flights was a major impediment to gaining access to the markets Huon needed to sell 44% of its FY2021 harvest.
  • HUON also announced on 6 August 2021, a takeover offer at $3.85 per share which is a +38% premium to the Huon share price of $2.79 on the prior trading day’s close.

Company Description: 

Huon Aquaculture (HUO) is a vertically integrated salmon producer in Australia. Its operations span all aspects of the supply chain, from hatcheries and marine farming to harvesting and processing, as well as sales and marketing. HUO’s marine farms are located in the cool, pristine waters of Tasmania, with the Company’s logistics infrastructure delivering salmon efficiently to the major fish markets around Australia. 

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Dividend Stocks Shares

National Australia Bank (NAB) delivered a solid FY21 result despite underlying profit declining

Investment Thesis

  • Ongoing share back should be supportive of share price levels.
  • Well capitalized after the capital raising.
  • Expectations of further customer remediation costs.
  • Impairment charges provisioned for in 1H20 with lower risk of further impairments (especially as a low interest rate environment helps customers and arrears).
  • Strong franchise model with management capable of improving below a 40% cost to income ratio (however we do not factor in management’s long-term target of 35%). 
  • Potential pressure on net interest margins as competition intensifies with other major banks in a low interest rate environment. Though we expect these pressures to slightly alleviate as we move into a higher interest rate environment.
  • Improving return on equity with management proving their abilities in recent times to manage profitability in a low interest rate environment.
  • Strong provisioning coverage.
  • A well-diversified loan book.

Key Risk

  • Low growth environment impacting earnings.
  • Potential cuts or reduction to dividends due to low earnings growth. 
  • Intense competition for loan and deposit growth.
  • Normalizing / increase in bad and doubtful debts or increase in provisioning.
  • Funding pressure for deposits and wholesale funding (increased funding costs).
  • Any legal fees, settlements, loss or penalties associated with ASIC or US-based law suits.

FY21 Results Key Highlights:  Relative to the pcp:

  • Revenue declined -2.4% to $16,729m. Excluding large notable items in FY20, revenue was -3.0% lower, on lower Markets & Treasury (M&T) income, which was challenged due to limited trading opportunities.
  • Cash earnings up 76.8% to $6,558m. Excluding FY20 large notable items, cash earnings were up +38.6%.
  • Cash return on equity up 420 basis points to 10.7%.
  • Net interest margin of 1.71%, was 6bps lower due to M&T. NAB saw NIM pressure due to the low interest rate environment, home lending competitive pressures and a mix shift towards more fixed rate lending.
  • Group Common Equity Tier 1 ratio of 13% was up 153bps from September 2020 and includes 29bps net proceeds from the sale of MLC Wealth. Leverage ratio (APRA basis) is at 5.8%. Liquidity ratio quarterly average of 128%. Net Stable Funding Ratio of 123%.
  • Fully franked final dividend per share of 67 cents was up from 30cps in 2H20, and brings full year dividend to $1.27 per share, up +111% from 60cps in FY20.
  • Credit impairment charge write-back of $217m (versus $2,762m in FY20) reflecting forward looking provisions and lower underlying charges.
  • Collective provisions at 1.35 of credit risk weighted assets.

Company Profile

National Australia Bank Limited (NAB) is one of Australia’s largest banks, with the majority of their financial service businesses operating in Australia and New Zealand. The bank also has a presence in Asia, UK and the US. NAB offers banking services, credit and access card facilities, leasing, housing and general finance, international and investing banking, wealth and funds management, life insurance and custodian, trusts and nominee services.  

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
LICs LICs

Loomis Sayles Global Equity Fund: Concentrated portfolio of best global equities

The Responsible Entity (RE) is Investors Mutual Limited who has appointed Loomis, Sayles & Company, L.P as the Investment Manager of the Fund. Loomis Sayles is a global asset manager that was established in 1926 and had over US$350b AUM as at 30 June 2021 across fixed income and equity investment mandates.

The Fund has a long only investment strategy with a fundamental bottom-up investment approach with the portfolio representing the “best ideas” of the investment team. The Fund seeks to deliver a return (after fees and expenses but before taxes) in excess of the benchmark (MSCI All Country World Index) over a full market cycle, which is considered to be 3-5 years. The Manager has an unconstrained mandate with no sector, style or geographic limitations. Stock selection is driven by the fundamental bottom up analysis undertaken by the investment team. The portfolio is concentrated given the investable universe with 35-65 stocks. The Manager has a long-term investment horizon and as such typically has low levels of portfolio turnover. The portfolio is expected to be largely fully invested at all times, with the portfolio typically having a cash position of less than 5%.

Investment Team:

Eileen Riley and Lee Rosenbaum have managed the investment strategy behind the Loomis Sayles Global Equity Fund since 2013. They’re supported by a team of analysts and a solid foundation of interconnected firm-wide resources, enabling them to leverage extensive research capabilities across equity and debt. Collaboration helps ensure capital flows to the team’s best ideas.

Performance:

Global Equity Fund1 month1 yr2 yrs3 yrsSince Inception
Total Return2.70%27.20%19.00%20.00%20.00%
Benchmark*1.10%28.30%14.90%15.40%15.40%
Outperformance1.60%-1.10%4.10%4.60%4.60%

About the fund:

The Loomis Sayles Global Equity Fund seeks to provide a concentrated portfolio of best ideas in global equities. Using foresight and flexibility, the team behind the Loomis Sayles Global Equity Fund look far and wide to pursue attractive, sustainable potential returns. Their sound investment philosophy and disciplined process focus on uncovering drivers of long-term company performance. The research-driven approach is unconstrained by style, sector, or geography, with the flexibility to invest across market capitalisations, while risk management is integral to every investment decision.

This delivers a distinctive yet disciplined approach to global equities investing which looks different to other funds while seeking to deliver potential returns above the benchmark over the long term.

(Source: FNArena, loomissayles.com.au)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Funds Funds Sectors

Allspring Diversified Income Builder Fund – Class C: A fund providing high income

Fund Objective

The investment seeks long-term total return, consisting of current income and capital appreciation.

Approach

The strategy targets a yield of 4%-5% and allocates 60%-90% of assets in fixed income, with the remainder in stocks. The team may also employ tactical shifts, vetted by the firm’s tactical trading council, by trading currencies or equity sector indexes, but these can be difficult to execute well consistently. Since introducing a multisleeved approach in early 2018, this strategy has undergone three prospectus benchmark shifts that signal it continues to experiment with its profile. The most recent adjustment (February 2020) decreased the equity exposure by 10 percentage points to 25% in order to make room for a more diversified bond sleeve. Other adjustments include the removal of a REITs sleeve in September 2018, the addition of a securitized bond sleeve in March 2019, and the introduction of an options sleeve in January 2020.

Portfolio 

As fixed-income markets have proved richly priced, the portfolio managers cited more attractive capital appreciation and dividends in the equity space, prompting an uptick in the equity holdings to roughly 38% here by September 2021. Within that equity sleeve, technology stocks (Microsoft MSFT is a holding) and healthcare stocks (such as Bausch Health Companies BHC, DaVita DVA, and AbbeVie ABBV) occupied roughly 27% and 17% of assets, respectively. 

High-yield bonds dominate the fixed-income portion of the strategy (59% of the portfolio as of September 2021), and it is worth noting that these are more sensitive to equity markets than the investment-grade fare employed by many peers for downside protection in stressed markets. Other bond sleeves here are modest but diversifying relative to the portfolio’s historical profile and include municipal bonds (3%) and securitized bonds (2%).

People

Kandarp Acharya as co manager alongside Margie Patel, who was the sole manager since 2007 but is departing this strategy (though she remains on Allspring Diversified Capital Builder EKBYX) as of Dec. 13, 2021. This move is accompanied by the arrival of quantitative researcher Petros Bocray, a 15-year firm veteran and Acharya’s collaborator on Allspring Asset Allocation EAAIX.

Performance

Over the strategy’s short tenure with its new contours (January 2018 through November 2021), the 5.5% annualized return of its R6 share class modestly outpaced the 5.3% return of the Morningstar Conservative. Target Risk Index and trailed the 6.7% return of its custom benchmark (60% ICE BoA U.S. Cash Pay HY Index, 25% MSCI ACWI, and 15% Barclays Aggregate Index). From an absolute return perspective, the strategy also generated a higher return than the 5.0% median of its typical allocation–15% to 30% equity Morningstar Category peer.This strategy has a riskier profile than many strategies in the category, particularly during stress periods, resulting in risk-adjusted returns (as measured by the Sharpe ratio) that trail all comparative points (typical category peer and benchmark as well as custom benchmark) over the aforementioned period. In three recent stress periods (when energy prices plummeted from June 2015 to February 2016, the 2018 fourth-quarter high-yield sell-off, and the coronavirus-driven market panic of Feb. 20-March 23, 2020), the fund lagged its category index by more than double and trailed its typical peer.

Top 10 Holdings

C:\Users\Akhila\Downloads\Screenshot 2021-12-10 121827.png

About the fund

The Fund seeks high current income from investments in income-producing securities. The Fund will normally invest at least 80% of its assets in income producing securities, including debt securities of any quality, dividend paying common and preferred stocks, convertible bonds, and  

derivatives. The strategy targets a yield of 4%-5% and allocates 60%-90% of assets in fixed income, with the remainder in stocks. The team may also employ tactical shifts, vetted by the firm’s tactical trading council, by trading currencies or equity sector indexes, but these can be difficult to execute well consistently.

(Source:Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.