Category: Research
an experienced investor with more than two decades of industry experience and around nine years at UBS. Grow steers the portfolio from its baseline allocation of 50/50 exposure to global and local fixed-interest markets.
The group philosophy is to find the best return available for a given level of risk, no matter where a bond is issued. Grow expresses thoughtful ideas via an allocation to several internal UBS funds, mostly in the International Bond Fund and the locally domiciled Australian Bond Fund. Further adjustments through overlays shape the portfolio when well-reasoned opportunities arise
Bonds and credit securities can be sourced locally and globally
The fund invests in a number of UBS pooled funds, which can include Australian Bond, Global Credit, International Bond, Asset Backed Securities, Asian Bonds, and cash. The fund uses the split benchmark for portfolio positioning, but the final portfolio has differed meaningfully in the past. This also means that the portfolio’s composition can move around quickly as the team’s view changes and markets move.
As at November 2019, there was around 40% allocated to the international strategy and 44% to the Australian strategy. The fund will also take significant duration and credit bets. During 2014, the fund’s duration position got as large as 1.8 years shorter than the benchmark in 2014 and contributed meaningfully to tracking error. While it was neutralised in April 2015, as at October 2019, it stood around 0.5-year longer than the benchmark.
The portfolio is predominantly made up of investment-grade exposure (typically 60% is in AA and above), but high-yield investments have featured (limited to 30% of the portfolio). China policy banks have been a new exposure since 2019 as they present a relatively attractive yield. As at June 2020, the team managed around AUD 2.6 billion in this strategy.
A balanced and experienced team
The UBS Australian Fixed Income team has been led by head of fixed-income Australia Anne Anderson and senior portfolio manager Tim van Klaveren. They have been with the business for more than 20 years and make for aformidable partnership. However, in October 2020 Anderson announced her retirement from UBS to seek advisory work in a part-time capacity. This means van Klaveren will take leadership of the Australian portfolio management team, and the responsibilities of senior portfolio manager Jeff Grow will increase.
Both are highly experienced with 31 and 26 years’ in the industry. Duties have typically been separated; van Klavaren is chair of the global IG subcommittee and is primarily focused on sector and credit allocation, while Grow is heavily involved in rates and currency positioning. Two additional portfolio managers assist here. On the credit side, Ben Squire leads the research efforts in APAC and has local analyst support. The Australian team has continual access to its global colleagues via the global macro committee, which produces key research for this strategy.
(Source: Fact Set)
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.
Our Opinion…
•New PM has solid investing experience, backed by a wider Fidelity analyst team.
On Mr. Kochar’s credentials and whether he is suitable to manage the Fund, Radhika Surie, Investment Director at Fidelity, highlighted in our meeting, that Mr. Kochar is “an experienced global growth-oriented Portfolio Manager. Ashish joins from Columbia Threadneedle and has over 16 years’ investment experience spanning across management of US, Global and Absolute Return products. He previously managed the Threadneedle Global Extended Alpha, American Extended Alpha, American Absolute Alpha and American Select funds. Prior to his 13 plus years at Columbia Threadneedle, he worked at hedge-fund manager, North Sound Capital, and Merrill Lynch. Ashish holds an MBA from Mason School of Business”. Mr. Kochar is expected to work closely with the broader global equities team and leverage the expertise of the 162 strong Fidelity global analysts
•Undermined investment process
On what will be the investment process which Mr. Kochar will adopt; Ms. Surie highlighted that the process remains to be officially determined (with the Fund’s documents to be updated). However, Ms. Surie highlighted “Ashish is a bottom-up fundamentals-based stock picker. His background in the hedge fund industry has given him a unique perspective, where he approaches investing in public markets like a private equity investor i.e. he likes to take an owner operator approach to stock selection – understanding business model is key. Ashish focuses on three main factors: high return on capital, strong management team and industry analysis which results in a portfolio that has a quality bias. A key metric is total earnings yield. In particular, a focus on operating earnings yield and factors that support growth in operating earnings, whether they come from businesses acquiring growth via factors like M&A; or restructuring via, say, divestitures; developing new products, adding production or distribution capacity. In evaluating management teams, he focuses on management compensation, track record, strategic plan, management accessibility and compensation. At any given point in time, Ashish looks to identify companies that meet a 15% total operating earnings yield potential”.
Downside Risks…
• PM Ashish Kochar departs Fidelity or the Fund or fails to fit well within Fidelity.
• The Portfolio Manager/analysts miss-calculate their bottom-up valuation.
• Deterioration in global economy which affect company fundamentals.
• Liquidity risk and volatility risk.
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.
Within months, sales had risen from 60 daily orders to over 1,000 orders. Nykaa capitalised on its success by tailoring products to Indian skin tones, skin types, and weather conditions. It introduced a wide range of nail colours, which presently number over 2,700.
It also introduced customers to make-up fundamentals like foundation, which it now provides in over 1,500 hues.
According to a copy of Nykaa’s draught red herring prospectus dated Monday, the company’s IPO will include a fresh issue of shares for up to 5.25 billion rupees ($70.63 million) and an offer for sale of up to 43.1 million shares.
Nykaa, which began selling cosmetics and grooming products on its website and apps in 2012, surged in popularity before expanding into fashion, pet care, and household supplies.
According to the prospectus, the company had 43.7 million downloads across all of its mobile applications as of March 31. It also has an offline presence in India, with 73 physical outlets spread over 38 cities.
Aside from TPG, the company has investors such as Fidelity Investments and Alia Bhatt, a well-known Indian film star. According to the prospectus, Nykaa would use the IPO proceeds to open new retail outlets, support capital expenditures, and repay debts.
Nykaa’s strategy has been to spend in technology, marketing, and product extensions in order to maintain its position.
Its online offerings, similar to Netflix Inc.’s movie recommendations, use algorithms to recommend things based on what users have already purchased.
(Source: Fact Set)
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.
while the more expensive N share class is rated Silver. This strategy is hemmed in compared with others they run given its 5% limit on high-yield corporate, and in practice it has had very little exposure there. As a result, the strategy outpaced 80% of peers in 2020, its best calendar year relative to peers since 2012. Among traditional core bond offerings, this is one of the best options available to investors.
Executing and refining
The strategy has long exhibited a strong balance between flexibility and discipline, while smaller, more recent improvements should continue to differentiate it from peers. As a result, its Process Pillar rating is upgraded to High from Above Average. This strategy is run by value investors looking to buy bonds when they’re cheap and sell them when they get expensive. They also dial risk up and down in a predictable fashion, and have made slight changes in recent years, such as an adjustment to more dynamically manage duration, which has resulted in the strategy being more competitive.
Back on defense
As of December 2020, the strategy’s largest allocation was to U.S. Treasuries, which soaked up 41% of assets. This was up dramatically from just a few months prior; Treasuries accounted for 30% of assets at the end of 2019 before managers drew down that stake to fund purchases during the sell-off, and by March 2020 it had fallen to under 9%. Agency mortgage-backed securities were the next-largest allocation at 30% of assets, a number that also moved around dramatically throughout the last year.
The managers dropped it to 5.2 years when the Fed cut rates in early 2020 but have since been increasing it as the economy and market recovered.
Rock steady
From January 2010 (the team’s first full month) through March 2021, the strategy’s institutional share class returned 4.3% annualized, beating roughly four fifths of distinct intermediate core bond peers; the peer group’s median return over the same period was 3.8%, while the benchmark Aggregate Index returned 3.7%. Though this strategy has less flexibility to invest in high-yield than Metropolitan West Total Return Bond (this one can own up to 5%, while its sibling can hold 20%), its overall positioning has mirrored the firm’s flagship strategy. Conservative positioning heading into 2020 led the strategy to hold up better than two thirds of distinct peers in the COVID-19 sell-off between Feb. 20, 2020, and March 23, 2020. As a result, the strategy beat out 80% of peers for calendar-year 2020.
(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.
Our Opinion…
- Well-resourced with a highly experienced team. RARE’s investment team is one of the largest in global listed infrastructure with 11 investment professionals focused on analysis of infrastructure securities solely. The Fund is managed by Nick Langley, Shane Hurst and Charles Hamieh and more recently Simon Ong who possess strong credentials and investment experience. PMs Mr. Hurst and Mr. Hamieh are also responsible for the governance and management of the investment process and the Sydney-based Infrastructure Investment team. They report to ClearBridge’s co-Chief Investment Officers and PMs Scott Glasser and Hersh Cohen, who are located in New York, but by and large are left alone to manage the Fund.
- Strong interest alignment. Relative to peers, the Manager has one of the best remuneration programs which aligns the interest of the investment team with investors. PM remuneration focuses on delivering 1-, 3-, and 5-year performance versus benchmark and peer group whilst research analysts compensation is skewed towards new idea generation, best ideas as measured in the performance model and PM feedback.
- Investment process yielding proprietary investment Universe. RARE utilises a list of 200 infrastructure companies known as the ‘RARE 200’ as its proprietary investment universe. The ‘RARE 200’ consists of 200 of the most liquid, high quality, high concentration infrastructure companies globally. Additionally, these stocks are screened for specific characteristics including long duration in assets, predictable cash flows, low volatility, inflation protection, and monopolistic or little competition.
| Main Details APIR Code |
| TGP0034AU |
| Asset Class |
| Global Shares |
| Market Capitalisation Large |
| Style |
| Neutral (Value bias) |
| Fund Size |
| $846.6m |
| Fees (MER) |
| 0.974% p.a. |
| Distribution |
| Quarterly |
Downside Risks…
- Rising interest rate environment.
- Deterioration in growth of economies that the Fund invests in. This includes
unfavorable regulations towards infrastructure assets.
- Key man risk – departures of any personnel on the investment team, but especially, Nick Langley, Shane Hurst and Charles Hamieh and Simon Ong.
Source: ClearBridge Investments Ltd.
Fund Performance
Figure 1: Fund historical performance (as at 30 Jun 2021) – Currency Unhedged
| (%) | Fund | Benchmark** | Out-performance |
| 1-mths | +1.5 | +1.0 | +0.5 |
| 3-mths | +5.4 | +2.8 | +2.7 |
| 1-year (p.a.) | +12.0 | +7.5 | +4.5 |
| 3-year (p.a.) | +8.1 | +7.1 | +0.9 |
| 5-year (p.a.) | +7.5 | +7.3 | +0.2 |
| Inception* | +9.9 | +7.1 | +2.8 |
Source: ClearBridge Investments Ltd. Past performance is not indicative of future performance.
* Internal calculations for ClearBridge RARE Infrastructure Value Fund – Unhedged Class A Units. All index data sourced from FactSet. Results over one year annualised. Fund performance is net of fees, assuming all distributions are reinvested and before tax. Performance inception date for ClearBridge RARE Infrastructure Value Fund – Unhedged Class A Units is 31/05/2011.
** OECD G7 Inflation Index +5.5% over a market cycle (rolling 5-year periods)
Fund Positioning
Figure 2: Fund Characteristics and Top 10 Positions (as at 30 Jun 2021)
| Portfolio Weighted Avg | Top 10 | Weight (%) | |
| Avg Market Capitalisation | 60.7bn | Enbridge Inc | 5.11 |
| Div Yield (Fwd) Gross | 3.10% | Union Pacific | 4.85 |
| 5 Yr DPS Growth (PA) | 8.10% | Vinci | 4.57 |
| Gearing (Current) | 34.00% | Exelon Corp | 4.37 |
| Interest Cover (Historic) | 3.7x | GetLink | 4.07 |
| EV/EBITDA (Forward) | 17.20% | Cheniere | 4.06 |
| American Tower | 3.93 | ||
| Cellnex | 3.78 | ||
| Public Services Enterprise Group | 3.75 | ||
| Ferrovial | 3.50 | ||
| Total | 42.00 |
Figure 3: Fund allocation breakdown (as at 30 Jun 2021)
Source: ClearBridge Investments Ltd.
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.
Our Opinion…
- Well-resourced, capable and experienced investment team. We regard the CIO and investment team of Altius as very experienced and capable investment managers.
- We like the total return focus, to protect capital in a rising yield environment. The Manager has an absolute return focus and is looking to protect capital in a rising interest rate environment. Whilst global rates are likely to be lower for longer, a specialist manager that can adequately navigate this risk is highly desirable.
- Being benchmark unaware requires conviction. We agree that most managers will look to manage their portfolios relative to a benchmark, which leads to risk managed on a relative basis (rather than absolute) and foregoing opportunities to drive alpha. This is where we expect Altius’ investment team to exercise significant investment experience and investment process to deliver superior returns.
- Scenario analysis critical to the investment process. In our view, the key component of the investment process is the scenario analysis forecasting and building a case for Best Case, Central Case and Worst Case. Putting a well thought-out and researched narrative around each case allows the investment team to answer critical questions and define the macro economic landscape. In our discussions with the team, we broadly agree with their current view under each case and analysis to support it. Whilst agreeing to their view is not so important to us, what we appreciate is the analysis (and logic) and how the narrative was articulated to us. We believe the Manager understands the market and critical drivers.
- Focus on liquidity management. The Manager embeds risk management in strategy formulation, with the liquidity risk being a key consideration during the security selection process and managed through a 10% buffer of cash-like assets, giving the fund some downside protection from impaired liquidity when credit cycles turn.
| Main Details | |
| APIR Code | WFS0486AU |
| Asset Class | Australian Fixed Interest |
| Inception date | 14 June 2011 |
| Style | Absolute Return |
| Fund Size | $133.39m |
| Fees (MER) | 0.46% p.a. + expense recovery |
| Distribution | Quarterly |
| Portfolio Characteristics | |
| Benchmark | 50% Bloomberg AusBond Composite (0+Y) + 50% RBA Cash Rate |
| Yield to maturity (%) | 1.17 (versus 0.58 benchmark) |
| Modified duration (years) | 1.91 (versus 3.02 benchmark) |
Downside Risks…
- Interest rate risk (however the Fund’s total return focus should limit this).
- The Manager gets the thematic and top down view wrong.
- Key man risk – Bill Bovingdon, Chris Dickman and Gavin Goodhand.
- Key man risk – Bill Bovingdon, Chris Dickman and Gavin Goodhand.
Source: Altius Asset Management
Fund Performance
Figure 1: Altius Bond Fund historical performance (as at 30 June 2021)
| (%) | Fund | Benchmark** | Out-performance |
| 1-month | -0.16 | +0.35 | -0.51 |
| 3-months | +0.38 | +0.77 | -0.39 |
| 1-year (p.a.) | -0.48 | -0.32 | -0.16 |
| 3-years (p.a.) | +1.53 | +2.49 | -0.96 |
| 5-year (p.a.) | +1.66 | +2.13 | -0.47 |
| 7-year (p.a.) | +2.27 | +2.73 | -0.46 |
| 10-year (p.a.) | +3.53 | +3.45 | +0.08 |
| Since inception (p.a.)* | +3.54 | +3.46 | +0.08 |
Source: Altius Asset Management; Past performance is not an indicator for future performance. * Inception date for performance calculations is 14 June 2011. ** Effective 1 July 2016, Benchmark is 50% Reserve Bank of Australia Cash Rate and 50% Bloomberg AusBond Composite 0+Yr Index and applied retrospectively for all periods.
Fund Positioning
Figure 2: Fund sector allocation (as at 30 June 2021)
| Fund % | Benchmark % | |
| Australian Commonwealth Government | 6.44 | 28.65 |
| Supranational | 15.06 | 4.63 |
| Industrials | 17.06 | 2.08 |
| Financials | 18.63 | 1.50 |
| Asset Backed | 9.62 | 0.00 |
| Agencies | 10.59 | 0.14 |
| 11am | 0.97 | 0.00 |
| Cash at Bank | 0.69 | 0.00 |
| RBA Cash | 0.00 | 50.00 |
| Semi Government | 20.95 | 13.00 |
Source: Altius Asset Management
Figure 3: Top 10 holdings (as at 30 June 2021)
| Fund % | Benchmark % | |
| New South Wales Treasury Corp | 11.13 | 3.09 |
| National Housing Finance & Investment Corp | 10.60 | 0.05 |
| Australian Commonwealth Government | 6.44 | 28.25 |
| Asian Development Bank | 4.94 | 0.40 |
| Treasury Corp Victoria | 4.34 | 2.78 |
| Queensland Treasury Corp | 3.28 | 3.09 |
| Inter-American Development Bank | 3.22 | 0.33 |
| UBS Ag Australia | 2.92 | 0.04 |
| Intl Bank Reconstruction & Development | 2.21 | 0.35 |
| McDonalds Corp | 1.89 | 0.00 |
Source: Altius Asset Management
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.
The agreement’s specifics
Square, Inc. and Afterpay Limited confirmed today that they have signed a Scheme Implementation Deed through which Square has come to terms to purchase all of Afterpay’s issued shares through a court-approved Scheme of Arrangement.
Jack Dorsey, the CEO of Twitter, is leading a $29 billion acquisition of Australian Afterpay
The deal is expected to be paid in all stock and has an indicated value of about US$29 billion (A$39 billion) based on the closing price of Square common stock on July 30, 2021. The merger will allow the organizations to achieve more enticing financial goods and services to more clients, as well as boost profits for retailers of all sizes. The deal is expected to close in the first quarter of 2022, depending to the fulfilment of certain closing terms stipulated.
Square’s strategic ambitions for its Seller and Cash App ecosystems will be accelerated by Afterpay, the world’s first worldwide “buy now, pay later” platform. Afterpay will be integrated into Square’s current Seller and Cash App business units, allowing even the tiniest retailers to offer BNPL at checkout, allowing Afterpay consumers to handle their instalment payments directly in Cash App, and allowing Cash App customers to discover merchants and BNPL offers directly within the app.
With such a best-in-class solution and a strong cultural alignment with Square, Afterpay is an industry leader. As of June 30, 2021, Afterpay had over 16 million customers and approximately 100,000 merchants worldwide, including major shops in fashion, home goods, cosmetics, athletic goods, and more.
Customers can buy with control of their finances
Afterpay enables customers to get the products they want and need while also enabling them to stay in control of their finances. Afterpay also helps merchants expand their operations by encouraging repeat purchases, increasing average transaction sizes, and allowing customers to pay over time. Afterpay is dedicated to assisting consumers in spending responsibly without incurring service fees, interest, or revolving debt, and currently supports customers in a number of countries spanning APAC, North America, and Europe (including under its Clearpay brand).
Source: squareup.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.
Looking across CNH’s end markets, we think agriculture demand will continue to be a major driver in the back half of the year. In our view, demand will be supported by strong crop exports to China. This dynamic has been a key reason why crop prices have been relatively high over the past year. Rising crop prices have propelled farmer incomes higher, allowing them to refresh their aging agriculture equipment–a benefit to CNH.
Overall, manufacturing sales reached $8.5 billion in the quarter, up 65% year on year. The strength in the company’s top line was attributable to increased volumes and favorable product mix. In agriculture, tractor sales worldwide were up 28%, compared with the prior-year period. Of that, high horsepower tractors (above 140 horsepower) saw strong volume growth in North America, surging 49% year on year. Combines also contributed to volume growth in the quarter, up 14% worldwide, with extraordinary growth in South America (up 38% year on year). CNH’s gross margins were also strong in the quarter, coming in at 19.3% as higher pricing more than offset cost inflation (due to supply chain constraints).
Company’s Future Outlook
Management reaffirmed its commitment to spinning off the on-highway business (commercial vehicles and power train businesses). Following the spin-off, CNH’s end market exposure will largely be focused on agriculture markets, with the balance in construction markets. We believe this is a good move for the company as the agriculture business has been fairly profitable for CNH. On average, its EBIT margins have been nearly twice the consolidated business’ EBIT margins. We estimate over 80% of EBIT will be coming from agriculture after the spin-off is completed, putting CNH on much better footing from a profitability standpoint.
Company Profile
CNH Industrial is a global manufacturer of heavy machinery, with a range of products including agricultural and construction equipment, commercial vehicles, and power train components. One of its most recognizable brands, Case IH, has served farmers for generations. Its products are available through a robust dealer network, which includes over 3,600 dealer and distribution locations globally. CNH Industrial’s finance arm provides retail financing for equipment and vehicles to its customers, in addition to wholesale financing for dealers; which increases the likelihood of product sales.
(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.
On August 6, a day before issue opening, the corporation will open its anchor book, if any, for a day.
The public offering of 1,85,32,216 equity shares is a full offer for current selling shareholders to sell their shares. The total value of the offer is Rs 2,998.51 crore.
Highdell Investment 84,09,364 equity shares, MacRitchie Investments Pte Ltd 50,76,761 equity shares, and Springfield Venture International 17,65,309 equity shares will be sold through the IPO by CMDB II.
Bina Vinod Sanghi (jointly held with Vinay Vinod Sanghi) will sell 1,83,333 equity shares, Daniel Edward Neary will sell 70,000 equity shares, Shree Krishna Trust will sell 2,62,519 equity shares, Victor Anthony Perry III will sell 50,546 equity shares, and Vinay Vinod Sanghi (jointly held with Seena Vinod Sanghi) will sell 4,50,050 equity shares.
Investors can bid for as few as 9 equity shares and as many as 9 equity shares after that.
The company has set aside 50% of the overall offering for eligible institutional purchasers, 35% for retail investors, and the remaining 15% for non-institutional buyers.
With 34.44 percent of the company, Mauritius-based Highdell Investment is the largest shareholder, followed by MacRitchie Investments with 26.48 percent, CMDB II with 11.93 percent, Springfield Venture International with 7.09 percent, and Vinay Vinod Sanghi with 3.56 percent.
CarTrade is a multi-channel auto platform that covers a wide range of vehicle types and add-on services. CarWale, CarTrade, Shriram Automall, BikeWale, CarTrade Exchange, Adroit Auto, and AutoBiz are some of the company’s brands.
The company uses these platforms to make it simple and efficient for new and used car buyers, dealerships, OEMs, and other businesses to buy and sell their automobiles.
(Source: Fact Set)
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.