Tag: Australian Market
Their Fully Franked Full Year dividend is 3.0%. The value of the management and performance fees forgone by the fund managers for the period totalled $3.9 million (June 2020: $3.4 million) and the value of the service providers, including the Board and Investment Committee working on a pro bono basis, totalled $0.7 million (June 2020: $0.5 million).
On 3 September 2021, FGX announced the issue of Bonus Options to shareholders on a one-for-one basis. The options will have an exercise price of $1.48 and can be exercised at any time up until the maturity date of 28 April 2023. The options will be listed under the code FGXOA.
The options are intended to be issued on 4 October and commence trading on the ASX on 5 October 2021. Options that are exercised on or before 17 November 2021 and shares held at the dividend record date of 22 November 2021 will receive the fully franked interim dividend of 3cps.
The exercise price is in line with the pre-tax NTA of the Company at the time of the announcement and represents a premium of 3.5% to the closing price at the close of the trading day before the announcement.
Assuming 100% of shares on issue are held by eligible shareholders on the Record Date (1 October 2021), the maximum number of options that may be issued is 401.26m and if all options are exercised the Company would raise $593.9m.
Investment Portfolio Performance
Company Profile
Future Generation Investment Company Limited is an investment company incorporated in Australia. The objective of the Fund is to provide exposure to a group of prominent Australian fund managers in a single investment vehicle. The Fund will invest in funds managed by a number of Australian fund managers with diversified exposure to Australian equities.
(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.
ESG characteristics and contribute towards the advancement of the UN Sustainable Development Goals, or SDGs. The investment process implements negative and positive screens and is based on a sustainable charter developed by the Sustainable Share Fund Compliance Committee. The negative screen seeks to eliminate companies that are involved in activities that are harmful to society. The positive screen aims to discover companies that make a constructive impact on society in areas of economic, environmental, and social development by making a net contribution to one or more of the UN SDGs. The fundamental research focuses on discovering undervalued companies in or entering an earnings upgrade cycle.
Portfolio:
The portfolio typically contains around 35-55 companies, which support the UN Sustainable Development Goals and have strong ESG practices. However, the stocks selected for the portfolio must also have attractive investment fundamentals and underestimated earnings growth potential. A composite research model houses the overall research process, blending ESG evaluations, qualitative analysis, and quantitative assessments. Stocks that score highly in the composite research model populate the biggest active weightings in the portfolio, though the maximum position is restricted to plus or minus 5% of the index weight. Companies that are involved in gambling, alcohol, and tobacco or mine fossil fuels, uranium, and gold are excluded from the portfolio.
People:
Johan Carlberg, AllianceBernstein’s former director of Australian equities, leads Alphinity, and his former AllianceBernstein colleagues Andrew Martin, Stephane Andre, and Bruce Smith all share investment duties. Andre and Smith are the portfolio managers of this strategy. In 2020, two new fundamental analysts were employed: Andrey Mironenko and Jacob Barnes. In addition, an ESG & sustainability manager, Jessica Cairns, was hired in 2020; she supports the strategies’ assessment and integration of ESG-related matters. Cairns also supports the strategy’s Compliance Committee and is involved in its efforts to define an investment universe that considers companies’ contribution towards achieving the UN’s Sustainable Development Goals.
Performance:
Alphinity took over investment management of this fund in late 2010. Alphinity Sustainable Share has outperformed the category index (S&P/ASX 200) and most category peers over three, five, and 10 years to 31 July 2021, on a trailing returns basis. Stocks that played a role in this solid performance include IDP Education, Fortescue, CSL, Goodman Group, and Lifestyle Communities.
(Source: https://www.alphinity.com.au/performance/)
Price:
Analysts find it difficult to analyse expenses since it comes directly from the returns. The share class on this report levies a fee that ranks in middle quintile. This share class is expected to deliver positive alpha relative to the category benchmark index.
(Source: Morningstar) (Source: Morningstar)
About Fund:
Alphinity was founded in 2010 by Johan Carlberg, Andrew Martin, Bruce Smith, and Stephane Andre, with Stuart Welch joining in 2017. The team structure is relatively flat, with all five senior team members being portfolio managers and undertaking company research. However, for more than a decade, Andre and Smith have made the major decisions on stock selection and portfolio construction for this strategy. The portfolio managers on stock research are capably supported by two fundamental research analysts, senior quantitative analyst, and senior trader. Alphinity Sustainable Share’s strong foundations–including experienced portfolio managers, disciplined multifaceted process, and comprehensive commitment to environmental, social, and governance-focused investments.
(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.
The company charges for its software based on the value of funds under management on its platform, comprising over 95% of group revenue, in addition to providing Netwealth-branded investment products, which are managed by third-party investment managers. Netwealth does not own investment management or financial advisory businesses.
The company has also benefited from regulatory changes such as the Future of Financial Advice, or FOFA, reforms, which require financial advisors to act in their clients’ best interests. These reforms have encouraged financial advisors to break away from vertically integrated, and potentially conflicted, wealth management businesses to operate as independent financial advisors, or IFAs, and use independent investment administration platforms, such as Netwealth, in the process.
Netwealth has also benefited from the banning of trail commission fees previously paid by investment administration platforms and investment advisors for recommending their products. This has encouraged financial advisors to seek new fee sources, including managed accounts, which were mainly available on the independent platforms.
The vertically integrated incumbent platform providers continue to develop their platforms, which poses a long-term competitive threat to Netwealth.
Netwealth Remains Overvalued Despite FUA Growth Upgrade
Netwealth’s share price jumped 16% following its third-quarter update, which included an increase to fiscal 2022 funds under administration, or FUA, net inflow guidance to AUD 12.5 billion from AUD 10 billion. However,the market overreacted to the announcement, is overly focussed on FUA and revenue growth, and is ignoring likely long-term outlook on profits and cash flows.
We have maintained Netwealth’s earnings forecasts and fair value estimate at AUD 6.50 per share, which is well below the current market price of AUD 16.56 per share.
Financial Strength
Netwealth is in good financial health because of its service-based and capital-light business model, which has little need for debt or equity capital. The company expenses, rather than capitalises, research and development costs, which results in strong cash conversion and means most operating cash flow is available for dividend payments. The profitable business model ensures dividends are fully franked, which we consider to be sustainable. We consider management’s target dividend payout ratio of 60%-80% of Netwealth’s statutory net profit after tax to be sustainable.
Bulls Say
- Netwealth has only a small proportion of the investment administration market, at around 4%, but has won market share quickly, and significant growth potential remains.
- Netwealth has a low fixed-cost base which means operating leverage is high and further strong revenue growth should be amplified at the EPS level.
- The investment administration platform industry has been growing at a low-double-digit CAGR in recent years, and we expect a high-single-digit CAGR over the next decade, providing a strong underlying tailwind for Netwealth.
Company Profile
Netwealth provides cloud-based investment administration software as a service, or SaaS, in Australia via its proprietary platform. Netwealth’s platform provides portfolio administration, investment management tools, and investment and managed account services to financial intermediaries and directly to clients. The company charges SaaS fees based on funds under management on its platform. Netwealth also offers Netwealth-branded investment products on its platform which are managed by third-party investment managers.
(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.
Well established and methodical investment Process
PIMCO’s investment process entails three main buckets: (1) the economic forum (top down analysis), which meets four times a year to debate the state of play on short and long – term basis. (2) the investment committee develops the strategic parameters for portfolios and set the risk parameters such as interest rate exposure, yield curve positioning and sector positioning. (3) Portfolio management (bottom-up analysis) consists of PIMCO’s rigorous analysis and research of securities.
Downside Risk
- Interest rate risk – (bond price and yields are inversely related)
- Credit risk (the risk of downgrade and default) & Inflation risk
- Personnel risk – significant turnover among the 3 lead PMs
Fund Performance
| (%) | Fund (net) | Benchmark | Out-performance | |
| 1-month | -0.15 | -0.22 | +0.07 | |
| 3-months | 1.08 | 1.53 | -0.45 | |
| FYTD | 0.87 | 1.03 | -0.16 | |
| 1-year | 1.69 | 0.55 | +1.14 | |
| 2-years (p.a.) | 2.54 | 1.53 | +1.01 | |
| 3-years (p.a.) | 4.38 | 4.28 | +0.10 | |
| Since inception (%p.a.) | 3.86 | 3.84 | +0.02 |
Source: PIMCO
Sector Exposure
Source: PIMCO
About the fund
The ESG Global Bond Fund is an actively managed portfolio of global fixed-interest investment which incorporates PIMCO’s ESG screening. The portfolio predominantly invests in governments, corporate, mortgage and other global fixed interest securities.
- The ESGGlobal
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.
