Asymmetric Opportunities Fund May 2023 Update
Dear Investment Partner,
For the month ended 31 May 2023 the Asymmetric Opportunities Fund (AOF) declined 2.6% (net of fees and expenses and assuming the reinvestment of distributions).
By comparison, the fund’s benchmark the S&P/ASX Small Industrials Accumulation Index declined 1.7%.
The closing net asset value (NAV) unit price was $1.1295
Portfolio Update
The fund’s underperformance this month can't be attributed to any company specific bad news. It was a simple case of owning more underperformers than outperformers over the month, without extremes.
Amongst the decliners were insurance broker AUB Group which appeared to experience some post capital raising softness. The raising was strongly supported (the fund participated in the discounted raising) with proceeds utilised on the balance of the Tysers acquisition.
Other companies to register notable share price falls included automotive aftermarket supplier GUD Holdings and radio broadcaster ARN Media (which changed its name from HT&E during the month).
With regards to ARN, readers will be aware we’ve been highly alert to potential economic headwinds, particularly at the consumer level. So, over the past twelve months we've built a portfolio of companies that are generally robust and exhibit defensive qualities. ARN is one of the few portfolio positions which we see as more exposed to a decline in consumption but its attractive discount to our assessment of fair value has led us to remain shareholders.
Bucking the downward trend in May was a continued strong performance from Karratha accommodation provider and modular building manufacturer Fleetwood. We’ve been long-term supporters of Fleetwood. Despite a series of set-backs, the company remained in the portfolio for a similar reason to ARN above i.e. its long-term earnings potential was not reflected in its share price. However, our conviction has been tested as our expectations have taken longer to come to fruition. Unfortunately, a tempering of our conviction meant we didn’t add to the fund’s position size (noting that it was already a meaningful weighting) during the period of weakness in Fleetwood’s share price. The fund has made good profits from its investment in Fleetwood so far but they could have been larger. Mistakes of omission can be just as painful as those of commission!
Kind regards,
Tim McArthur & Pierre Prentice
Co-Portfolio Managers
Disclaimer: The information contained in this document is general information only and does not constitute investment or other advice. The contents of this document do not constitute an offer or solicitation to subscribe for units in the Asymmetric Opportunities Fund. Asymmetric Asset Management (AFSL No: 536830) accepts no liability for any inaccurate, incomplete or omitted information of any kind or any losses caused by using this information.