Asymmetric Opportunities Fund November 2022 Update
Dear Investment Partner,
For the month ended 30 November 2022 the Asymmetric Opportunities Fund (AOF) returned 2.2% (after all fees).
By comparison, the fund’s benchmark, the S&P/ASX Small Industrials Accumulation Index, returned 2.7%.
| Returns to 30 November 2022 | 1 month | 3 months | CYTD 2022 | CY2021 | CY2020 | CY2019 | Since Inception 1 Jan 2019 (p.a) |
|---|---|---|---|---|---|---|---|
| Asymmetric Opportunities Fund (Net Return*) | 2.2% | -2.8% | -19.0% | 29.8% | 16.7% | 20.3% | 10.5% |
| Benchmark** | 2.7% | -1.7% | -19.0% | 13.7% | 5.9% | 24.5% | 5.1% |
| Value Add (Net) | -0.5% | -1.1% | 0.0% | 16.1% | 10.8% | -4.2% | 5.4% |
*Net of fees & assumes reinvestment of income distributions; **S&P/ASX Small Industrials Accumulation Index (XSIAI); All performance figures are calculated by Asymmetric Asset Managment Pty Ltd. Until June 2022 the Fund was priced on a quarterly basis. This affects the performance time frames that can currently be reported.
Net Asset Value (NAV) Unit Price: $1.0721
While the fund slightly underperformed its industrial benchmark, the more noticeable discrepancy at present is how significantly the industrials market is lagging broader indices which have significant exposure to resources . Materials and Energy are approximately a quarter of the ASX300 by market capitalisation.
For November, Small Resources leapt 11.5%, about 9% points better than the Small Industrials; and for the calendar year to date the Small Industrials are down 19% versus a fall of just 1.8% for the Small Resources.
Resource stocks are enjoying their ‘time in the sun’. However, as we have highlighted previously, the long-term returns from the resources sector are poor and we’ll be sticking to our strategy and not chasing returns from resource companies.
Reinforcing our standpoint, according to recent research by Goldman Sachs, the Small Industrials is trading at an approximate 26% discount to large industrials. That gap is one of the largest gaps in the past decade. This suggests the long-term returns from Small Industrials from here is promising.
PORTFOLIO HOLDINGS BY MARKET CAPITALISATION
| Portfolio Snapshot | ||
|---|---|---|
| # of Portfolio Positions (stocks held) | 14 | |
| Equity exposure | 95.4% | |
| Cash exposure | 4.6% | |
| Median Market capitalisation of companies held ($m) | $421.0 |
Portfolio Update
While most of the portfolio enjoyed gains for the month, the fund’s drag relative to market was mostly caused by two companies (Enero and Here There & Everywhere) with exposure to advertising. We’re acutely aware of the headwind a slowing economy causes for advertising spend but we have company- specific reasons for maintaining our positions here.
Kind regards,
Tim McArthur and 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.