fitzpatricks mda specific portfolios · the telecommunications and insurance sectors dragged...

FITZPATRICKS MDA SPECIFIC PORTFOLIOS

Monthly Report, September 2016

www.fitz.com.au 1Monthly Report | Fitzpatricks MDA

Source: Fitzpatricks, Iress. Performance from 30 September 2002 to 30 September 2016. Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past performance is not a reliable indicator of future performance.

PERFORMANCE

AUSTRALIAN EQUITIES – DIRECT The return on the Portfolio was lower for September, down -1.1 per cent for the month in comparison to the S&P ASX 200 Accumulation Index, which returned a relatively flat 0.5 per cent over the same period. Small cap returns outperformed the S&P ASX 200 Accumulation Index this month with the S&P ASX Small Ordinaries Accumulation Index up by 1.5 per cent in September.

The Australian market caught the cold that came out of Wall Street in the first half of September. A collective sell off by systematic fund managers, many having a higher than desired exposure to equities, coupled with an anticipated rate hike announcement by the U.S. Federal Reserve (The Fed) initially sent markets lower.

The Telecommunications and Insurance sectors dragged markets lower this month with returns down -4.0 per cent and -0.9 per cent respectively. The Portfolio was underweight Telecommunications in comparison to the benchmark, adding positively to equity performance. Towards the end of the month the Financial Sector suffered partially due to the uncertainty concerning Europe’s largest lender, Deutsche Bank.

Markets recovered sharply towards the latter half of the month as The Fed left official interest rates unchanged. Gains in the domestic market were largely attributed to the advances in the Resource Sector as oil prices surged on the back of an announcement by the

Performance VolatilityPortfolio Inception

1 Month 3 Months 6 Months 1 Year 2 Years p.a.

3 Years p.a.

5 Years p.a.

Since Inception

Since Inception Date

Direct Australian Equities Portfolio -1.1% 1.9% 2.4% 8.5% 8.8% 8.2% 13.2% 11.3% 12.7% 30/09/02

S&P ASX 200 Accumulation Index 0.5% 5.1% 9.3% 13.2% 6.0% 6.0% 11.2% 9.1% 13.1% 30/09/02

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16

MDA Direct Australian Equities Portfolio

S&P ASX 200 Accumulation Index

Organization of the Petroleum Exporting Countries (OPEC) with an aim to reduce the supply of oil.

Lovisa Holdings (LOV) continued to add positively to the portfolio’s performance, whilst we exited our position in Regis Healthcare (REG) due to regulation changes in aged care funding.

The performance of the Portfolio was down -0.9 per cent for the month. Both the Atrium Equity Opportunities Fund and the Bennelong ex-20 Australian Equities Fund underperformed in September, down -1.2 per cent and -1.7 per cent respectively. Underperformance in the Atrium Equity Opportunities Fund was due to overweight exposure to the Healthcare Sector as well as an underweight exposure to cyclical stocks which advanced in September.

The largest detractor to the Bennelong ex-20 Australian Equities Fund was TPG Telecom which retreated heavily in September.

Global equities ended the month flat overall as uncertainty returned to international markets in a month fuelled by market news.

The international equities portfolio was lower with a return of -1.2 per cent. This was on par with the MSCI All Countries World Index (Net AUD) which also returned -1.2 per cent. Uncertainty around monetary policy drove the global market decline in early September, however, gains by the Energy Sector on the back of OPEC’s announcement to limit oil production lifted markets slightly in late September. WTI crude rose 7.9 per cent over the month.

The MSCI Emerging Markets Index (Net

FITZPATRICKS MDA SPECIFIC PORTFOLIOS MONTHLY REPORT




3 Years p.a.

5 Years p.a.

Since Inception


Australian Equities (Managed Funds) Portfolio -0.9% 3.3% 4.5% 12.9% 10.1% 8.7% 13.1% 9.1% 10.8% 30/09/10

S&P ASX 200 Accumulation Index 0.5% 5.1% 9.3% 13.2% 6.0% 6.0% 11.2% 7.6% 12.1% 30/09/10



3 Years p.a.

5 Years p.a.

Since Inception


International Equities Portfolio -1.2% 3.3% 5.0% 1.8% 12.7% 13.6% 16.2% 7.6% 10.0% 30/09/02

MSCI World ex Australia, (Net in AUD) -1.3% 2.0% 6.4% 1.9% 10.1% 13.4% 17.3% 5.7% 11.6% 30/09/02

MSCI World ex Australia (Net Local) 0.2% 4.8% 6.0% 10.5% 4.7% 8.2% 13.5% 7.8% 13.6% 30/09/02

Source: Fitzpatricks, Iress. Performance from 30 September 2010 to 30 September 2016 Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past performance is not a reliable indicator of future performance.


PERFORMANCE

PERFORMANCE

AUSTRALIAN EQUITIES – MANAGED FUNDS

INTERNATIONAL EQUITIES

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

$1,800

$1,900

Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16

Australian Equities (Managed Funds) Portfolio

S&P ASX 200 Accumulation Index

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16

International Equities Portfolio

MSCI World ex Australia, (Net in AUD)

MSCI World ex Australia (Net Local)

AUD) was down -0.5 per cent as markets in Asia ended mixed. In Europe, the Euro Stoxx 50 Index was down -0.6 per cent while the German DAX fell -0.8 per cent as uncertainty again spread throughout Europe with Europe’s largest lender attempting to finalise a penalty settlement with the U.S. Department of Justice.

Global managers retreated lower with Northcape Capital Global Emerging Markets down -0.4 per cent and the Antipodes Global Fund Long Only Class down 0.2 per cent. The Atrium Global Equities Mandate No.1 (Magellan Global Fund) was the largest detractor to the international portfolio, down -1.5 per cent for the month.

September currency movements proved to be unfavourable as the Australian Dollar (AUD) appreciated against the U.S. Dollar (USD) by 1.9 per cent, ending the month at U.S $0.77. The AUD also appreciated against most other major currencies, including the Euro, up 1.3 per cent, and the British Pound, up by 3.2 per cent.

Meanwhile, the SGH ICE Professional Investor Fund returned 0.4 per cent. No changes were made to the portfolio during the month.



The Portfolio was lower in September, ending the month down -0.4 per cent as the performance of underlying managers ended the month mixed.

CTA (Commodity Trading Advisers) strategies were universally lower with the Transtrend and Winton Segregated Portfolios collectively lower by -2.5 per cent and -1.0 per cent. Transtrend’s largest losses were attributable to their short positions in the commodity markets, mainly in base metals and the oil markets whilst Winton faced tough trading conditions overall.

Market Neutral and Global Macro Trading strategies were lower as most funds ended the month in the red. The Bennelong Long



3 Years p.a.

5 Years p.a.

Since Inception


Alternatives Portfolio -0.4% -0.9% -0.1% -0.6% 4.4% 4.8% 4.9% 5.5% 3.8% 30/09/10

RBA Cash Rate 0.1% 0.4% 0.9% 1.9% 2.0% 2.2% 2.7% 3.0% 0.3% 30/09/10

Source: Fitzpatricks, Iress. Performance from 30 September 2010 to 30 September 2016 Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past performance is not a reliable indicator of future performance.

PERFORMANCE

ALTERNATIVES

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16

Alternatives PortfolioRBA Cash Rate

Short Equity Fund underperformed with a return of -1.1 per cent. The fund had a long position in TPG Telecom and a short position in Telstra while TPG Telecom’s prices declined, adding to the funds lacklustre performance.

Of the underlying managers, the GMO Systematic Global Macro Trust was the only fund to defy the negative trend ending 1.4 per cent higher for the month.

The Portfolio’s position in the Crown Atrium Potomac River Segregated Portfolio was fully divested in September.



The Portfolio had a return of 0.2 per cent compared with a cash return of 0.1 per cent. The key focus for the rates markets in September remained The Fed’s stance on impending rates hike.

Listed fixed income returns were slightly weaker for the month, in line with the broader Australian credit market. The Kapstream Absolute Return Income Fund – Premier Class returned 0.2 per cent for the month and has returned 3.8 per cent net of fees on a 12 month basis outperforming the 12 month cash



3 Years p.a.

5 Years p.a.

Since Inception


Atrium Enhanced Fixed Income Fund 0.2% 1.1% 2.3% 3.8% 3.5% 0.7% 01/09/15

Bloomberg AusBond Composite Bond Index - All Maturities (TR) -0.2% 0.9% 3.8% 5.7% 6.3% 6.2% 6.0% 5.5% 2.3% 01/09/15

RBA Cash Rate 0.1% 0.4% 0.9% 1.9% 2.0% 2.2% 2.7% 1.9% 0.1% 01/09/15


PERFORMANCE

ENHANCED FIXED INCOME

$980

$990

$1,000

$1,010

$1,020

$1,030

$1,040

$1,050

$1,060

$1,070

Atrium Enhanced Fixed Income FundRBA Cash RateBloomberg AusBond Composite Bond Index - All Maturities (TR)

rate by 1.9 per cent.

Currently, operational due diligence is underway on a range of investments being considered as part of the Portfolio, with a small number in the final stages of committee approval.


MARKET COMMENTARY

Concluding his 10 year term as governor of the Reserve Bank of Australia (RBA), retiring Chairman Glenn Stevens delivered his final speech on the state of the Australian economy and related monetary policy on the 6th September 2016. In light of the continued trend of lower inflation and subdued growth in labour costs domestically and globally, interest rates remained unchanged at 1.50 per cent.

On the domestic front, the Australian economy showed signs of slow but continued growth despite the continued slump in business investments. Historically lower costs of borrowing have supported domestic consumer demand, and a comparatively lower exchange rate (since the highs in 2013) has aided the trade sector. China’s economy continued to moderate as the government steers the economy away from the reliance on industry towards consumption and services, a trend that will continue to have a spillover effect on Australia’s trade and exports industries.

Domestic markets remained relatively flat with the S&P ASX 200 Accumulation Index returning 0.5 per

cent for September on the back of mixed results from underlying sectors. Materials and Mining were both stronger in September, up 5.6 per cent and 8.1 per cent respectively. The Telecommunications and Insurance Sectors ended the month weaker, down -4.0 per cent and – 3.6 per cent respectively driven by domestic fundamentals as well as global market trends. The Australian to U.S dollar (AUD/U.S) exchange rate climbed higher by 1.9 per cent closing the month at U.S$0.77.

Globally September proved to be a volatile month driven by market as well as company specific announcements. Markets awaited for news out of the U.S Federal Reserve (The Fed) on movements to official rates which remained unchanged (maintaining a target range of 0.25 to 0.50 per cent). Reflective of the previous month, business fixed investments continued to remain soft as household spending remained the dominant driver of economic growth. September nonfarm payroll numbers (indicator of employment growth) was below expectations (increasing by 156,000 jobs) and inflation remained below the targeted 2 per cent long run objective.

On the backdrop of this data, the Federal Reserve board noted that although the case for a rates increase had strengthened, further observations on overall market movements were required and continuing to maintain an accommodative stance was the optimal solution during this period.

Global equity markets weathered an unpredictable month. As a rates decision removed some uncertainty from the markets, announcements by OPEC (Organisation of the Petroleum Exporting Countries) as well as news out of Europe sent markets into a spin. The price of oil surged by 6.2 per cent in the latter half of September (as measured by the price of Brent Crude) as OPEC announced its intention to limit the supply of oil production.

Coupled with a resurgence in the price of oil, European markets fell as news out of Germany weighed heavily on the banks and overall market sentiment. The DAX Index ended 0.8 per cent lower for the month as Deutsche Bank, Europe’s largest lender, tried to reach an agreement with the U.S Department of Justice over settlement related to the sale of mortgage backed securities.



PORTFOLIO TARGET ALLOCATIONS

Target Weights

AS AT 30 SEPTEMBER 2016Australian Equity

- DirectAustralian Equity - Managed Funds

International Equity

AlternativesListed Fixed

Income

TOTAL 100.0% 100.0% 100.0% 100.0% 100.0%

CASH / LIQUIDITY 2.0% 2.0% 2.0% 2.0% 2.0%

BONDS 0.0% 0.0% 0.0% 0.0% 98.0%

Listed Fixed Income 0.0% 0.0% 0.0% 0.0% 98.0%

EQUITIES 98.0% 98.0% 98.0% 0.0% 0.0%

Austalian Equities 98.0% 98.0% 0.0% 0.0% 0.0%

Atrium Equity Opportunities Fund 0.0% 44.1% 0.0% 0.0% 0.0%

SG Hiscock ICE Fund 0.0% 29.4% 0.0% 0.0% 0.0%

Bennelong ex-20 Australian Equity Fund 0.0% 24.5% 0.0% 0.0% 0.0%

International Equities 0.0% 0.0% 98.0% 0.0% 0.0%

IFP Global Franchise Fund 0.0% 0.0% 12.7% 0.0% 0.0%

Atrium Global Equities Mandate No. 1 (Magellan) 0.0% 0.0% 62.7% 0.0% 0.0%

Northcape Capital Global Emerging Markets Fund 0.0% 0.0% 5.4% 0.0% 0.0%

Antipodes Global Fund 0.0% 0.0% 17.2% 0.0% 0.0%

LIQUID ALTERNATIVES 0.0% 0.0% 0.0% 98.0% 0.0%

Atrium Alternatives Fund 0.0% 0.0% 0.0% 98.0% 0.0%

Crown Atrium Alternative Investment SPC (USD) 0.0% 0.0% 0.0% 27.9% 0.0%

Zebedee Segregated Portfolio 0.0% 0.0% 0.0% 11.3% 0.0%

Nezu Japan Segregated Portfolio 0.0% 0.0% 0.0% 6.4% 0.0%

Eaglevale Segregated Portfolio 0.0% 0.0% 0.0% 1.8% 0.0%

Atreaus Segregated Portfolio 0.0% 0.0% 0.0% 3.6% 0.0%

Transtrend Segregated Portfolio 0.0% 0.0% 0.0% 2.0% 0.0%

Winton Segregated Portfolio 0.0% 0.0% 0.0% 2.9% 0.0%

Atrium Bennelong Long Short Equity Fund Mandate 0.0% 0.0% 0.0% 17.2% 0.0%

Regal Tasman Market Neutral Fund 0.0% 0.0% 0.0% 9.8% 0.0%

GMO Global Systematic Macro Fund 0.0% 0.0% 0.0% 12.3% 0.0%

Henderson Alphagen Long Short Agriculture Fund 0.0% 0.0% 0.0% 1.4% 0.0%

Henderson Alphagen Relative Value Agriculture Fund 0.0% 0.0% 0.0% 1.4% 0.0%

Albion Investment Trust 0.0% 0.0% 0.0% 0.6% 0.0%

Barwon Child Care Trust 0.0% 0.0% 0.0% 1.1% 0.0%

Doncaster Development Trust 0.0% 0.0% 0.0% 0.1% 0.0%

Woolloomooloo Investment Trust 0.0% 0.0% 0.0% 0.3% 0.0%

Barwon Healthcare Property Fund 0.0% 0.0% 0.0% 0.1% 0.0%

Primewest Exchange Tower Trust 0.0% 0.0% 0.0% 0.5% 0.0%

Liquidity 0.0% 0.0% 0.0% 25.5% 0.0%


Source: Atrium and External Investment Manager / Administrator websites or reports. Target weights as at 30 September 2016. Holdings within the Crown Atrium Alternatives Investment SPC are given on a look through basis, individual clients will not hold these funds directly. Please note: The Atrium Global Equities Mandate No. 1 is managed by Magellan Asset Management Limited in a manner consistent with the management of the Magellan Global Fund. The Atrium Bennelong Long Short Equity Fund Mandate is managed by Bennelong Funds Management Limited in a manner consistent with the management of the Bennelong Long Short Equity Fund.

Important InformationThe information in this document (Information) has been issued by Fitzpatricks Private Wealth Pty Ltd (ABN 33 093 667 595), (AFSL 247429) (Fitzpatricks). The Information is of a general nature only and has been prepared without taking into account your objectives, financial situation or needs. Because of this, we recommend you consider obtaining your own legal, financial or other professional advice before making a decision in relation to any investment. The views expressed are the opinions of the authors at the time of writing and do not constitute a recommendation to act. All information referenced is believed to be accurate at the time of compilation and is provided by Fitzpatricks in good faith. Past performance is not a reliable indicator of future performance. Neither Fitzpatricks nor any other person guarantees or makes any representations as to the future performance of any fund, stock or the return of an investor’s capital. When we speak of our investment objectives, particularly for performance, it is very important to understand that these are not forecasts, promises or guarantees. They are simply our goals. You can lose as well as make money. Performance figures relate to the model portfolios offered by Fitzpatricks, with investment management implemented by one or more underlying investment managers selected from time to time and monitored by Fitzpatricks. Underlying investment managers and the details of each model portfolio have changed in the past and will change in the future and you should keep this fluidity in mind when considering figures. Actual performance will differ amongst clients depending on the timing of their investment, the ability of an investor to nominate stocks they do or do not wish to hold and the level of variation from the models. Figures are post portfolio management fees and expenses of Fitzpatricks and underlying managers. They do not take into account inflation or tax or adviser fees and assume reinvestment of distributions. While the Information has been prepared with all reasonable care by Fitzpatricks (with input from its related bodies corporate as required) and derived from sources believed to be reliable, it has not been independently verified and no warranties are given that it is complete, accurate, and up-to-date or fit for the purpose for which it is required. Neither Fitzpatricks nor any party appointed by or associated with any of them assume any responsibility for errors, inaccuracies or omissions in this document. This document is provided for information purposes only and should not be construed as a solicitation or offer to buy or sell any financial instruments; neither should it serve as the sole basis for making an investment decision.

For more information please contact your Adviser or Fitzpatricks Private Wealth:

SYDNEYLevel 5, Challis House 4 Martin PlaceSydney NSW 2000 PHONE 02 9248 8000

GPO Box 1193 Sydney NSW 2001

BRISBANE37a Kennigo Street Spring Hill QLD 4000

PHONE 07 3105 6500

EMAIL [email protected]


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