November Fund Performance

Bull unleashed

Hi Everyone,

See below month end fund performance data ranked by monthly performance. 1 Year and 3 Year data ranked by:

• Best performing funds highlighted in grey

• Worst performing funds highlighted in yellow

HOUSEKEEPING

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Fixed Income

• Massively volatile month through the election with bonds selling off and rallying immediately after the election.

• Check out how much active asset allocation matters within the credit space – if you didn’t reduce duration when rates started going up and just held long duration bonds, you would have generated negative returns.

• US Fed cut 75bps in 50 days (!) and perhaps another 25 this week?

• High US monthly inflation numbers disappear to be replaced with much nicer lower ones – inflation was running at 0.50% per month at the start of the year and running closer to 0.3% per month now.

  • US YoY Core inflation is going to end up being around 2.5% at this rate very quickly.

• But does it matter? Tariffs are the big surprise element – no one knows…

FI LICs

• Returns are highly influenced by the share price movement rather than any underlying performance.

• This space is about to transform rapidly in the new year – APRA bank hybrid rules means there is going to be the mother of all chases for yield – should mean existing funds in this space get a bid and new products coming!

Domestic Large Cap

• The investment cycle this time around was 3 years? ASX200 bang on the LT assumed average for returns (and that is before franking credits!)

• Surprising to see active management have such poor performance share vs the benchmark, but the toughest part has been that everyone played the rate cycle well, but no one held banks to market weight this year and ended up underperforming.

Domestic Mid/Small Cap

• Most players in this space continue to suffer against the ASX200 – only some of the more aggressive (growth factor) or nimble (low FUM) funds have been able to generate decent performance this year

• You could have thrown a dart against the wall in picking a small/mid Aussie manager and made +30% this year

Domestic Micro-Cap

• Saville… Up +54.6% since 1 July

• Animal spirits have arrived to this end of the market – get excited everyone, capital markets are open - placements, capital raises, etc all happening now, only a matter of time we start getting a flood of IPOs

International Equities

• Said it last time, incredibly hard to beat the index here as US exceptionalism dominates and most active managers are underweight US.

• Absolute risk-on in markets since Trump AKA the bull arrived. And need to remember the market =/= economy.

• There are some major catalysts here that force a rethink of allocations & positioning. Catalysts being US rate cutting cycle and new presidency. US makes up 75% of the benchmark so this is all very relevant.

Infra + REITS

• Like the bond funds, infra and REITs both got a bid last month.

• Improvement in number of transactions in REITs – assets trading at premiums to implied discounts. As indicated by price, worst over? Yield important here, loss of Hybrids presents the industry with an opportunity.

Other

• Ripper of a month for anything with a levered long exposure. Well execpt anyone short the banks (ahem, L1)

• Arguably the meat of the rate cycle and bond move in this episode is over, so Vanguard Balanced 1yr and 3yr performance back to correlation with wider active industry (who went short duration).

  • The big Industry Super players not delivering any active alpha vs Vanguard Balanced over 3years.

  • Something I’ll produce in the future – Industry super vs others. Getting a bit over their narrative…

• I find Ruffer fascinating, incredible track record but longest period I’ve seen them get it so wrong, super conservative

• Gold takes a breather but still ticking along over the long run.

  • Institutional ownership of gold (and BTC!) for portfolios is abysmal – many professional investors won’t realign themselves away from the principals of cashflow assets and instead believing in ~vibes~ as an investment thesis. Only if they liked making money.

GICS Sectors

• Long duration assets (tech, infra, etc) all getting a strong bid last month.

• Find it fascinating to see energy still beat the ASX200 over 3 years

  • How is this sector investible when Trump could fundamentally hurt Aussie gas exports by flooding oil markets?

ASX20

• Well actually more like ASX19 as I can’t pull nice data for NEM/NCM

• I’ve highlighted the Big-4 Banks in orange

• Everyone keeps banging on about CBA but Westpac has beaten it over 1 and 3 years! Haha, hilarious stuff!

Bonus Round

• Mega (maga?) month for BTC.

• So much positive newsflow still coming out and plenty of market participants I talk to absolutely won’t hold this as an investment asset.

• The tailwind here is capitulation – how long before both institutional allocators and custodial entities say fine, we’re open to an allocation.

• I appreciate AMP making the call to allocate here – the cost of omission is high. A high vol asset is great for portfolio construction anyway!

• Only 8.6x until Bitcoin flips the market cap of gold!

  • Mark my words – that number will act as a magnet to the price of BTC.

Thought of the month

Market narratives for the average Aussie

I’m a big Bitcoin fan (if you couldn’t tell) because I firmly believe that - believe it or not - the internet is a thing, so internet money isn’t that far of a leap.

Sure, there is plenty of silly stuff (my FARTCOIN holding is up ~2.5x since my last write up, why bother ever punting on horses?) but the fundamentals of the internet, interest, finance, and reflexivity remain strong.

Bitcoin vs the Aussie Experience

Let’s put things in perspective though, yeah bitcoin is up big but what about the average Aussie? What upside have they gotten in the last 3 years?

Media narratives (AFR front page yada yada) are generally reflective of a version of the immediate truth which isn’t always necessarily reflective of the whole picture. Time to widen the picture for a moment:

• It is not unrealistic to think that nearly every Australian as a holding in the Big-4 banks.

  • Be it passive ETFs, active funds, super funds, SMSFs, etc

• Ranked by the last 3 years I’m going to choose some assets selectively here - 18 names, 10 winners, 5 losers, Gold, ASX200 and Vanguard Balanced as a benchmark:

• Coal stocks, WBC & CBA have been a better investment than Bitcoin over the last 3 years! – the average Aussie wins again!

• Social licence really matters – our market structure punishes those that communicate the benefits of their position to society poorly. Woolies suffering. CBA have no issue despite printing $$$.

• ANZ where art thou

Although the headlines might have you think you’ve missed out on great returns by not holding Bitcoin, in reality you’ve probably held assets that have beaten it over the last 3 years. I wonder how the table looks like in 3 years’ time.

On the balance of probabilities, I doubt banks generate 20%+ per annum over the next 3 years. Happy for someone to build me the bridge there. But I can build a bridge for BTC (or Aussie small/micro caps for that matter) generating those kinds of returns, albeit volatile.

Thanks

Well done for making it this far and it pleases me you are reading this sentence. I thank you for reading the above and I hope it has provoked some thoughts.

Formalities

If you are thinking about starting a new fund, are a new manager or an existing manager, an analyst, or would like your vehicle to be part of the list I track, I’m always keen to chat.

Likewise, if you just want to have a good old chat, I’m always free to do that too :)

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While I take care to make sure data is correct, I do not make any guarantees as to the complete accuracy of these figures. The data and comments above are simply my observations and not financial advice.