16 Oct 2018
Quarter in review
Ranger Fund had another good quarter with no major detractors to performance. Afterpay Touch was the standout performer as investors reacted positively to recent operating performance and positive signs from their expansion into the US. Spicers, Wellcom and MacMahon provided positive investor updates and also contributed materially to performance.
We added to our investments in Capral and Spicers, and added a new company, Gale Pacific. More on Gale Pacific in the commentary “Quality or Value?” below. We have also purchased some portfolio insurance in the form of a bundle of put options. The purpose of this is to safeguard the portfolio in the event of a market crash. While we don’t profess to be able to predict these events, it is our opinion that the length of this bull market and the high values placed on a range of assets warrants some downside protection. We discuss this further in the commentary “Portfolio Insurance” below. We also currently have nearly 40% of the fund in cash and cash equivalents leaving us relatively well protected and giving us plenty of dry powder for taking advantage of the fantastic investment opportunities that occur in severe market dislocations.
5 Oceans Fund
The 5 Oceans Fund had another solid quarter, up 2.6% (after fees). The primary drivers of returns were the allocations to growth assets, with the Ranger Fund up 6% and the global focused Acadian Fund up 6.9%, although some of this was due to currency with the NZD continuing to sell off over the quarter.
The currency hedging in place slightly reduced these global equity gains. The other offset in the growth category for the Fund was the on-going weakness in the Kohinoor allocation. This will likely continue to be the case until we experience a real risk-off market and a spike in volatility, which is an environment that should suit Kohinoor perfectly.
This quarter was the first full quarter for our new global fixed income pairing of T. Rowe Price and Daintree. In a challenging period for bond funds, with yields rising steadily over the quarter, it was pleasing to see positive returns from both allocations. Daintree was up 0.7% while T. Rowe returned 0.1%.
Trans-Tasman had another good quarter, managing to out-perform an already strongly performing New Zealand equity market.
Afterpay Touch was the standout performer as investors reacted positively to recent operating performance and positive signs from their expansion into the US. Spicers,Wellcom andMacMahon provided positive investor updates and also contributed materially to performance. EBOS was the largest of a short list of detractors.
In July investors reacted positively to news that EBOS had won a tender to act as the exclusive third-party distributor of pharmaceutical products to more than 400 Chemist Warehouse and My Chemist stores in Australia. EBOS is now a large enough component of the NZX50 for us to add it to the portfolio, although we remain underweight. The EBOS management team have, to date, executed very well but it remains a very tough industry.
We also added a new company, Gale Pacific. More on Gale Pacific in the commentary “Quality or Value?” below.