19 Jul 2020
Quarter in Review
Even though the Ranger Fund had a very solid quarter, +26%, it was a quarter of very modest news flow. None of the companies in the fund were forced to raise capital which helped returns. All trading updates, that were issued to the market, were in line with expectations, which in the current climate is another positive tick. The results were some very strong share price moves as the market came to understand that not only were these companies going to survive, but that they would either remain profitable or return to profitability. However, we still see considerable upside from current levels.
Looking ahead we continue to see both long term upside and short term risks. This explains our continued allocation to put options and cash in the fund. In combination with the equity holdings, we believe this creates the ability for the fund to weather market volatility while still able to deliver clients with solid medium term returns.
5 Oceans Fund
The 5 Oceans Fund had a positive return for the quarter which moved the fund into positive territory in terms of year to date returns.
The local equity allocations were the main drivers of the positive return, as Ranger and Tran-Tasman more than made up for their March quarter drawdowns, with both funds up more than 25%. The global equity allocations with Schroders and Acadian were positive but only modestly so, as value continued to trail broader market weighted indices. Currency hedging also added to returns as the NZD recovered some lost ground over the quarter.
The fixed income allocations also contributed to the positive return but in a more modest fashion, with T Rowe Price, Daintree and AMP all delivering positive returns for the quarter.
The only detractor, which will always be the case when the market has a broad relief rally, was Kohinoor but given they had realised investments in March, they remain very positive year to date. And looking forward we belief that there are sufficient risks to the market that more than merit the fund’s on-going allocation to the Kohinoor hedging strategies.
The Trans-Tasman Fund had a solid quarter with returns 8% greater than its benchmark, the S&P/NZX50. All but one active overweight position outperformed the benchmark, which underpinned the relative out performance. This was despite very little in the way upside surprises from those overweight holdings. Rather it was more about not raising capital and a mix of solid market updates. Essentially this created the environment for significant share prices recoveries over the quarter. The highlights were Sezzle +490%, Redbubble +260%, Kogan.com +180% and The Reject Shop +170%.
The main detractor, from relative performance, was the fund’s underweight to Pushpay which was +159% on the back of an upbeat trading update.