Performance Commentary
Global equity markets, having retraced most of their 4th quarter 2018 declines by the end of April, fell sharply in May on concerns around the negative impact on the global economy from a potentially protracted trade talks between the US and China. Economic data around the world has been softening with investors concerned that the risk of a recession has increased. This is most clearly reflected in the inversion of the yield curve in the United States. Remarkably 10 year bond yields in Germany, which are negative again, and Australia have reached record lows.
Our Global Capital Aware fund delivered a return of -1.90%, after the cost of downside protection, in May compared to the benchmark return of -4.58% (Our long-only Global Equity Fund at -2.25%). Strong contributions from stock selection and a positive contribution from the increase in the value of the index ‘puts’ led to the Capital Aware fund losing significantly less than the market. Likewise strong contributions from stock selection significantly buffered the Global Quality fund from the fall in global equity markets.
Fund Performance
Positive highlights include Adidas, IDEXX Laboratories, Wirecard, Boston Scientific Corp and the London Stock Exchange. Detractors were Facebook, Apple, Booking Holdings, Constellation Brands and Tencent Holdings. No currency hedging continues across both funds. Insync considers the main risks to the Australian dollar to be on the downside.
Current market conditions continue to reflect the trend in place since the GFC of low growth and low inflation. If this trend continues to persist then investing in a portfolio of high ROIC stocks benefitting from global megatrends should prevail. The Insync portfolio of companies is less dependent on the global economy to generate consistent profitable growth. The portfolio, which has very specific quality and growth attributes, continues to pick up almost all of the upside in rising markets as well as, importantly, buffering the fund from significant market falls.
Disclaimer
EQT Responsible Entity Services Limited (“EQT”) (ABN 94 101 103 011), AFSL 223271, is the Responsible Entity for the Insync Global Quality Equity Fund and the Insync Global Capital Aware Fund . EQT is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT). This information has been prepared by Insync Funds Management Pty Ltd (ABN 29 125 092 677, AFSL 322891) (“Insync”), to provide you with general information only. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Neither Insync, EQT nor any of its related parties, their employees or directors, provide and warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Product Disclosure Statement before making a decision about whether to invest in this product.