Monthly Fund Commentary - Apr 2017

April 30, 2017

Global Titans Fund commentary

 

Global stocks rose strongly in April, supported by improving world economic growth and following the French primary election, which signalled a lower potential for an anti-EU candidate to win the upcoming run-off. The weaker Australian dollar also helped drive returns in international markets. Quality stocks continued to perform well.

 

The Fund’s unit price increased by 5.2%, after the cost of protection, in April. The performance was driven by positive contributions from our holdings in PayPal, Heineken, Comcast Corp, Unilever and Microsoft Corp. There were no negative contributors during the month. The Fund continues to have no foreign currency hedging in place as Insync consider the main risks to the Australian dollar to be on the downside. Over 50% of the Fund is currently protected using our put protection strategy.

 

Insync’s focus on global megatrends, which are trends that we consider to be at least over 10 years in duration, led to two new positions in the portfolio during the month. Both companies are exposed to the travel megatrend where research shows that consumers are spending an increasing amount on experiences providing a long runway of growth for companies exposed to the trend.

 

Priceline is the leading online travel company in the world which is benefitting from the increasing spend on travel and growing penetration of bookings online. Amadeus is the leading global distribution system provider to airlines with a high level of recurring earnings, the potential to grow into new markets, such as the hotel industry, and create a similar highly profitable business model to what they have in the airline industry. Both businesses are industry leaders generating high returns on invested capital trading on attractive free cash flow yields.

 

Top 10 holdings

  • Medtronic

  • Comcast

  • Microsoft

  • PayPal

  • Visa

  • Cognizant Tech Solutions

  • BAT

  • eBay

  • Zimmer

  • Oracle

 

 

 

 

  1. Returns are calculated net of management fees and expenses but before tax and adviser fees (if applicable) with all distributions reinvested. Inception date for the Insync Global  Titans Fund is 7 October 2009.

  2. MSCI All Country World ex-Australia Net Total Return Index in $A.

  3. UBS Australia Bank Bill Index.

  4. PORTFOLIO CHARACTERISTICS: Average market cap A$187.9bn

 

 

London Stock Exchange (LSE) – Don’t let the name fool you!

 

LSE is one of the oldest stock exchanges founded in 1801. Whilst stock exchanges were highly profitable monopolies in the past their original core business has now been commoditised with the matching of buyers and sellers not very profitable and not having great prospects.  Today, LSE is not really a stock exchange any more. The business has been transformed with the bulk of its business no longer based on shares nor on trading but on other securities and activities.

 

One of its biggest operations is clearing — taking care of the contracts after trades are done. Its SwapClear division now clears 95 per cent of the global market in over-the-counter interest rate swaps (private interest rate contracts reached by banks). This is less exciting or visible than equity trading but bigger and more profitable; SwapClear often clears $1 trillion of swaps daily.

 

Over the past 5+ years LSE’s management has transformed the group from a mostly commoditized, cyclically driven business to a highly attractive, structurally growing business with pricing power and high barriers to entry. Through a series of acquisitions the business mix has shifted from being more than 50% exposed to equity capital markets activity towards close to 80% of profits being generated from mission critical market infrastructure and indices. Whilst the cash equities and listings business has been flat for the past 5 years, the market data, connectivity and the clearing business have been growing at double digit rates.

 

Insync’s focus is to invest in highly profitable businesses with structural growth drivers that are good allocators of capital. In the most recent half yearly results LSE announced a dividend increase of 20% on the prior corresponding period and a 200m pound buyback.

 

About Us

PORTFOLIO CHARACTERISTICS

Average market cap                   A$189.3bn

WAVG⁴ forecast dividend yield  1.50%

Wt AVG forecast PE ratio           20.3x

WAVG ROE                                21.0%

Current FX hedging position      0% overseas exposure hedged back into $A

Current put protection                50%

Benchmark                                 Unconstrained

 

KEY INFORMATION

APIR code                                  SLT0041AU

ASX mFund code                       INS01

Distributions paid                       Annually, as at 30 June

Unit pricing                                 Daily

Minimum initial investment         $10,000

Applications & redemptions       Each Sydney business day

Entry & exit fee                           Nil

Buy/Sell spread                          0.20%/0.20%

MER                                            1.3% (plus GST) p.a.

 

Investment style

Concentrated, large cap global equity fund, incorporating active currency management and downside protection strategies

 

Investment  objectives

To provide long term capital growth and some income through investment in listed global securities. Insync believes that a strong focus on capital preservation will lead to superior relative and absolute returns over time

 

How to apply

Apply online here.

 

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