REPORT TO THE UNIT HOLDERS IN THE ASPIRING FUND FOR THE MONTH ENDED 31 JANUARY 2012
| Aspiring Fund | NZ50G | ALL Ords
Accumulation
Index (rebased
in NZ$) |
| Month January | 3.32% | 0.66% | 2.97% |
| Quarter | 3.32% | 0.66% | 2.97% |
| Last 12 Months | 5.79% | -1.27% | -7.14% |
| Financial Year to Date | 4.12% | -4.18% | -14.11% |
| Annualised since PIE (1/10/07) | 8.64% | -5.79% | -4.01% |
The Unit Price as at 1st February 2012 was $1.7070
The performance for the month of January was 3.32%% after all expenses.
Our asset allocation at the end of the month was approximately:
| New Zealand Equities | 32.7% |
| Australian Equities | 24.7% |
| Global Equities | 2.3% |
| Corporate Credit/Bonds | 19.0% |
| Cash | 21.3% |
The Net Asset Value of the fund as at 1st January 2012 was approximately $97,500,000.
The Aspiring fund had a good start to the year with its 3.32% return being approximately 1.5% above the arithmetic average of Australian and NZ market returns. This was achieved despite a cautious asset allocation strategy in what turned out to be a strong month for equities globally.
In the business of fund management this meets the key criterion for being a good “risk adjusted” return. Indeed, achieving good risk adjusted returns (matching or bettering equity markets whilst carrying a lot less risk than the market) is one of the prime objectives of the Aspiring Fund.
We have recently undertaken some analysis of our returns. Since the formation of the PIE regime the average performance of the two markets in which we invest has been up in 28 months and down in 24 months. In the down months the market has on average fallen 3.99% and the Aspiring fund on average has lost less than half this amount at 1.79%. In up months the market has on average risen 2.94% and we have on average produced gains of only slightly less at 2.92%.
Preserving capital in hard times, yet banking gains when markets are rising has been the secret to our results to date.
One could argue that we should have been more adventurous and put more money to work in the market in January but month-by-month timing of asset allocation is a tricky business at the best of times.
Global markets feel to us a bit like a large room full of people and unexploded live bombs. The people are going about their normal business but the bombs are ticking away. As they explode they will change the lives of those caught in the aftermath. Central banks and Governments are desperately trying to defuse these bombs without turning them in to slow burning fires and everyone is hoping they will not be the unlucky ones caught up in either explosions or fires. We are sceptical about the likelihood of this outcome.
However we cannot be sure that markets have not already adjusted prices in advance for whatever mess and destruction will result. We would guess that some of the ticking issues like Japanese and US debt will take some time to go off, whilst Greece et al may come to a head sooner, but really we do not know. We live in such uncertain and unusual times that our default position is to be cautious most of the time.
January saw a continuation of the rally which started late last year. The most obvious possible explanation for this is the almost unlimited cheap liquidity being pumped into global banks. But who knows? The rally might have just resulted from investors being underweight equities and coming back from Xmas holidays with a penchant to take on more risk. Last year we saw a succession of “risk on”, “risk off” swings in the market and we expect more of the same this year.
Our January performance was largely attributable to a large number of individual stocks performing well and very few disappointing.
While it was not the biggest contributor financially one of the most satisfying was an approximate 11% rise in the value of Cavotec (now listed in Stockholm) to the equivalent of $2.86 a share. Many of our competitors in the funds management industry were forced to sell their shares at the time of delisting due to restrictive mandates prohibiting holding shares outside of Australasia. The shares closed out in NZ at about $2.45 so our open mandate has proved of value to unit holders.
Other star performers included Ebos, which rose 9.2% on the back of the purchase of a pet food business, and Diligent which was up 31% on a fantastic quarterly sales outcome. Diligent is hovering just below our top 10 Holdings by virtue of a small investment growing into a large one via price appreciation. When we first invested in the company none of the mainstream brokers researched it and it remains very under- owned by most mainstream index aware institutional investors. It is now approaching a size where it becomes a potential candidate for inclusion in the Top 50 index which would not be negative for the share price.
Somewhat ironically, given the lack of exposure the fund has had to Telecom since inception, we finished the month with over 10% of the fund in the demerged entities, Chorus and Telecom. Virtually all the Telecom were bought early in the month at prices around $2 which made them a very useful contributor while we elected to take some profits on our Chorus stake as the price climbed back to its previous highs around $3.30.We believe both companies offer defensive yield and expect this to be keenly sought while the current mix of low interest rates and global uncertainty persists.
In Australia Silver Lake Resources (another big winner over time) rose 22%, more than reversing a 16% decline the month previous. Super Retail Group also more than reversed previous weakness in December’s retail rout with a 12% gain on sales numbers which we expected but the market found reassuring. Given the challenges the whole retail sector faces in Australasia we sold about a third of our position in to the rally. Another useful contributor in Australia was the Transpacific step up shares which rose more than 10%. These have appreciated by over 50% since the successful completion of the company’s recapitalisation late last year.
| TOP 10 HOLDINGS AS AT 31 JANUARY 2012 |
| Telecom | 7.3% |
| Skellerup | 5.4% |
| Genesis Capital Bonds | 4.8% |
| Transpacific Step Up Hybrids | 4.1% |
| GPG Capital notes | 4.0% |
| Transpacific Industries | 3.4% |
| Chorus | 3.3% |
| Mainfreight | 3.0% |
| Super Retail Group | 2.6% |
| EBOS | 2.5% |
Aspiring Asset Management Limited
http://www.aaml.co.nz