Monthly Report

Monthly Report

June 2017

June 2017

Net Performance (After Fees) 1 Month 3 Month 6 Months 1 Year 3 Years 5 Years *Since inception (Annualised)
Concise Mid Cap Fund Return (%) 1.75 2.43 5.15 11.20 8.98 10.98 4.99
Mid Cap Masters Index (%) 1.80 2.64 6.74 14.35 12.28 12.66 3.45
Active Performance (%) -0.05 -0.21 -1.59 -3.15 -3.30 -1.68 1.54

Market Performance

The Australian equity market, measured by the S&P/ASX 200 Accumulation Index, rose +0.17% in June, resulting in a June quarterly return of -1.58% and an annual financial year return of +14.1%. The Australian market (-1.58%) lagged most major global markets during the June quarter with the MSCI World Index Acc. (+4.0%), Dow Jones Industrial (+3.3%) and S&P 500 (+2.6%) all posting positive gains. For the financial year, the MSCI World Index Acc. posted a +18.2% return, with over 80% of the gains occurring post Donald Trump’s election as US President.

In Australia, Mid Cap ex-50 stocks fared much better than the broader ASX200 over June with the Concise Mid Cap Fund returning +1.75%, behind the Mid Cap benchmark return of +1.80% but well ahead of the broader Australian market (+0.17%). Healthcare (+6.10%), Financials (+1.63%) and Information Technology (+1.36%) were outperformers in June, whereas Energy (-6.93%), A-REITs (-4.82%) and Utilities (-2.69%) were laggards.

In commodity markets, iron ore rallied of recent lows to be up +14% in June. Other bulk commodities where less volatile with coking coal +0.4% and thermal coal +5.8%. Base metals were strong in June; zinc rose +7.1%, nickel +5.3% and copper +5.2%0. Crude prices (-4.8%) fell for the fourth consecutive month as a recovery in US shale drilling and strong Libyan and Nigerian production acted to reduce confidence in an expected inventory draw down. Gold prices fell -2.3%.

The US economy continued to show ideal conditions over the June quarter; low and falling unemployment, low interest rates, GDP growth, strong consumer sentiment and low inflation. These conditions are an ideal mix for asset price growth and help to explain gains in the S&P 500 (+15.5%) over the past financial year. New home sales so far this year are on track for their best annual level since 2007, the Conference Board’s Consumer Sentiment Index improved to a nearly 16 year high and the unemployment rate has fallen to 4.3%, a 16 year low. The US unemployment rate is now below the Fed’s non-accelerating inflation rate of unemployment (NAIRU) which is an estimated number (4.7%) guided by the historical relationship that labour markets at this point should be tight and place upward pressure on wages and inflation. Any further pick up in wages will be closely watched closely by the Fed with its 2% inflation target in mind. Yellen unambiguously stated in June “we continue to feel that with a strong labor market and a labor market that’s continuing to strengthen, the conditions are in place for inflation to move up.”

In China, export growth was stronger than expected in May as global economic growth continued to expand. Industrial production has remained stable over recent months and is currently running at +6.5% YoY. Fixed asset investment growth has slowed from +9.2% year to date (YTD) YoY in March to +8.6% YTD YoY in May. Retail sales have been stable over recent months and are running at +10.7% YoY.
In Australia, the Reserve Bank remains firmly on hold regarding the cash rate. Domestic economic data releases continue to show business conditions are generally healthy. Consumer confidence continues to track below the key 100 mark, indicating pessimists outnumber optimists.

In June, Metcash (MTS) reported its full year 2017 results which showed a resilient earnings performance in the food and grocery business alongside a solid hardware and liquor performance. The merger between Tabcorp (TAH) and Tatts Group (TTS) received approval from the Australian Competition Tribunal, subject to TAH divesting its Odyssey gaming services business. Vocus Communication (VOC) announced it had received a takeover proposal from private equity group Kohlberg Kravis Roberts & Co. L.P. at $3.50 cash per share.

Attribution Analysis for the month ended June 2017

Top 5 Bottom 5
HT&E Aveo
ALS WorleyParsons
Southern Cross Media Spark Infrastructure
IOOF Investa Office Fund
BlueScope Steel Bendigo & Adelaide Bank

Fund Performance

The Concise Mid Cap Fund was up +1.75% in June, behind the index return of +1.80%. For the quarter the fund returned +2.43%, below the benchmark return of +2.64%. Major contributors to performance over the month included HT&E Ltd (HT1), ALS Ltd (ALQ) and Southern Cross media (SXL) with Aveo (AOG), WorleyParsons (WOR) and Spark Infrastructure (SKI) the major detractors. Major contributors for the quarter were Aristocrat Leisure (ALL), Janus Henderson (JHG) and Ardent Leisure (AAD) whereas TPG Telecom (TPM), Super Retail Group (SUL) and Spark Infrastructure (SKI) detracted.

Southern Cross Media (SXL) had a solid month with news the government announced licence fee cuts will apply retrospectively to the fiscal 2017 year. SXL expects licence fee savings of $11.8m for FY17 which means May earnings guidance for slightly less than $168m now becomes slightly less than $180m. SXL’s generates high levels of free cash flow and we continue to hold the view that the market is yet to adequately reflect this quality attribute. We are hopeful that any future media reform may help lead investors to a recognition of this value.


The ASX 200 finished FY17 on a strong note delivering a total return for the 12 months of 14.1%. The materials sector led, returning 26.0% while Telecommunications was the largest drag on performance declining 21.7%. Over the last 5 years, the ASX 200 has generated an annualised return of 11.8% per annum. Over this period there has been high correlation of returns across market segments with all segments delivering strong positive returns. Macro economic factors, particularly consistently falling bond yields provided a strong backdrop for equity market performance.

Despite a strong overall return in FY17, the dispersion of returns has become far more pronounced. ‘Bond proxy’ yield stocks have materially under performed in recent months as bond yields have been steadily increasing, consumer stocks have been under pressure due to the weak underlying environment while companies deriving a large percentage of earnings in overseas markets have been strong outperformers.

Our recent company meetings both domestically and in international markets lead us to believe these themes will continue to drive equity markets in the medium term.

*The Mid Cap Masters Index is a price and accumulation price, free float adjusted index calculated daily for Concise on behalf of S&P. The constituent universe of index is the S&P/ASX 200 excluding the S&P/ASX 50. * The CMCF commended on the 16th of April 2008. The since inception figure is annulaised.

This publication is intended to provide general information only and has been prepared by Concise Asset Management (ABN 62 126 975 282) and (AFS Licence No. 320497), the issuer of the Fund, without taking into account any particular person’s objectives, financial situation or needs. Investors should before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. Your investment is subject to investment risk, including possible delays in repayment and loss of income and capital invested. The repayment of capital or income is not guaranteed by Concise Asset Management. Offers of interests in the Fund are contained in a current Product Disclosure Statement (‘PDS’). A copy of the PDS is available from our website: or contact Client Services on (03) 9642 8968. You should read the PDS and seek professional advice before making any decision about whether to acquire or continue to hold an investment in the Fund.