You are reading: Progressive Global Fund – April 2022

 

The Progressive Global Fund declined 2.9% for the month of April. In contrast, the MSCI ACWI Index declined 2.8% in Australian dollar terms. Year to date, the Fund has declined 6.8% versus the MSCI ACWI Index which has declined 10.9%.

The Progressive Global Fund Positioning & Portfolio

The turbulent start to the year continued into April. Increasing fears of rising inflation, interest rates, China lockdowns and recession gripped markets which saw the Nasdaq (re)entering a bear market and all major industry sectors returning negative returns.  2022 is off to the worst start for the US market through April since 1988.  This has no implications for what comes next, but it does illustrate that this year has been difficult, to say the least.

For equity investors in developed markets, there has been virtually nowhere to hide.  As seen in the table on the next page, all indices bar the UK were in the negative in the last month of April. The table shows a sea of red, representing the losses investors have been dealt.

The fund itself incurred a modest fall in April. The biggest detractor to performance came from long positions in the technology sector. We had entered most of these positions at what we viewed as attractive levels, at or well below historical valuations. However, relentless selling in the sector pressured our holdings with stop losses and hedging assisting to stem some of our losses. To that extent, our risk management allowed us to contain the losses these stocks dealt investors over the month. We are still positive on the technology sector which has and will continue to be home to some of the best and most promising businesses in the world but recognise that managing our exposure levels here is particularly prudent in the current macro environment. Reflecting on the market falls, there were few positive performers among the long positions over the month, except for a few select names in our cyclicals bucket.

Our short book delivered for the portfolio over the month. Short positions in asset managers leveraged to the market cycle and in the major indices were the largest contributors. Our short book is well positioned to manage the risks associated with difficult markets.

As we have written previously, this year is likely to continue to be particularly turbulent after years of relative smooth sailing.  The fund is positioned well for the current and changing macro environment. To summarise the major themes within the portfolio, we are long quality cyclicals and secular growth names, while short housing related stocks and consumer products.  We have continued to reduce our net exposure in the portfolio by increasing our short book and being patient and prudent in managing our long holdings.  It is likely that the portfolio will remain low net exposure in the near term until we see risks to the downside receding.

As always if you would like to learn more about investing in our fund please contact us – investor@fiftyonecapital.com