You are reading: Progressive Global Fund – February 2022

The Progressive Global Fund (PGF) declined 4.1% for the month of February. In contrast, the MSCI ACWI Index declined -5.4% and the ASX All Ordinaries Index rose +1.7%.

The Progressive Global Fund

February 2022

PGF Performance Graph Feb 2022
PGF Performance Table Feb 2022

The Progressive Global Fund (PGF) declined 4.1% for the month of February. In contrast, the MSCI ACWI Index declined -5.4% and the ASX All Ordinaries Index rose +1.7%.


THE FUND’S PERFORMANCE & MARKET REVIEW

The Progressive Global Fund Positioning & Portfolio

February was another turbulent month for markets. This turbulence owed itself to developments around Russia’s invasion of Ukraine, accelerating inflation and the likelihood of Fed monetary tightening. It has certainly been a difficult market to navigate.

Very often when markets hit turbulence, the Australian dollar tends to fall. This normally insulates Australian dollar denominated portfolios such as ours and provides some in-built hedge protection. This month, however, the Australian dollar rose despite all that is happening in the world, in large part because commodity prices rose as a result of the Ukraine-Russian war. Alas, the largest detractor to the portfolio’s performance was the negative impact of a rising Australian dollar.

The portfolio had some positions exposed to Russia that suffered over the month. An example was our position in UniCredit, an Italian bank that has only a relatively small banking business in Russia. In banking, a small exposure can leverage into a large impact on the balance sheet. Fortunately, and partly why we are attracted to UniCredit, is that it has one of the strongest balance sheets among European banks. On a worst-case scenario, its Tier 1 capital ratio would fall from 15% to 13% and still be very well capitalised. We see the share price fall in February as having no impact on our positive longer-term view of the stock. It is cheap on most standard metrics and stands to benefit from the prospect of rising rates and economic reform in Italy.

Our positions in very high-quality global technology leaders were the largest detractors to the portfolio’s performance over the month. An example is Meta, the new corporate name for Facebook. The company reported softness in its business on account of competition from the likes of TikTok as well as questionable investment in the metaverse. The company is still a solid company with a user base that covers half the planet and over 10 million customers who advertise with it. The company trades on a very undemanding price-to-earnings multiple of 14 times and has a substantial net cash position. We note tech stocks have generally seen their share prices fall quite hard in recent months, but we believe this represents an opportunity to now buy high quality global businesses at attractive prices. As such, we have added to our positions in a number of these companies.

Our own positions in commodity stocks performed well and were among the best performers over the month. We believe select commodities such as oil are likely to see higher prices even from here as the supply-demand imbalances take time to rectify. Years of underinvestment in new production has created a constructive outlook, while generally higher rates of inflation also provide support.

While the short term is difficult to navigate, we are focused more on the long term. We continue to believe the portfolio is well set up to provide attractive returns over this timeframe. In the short term, we remain active and nimble, looking for opportunities as they present.

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