Investment objective
The investment objective is to generate superior returns for Unit holders by investing in global markets, with a focus on reducing risk and preserving capital. More information can be found in the Information Memorandum located at the Fund website.
Applications available here.
Investment Strategy
The Defender Global Fund (Fund) provides investors with exposure to global markets through a long and short strategy.
The Fund starts with the Managers global macroeconomic and market outlook, then overlays key thematics which the Manager believes will effect future performance and combines this with a bottom-up investment decision criteria.
Performance Summary
Commentary
The Defender Global Fund returned +4.3% in Q2, 2023. A pleasing result given the complex global financial backdrop.
At the macro level in the developed world, Q2 was characterised by generally moderating inflation, interest rates broadly starting to plateau, financial conditions remaining tight and economic data overall mixed. Calls for the most widely forecast recession in recent memory continue unabated, and the continued obsession over inflation by central bankers (with flow-on effects to global liquidity) remained apparent.
The developed world may have entered a regime in which central bankers continue to pay lip-service to their inflation targets but shy away from measures severe enough to meet them. In other words, 4% may be the new 2%. This has important ramifications to our overall portfolio construction.
Within this environment the fund continued to invest across its core thematics (Technology, Electric Vehicles, De-Carbonisation, Artificial Intelligence, Special
Situations), albeit we are running a higher cash position at present given the mixed macro conditions. We remain patient with our capital and will deploy only when the
risk/reward warrants it.
Despite the aforementioned macro headwinds, there is always a bull market in something. At the current juncture this is in Artificial Intelligence (Ai).
The fund has direct exposure to this thematic via one of its largest listed positions Microsoft (+25% in Q2) and indirectly to other listed companies including Nvidia, Apple, Amazon, Google, AMD, Facebook and Tesla via our currency hedged Nasdaq (+20% in Q2) and S&P500 positions (+15% in Q2).
We are of the view that some of the biggest gains from Ai will accrue to the large incumbent internet platforms (Google, Apple, Tesla, Microsoft, Amazon, Meta), given their enormous installed base of existing customers, large R&D budgets and talented software developers.
In Microsoft’s case, over 500 million users across their Office and other product suites have only just begun to see the benefits that Ai can bring to their everyday lives. We believe this will lead to a multi-year upgrade cycle as customer growth continues and higher pricing for these services will lead to sustained earnings growth for Microsoft. A fortress balance sheet with the ability to make accretive acquisitions, and a very strong relationship with OpenAi (developer of Chat-GPT) puts Microsoft in a very strong position to be dominant in this space.
Another highlight of Q2 was in our Private Investments bucket – Lyka Pet Food. Lyka completed its second up-round (+40%) within 6 months in Q2, valuing the business at approximately US$150M. The fund invested in Lyka a little over 18mths ago and is up ~3.5x over this period. Lyka is a technology-based pet food business that has seen rapid growth since inception only a few years ago, and now serves over 20,000 dogs. The Lyka management team is high-quality, founder led, and highly aligned with shareholders given their large % holdings in the business – a key attribute we look for when allocating capital. Lyka were profiled in the Australian Financial Review on the 9th June – you can access this article here.
The fund continued to allocate capital into the Electric-Vehicle/De-carbonisation thematic in Q2, where we believe demand for industrial metals Lithium, Copper and Nickel will be strong for many years to come. The Australian stock exchange offers multiple opportunities in this space, with Mineral Resources (MIN.ASX), BHP Limited (BHP.ASX) and Nickel Industries (NIC.ASX) the fund’s largest positions in this sector. These three companies in particular are generating solid EBITDA at current commodity prices, are growing production over the coming years and pay solid dividends – important attributes for a producing resource company in our view.
Over the course of Q2 your portfolio managers met with and attended multiple company meetings and presentations – we will continue to do our research
and wait for the right moment to deploy further capital, whilst remaining cognisant of the evolving macro backdrop.
Key Information
Strategy Inception
January 2023
Portfolio Managers
James Manning, Nick Hughes Jones
Net Asset Value
$0.82 AUD
Liquidity
Monthly
Management Fee
1% p.a.
Performance Fee
20%
(subject to high water mark)
