IML investment update - FY22 in review

By Hugh Giddy |  13 July 2022

Hugh Giddy discusses the markets over FY22 and how IML portfolios performed in the current market volatility.

Transcript of IML Investment FY22 in review.

Fiscal 2022 has been a year that's been quite challenging for investors with the benchmark index in Australia down 7% with the final quarter alone accounting for a 12% fall.

Global markets were weaker than Australia. Australia has been outperforming the world probably because largely because of commodity prices where Australian markets are dependent on commodities with the global index S&P down 11%.

Very pleasingly, all of Investors Mutual’s funds outperformed their benchmarks with the large cap funds delivering positive returns the main Australian share fund, up 2% against the benchmark down 7%.

A number of factors were buffeting markets. You've had the invasion of Ukraine by Russia, and you've had a rise of inflation, which is hardly surprising given all the stimulus, the monetary easing from central banks and the stimulus of governments trying to support their economies through COVID has led to very buoyant markets that has started to unwind.

But those stimulus sources seem to have led to some inflation central banks are trying to halt that inflation by raising interest rates for the first time in many years.

The Reserve Bank of Australia has been somewhat behind the curve, people would say and has only recently started really raising rates. Those rate rises could crimp consumer spending and house prices,
which are one of the things that's risen a lot with the boom.

Another thing rising a lot in the boom has been the oil price, which for the year, is up 52%. Now, everyone knows they're paying more at the gas pump.

So much so that the government as an election sweetener took off some of the tax on fuel. But even so, petrol prices are very high. Obviously, energy stocks have been very strong, but that's been a very crowded trade and subsequent to year end, you've seen some quite big falls in energy-related companies.

Talking about companies overall, We did have some detractors from our funds obviously, with News Corp and Nine Entertainment key amongst those. suffering as a result of people starting to price in potential recession or slowdown in advertising revenues.

But on the plus side, you've seen takeovers such as Ausnet contributing very positively to funds as well as some of our core industrial positions such as Amcor, Orica and Tabcorp.

As we look forward, the environment seems to have switched from let's go out and speculate to hey, we better pay some attention to fundamentals, you know, cash flows, dividend yields and so on. And you've seen the demise of the popularity of speculation, things like cryptocurrency have fallen quite sharply, things like the imaginary asset class, if I could call an asset class, things like non-fungible tokens.

The index of those is down, I think, close to 95% and fundamental investing seems to be back in vogue.

We think this will continue with higher interest rates still likely, People are paying much more attention to traditional investing principles, which will play into the strength of our portfolio against the benchmark with
quality companies with more defensive characteristics, continuing to do well versus what will probably be a challenging market environment.

 

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