February 1, 2021

In the Frame – Issue 1, Investor updates
Co-Portfolio Manager

Frame Long Short Australian Equity Fund – Jan 21

The Frame Long Short Australian Equity Fund declined by -2.85% in January.

During the month we implemented the systematic component of the strategy. Over the course of the month, the strategy became fully invested with 20 positions. Upon conclusion of the month, the 5 largest holdings within the portfolio are Pro Medicus Ltd (PME), Harvey Norman Holdings Ltd (HVN), Lynas Rare Earths Limited (LYC), Fletcher Building Limited (FBU) and Bank of Queensland Limited (BOQ).

The top sector weighting is Materials at 54%. Standout performers were PME and LYC, contributing +1.3% and +0.56%, respectively. PME, a health imaging IT provider, was awarded a significant 7-year contract with Intermountain Health. LYC, a rare-earths mining company, rose as rare earth prices increased in combination with the announcement of a contract to build a United States Light rare earths facility. We continue to see positive price action and news flow in the rare earths space and are excited by the future opportunities.

Nanosonics Ltd (NAN), IGO Ltd (IGO), Fortescue Metals Group Ltd (FMG) and Sims Limited (SGM) detracted -0.76%, -0.83%, -0.71% and -0.78%, respectively. A 2 day, -8% decline in the Iron ore price did not help investments in FMG, Rio Tinto Limited (RIO), BHP Group Limited (BHP) and SGM. Our view is that base commodity prices should continue to rise as the global economy continues to rebound post COVID-19.

Globally equity markets rose throughout January, however they experienced volatility near the conclusion of the month. The S&P/ASX 200 experienced a 3 day selloff, where it fell over -3%. It has been suggested that the selloff in global markets was linked to hedge fund repositioning post the GameStop saga. We expect this repositioning to be short lived.

At the time of writing, both the portfolio and S&P/ASX 200 have recovered. Discretionary trading was marginally positive throughout the month. A position trade in Creso Pharma Limited (CPH) added to performance. We are closely following developments in the cannabis space.