February 21, 2023

In the Frame - Issue 22, Investor updates
Co-Portfolio Manager

Frame Long Short Australian Equity Fund – January 2023

Units of the Frame Long Short Australian Equity Fund increased +1.34% in January. Comparatively, the S&P/ASX200 Accumulation Index advanced +6.23%. 

Global equity markets had a hot start to the year, with the ‘soft landing’ narrative taking centre stage. Investors seemed optimistic that both growth and inflation would slow to a sustainable level, allowing central banks to ease monetary policy. Counter to this theory, inflation in Australia hit a new high for the December quarter at 7.8%. All eyes will be on the Reserve Bank’s February meeting to see if the higher-than-expected figure will change the path of monetary policy. 

Absolute momentum strategies (long only) fared well in January, contributing +1.45%. Our diverse basket of longer-term holdings allowed us to participate in the upward move, however an underweight allocation meant performance trailed the market. As the market continues to show signs of resilience, we will increase our investment in momentum signals of all frequencies. Top performers were Mineral Resources Ltd (ASX: MIN), Lovisa Holdings Ltd (ASX: LOV) and Pro Medicus Ltd (ASX: PME). They contributed approximately +0.28%, +0.17% and +0.15% respectively. 

Mean reversion strategies (long and short) underperformed for the month, detracting -0.39%. The primary driver of underperformance were short trades which suffered as markets trended higher, especially in the lithium miner space. The largest detractors were Pilbara Minerals Ltd (ASX: PLS), Reliance Worldwide Corporation Ltd (ASX: RWC) and Corporate Travel Management Ltd (ASX: CTD). They detracted approximately -0.22%, -0.20% and -0.09% respectively. 

The market exposure strategy (long and short) performed solidly over the month. It was able to increase gross exposure at the beginning of the month as the market moved off local lows and began to trend. It contributed approximately +0.57%. 

Activity was higher than average over the course of the month and the Fund has exposure in every sector. The highest weighted sector remains materials at 11.88% and the largest position is Treasury Wine Estates Ltd (ASX: TWE). 

 The full report can be downloaded by clicking the image below.