December 15, 2021

In the Frame - Issue 11, Investor updates
Co-Portfolio Manager

Frame Long Short Australian Equity Fund – November 21

Units of the Frame Long Short Australian Equity Fund decreased -1.06% in November. Comparatively the S&P/ASX200 declined -0.92% for the month.

Financial markets and global central banks continued to face off over the timeline of policy tapering and interest rate increases in November. Yields continued to rise for most of the month, at least until news of the new ‘Omicron’ COVID-19 variant broke out of South Africa. Upon its discovery, money was aggressively pulled from equity markets as uncertainty over the transmissibility and virulence of the new strain circulated.

Fund activity was above average again as the broader Australian market lacked direction. We closed our position in South32 Limited (ASX: S32), as commodity markets continued to cool in line with a weaker Chinese economy. Our investments in Blackmores Limited (ASX: BKL) and Bank of Queensland Limited (ASX: BOQ) were also exited as they continued to underperform expectations. We initiated investments in Lynas Rare Earths Limited (ASX: LYC) and Pilbara Minerals Limited (ASX: PLS) as the rare earth/battery metal theme continued to show resilience in the face of tough market conditions. We also participated in the Macquarie Group Limited (ASX: MQG) placement at a slight discount.

Top equity contributors were Fortescue Metals Group (ASX: FMG), Pilbara Minerals Limited (ASX: PLS) and Cleanaway Waste Management Limited (ASX: CWY), they contributed 0.56%, 0.47% and 0.39% respectively. Our patience and ability to accumulate Fortescue at lower levels was rewarded, as the iron ore price rebounded solidly after selling pressure finally abated. Pilbara rose with the lithium price, while Cleanaway continued on trend.

Largest detractors were Pinnacle Investment Management Limited (ASX: PNI), Oil Search Limited (ASX: OSH) and Bank of Queensland Limited (ASX: BOQ), which detracted 0.64%, 0.49% and 0.39% respectively. Pinnacle fell after they announced a raising to acquire 25% of Five V Capital. Their Executive Director also announced the sale of a portion of his shares. Oil Search suffered from the sharp decline in the price of oil after the Omicron variant news, while Bank of Queensland was not immune to broader financials sector weakness. Our heaviest weighted sector is now materials at 21.28%.

At the conclusion of the month, the Fund held 21 investments.

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

FLSAEF November 2021 page 1