microequities deep value microcap fund july 2012 update
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7/31/2019 Microequities Deep Value Microcap Fund July 2012 update
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MICROEQUITIES ASSET MANAGEMENT |AFSL 287526 |Suite 702, 109 Pitt Street, Sydney NSW 2000
Office: +61 2 9231 6169 Fax: +61 2 9475 1156 [email protected]
JULY 2012 FUND UPDATE by Chief Investment Officer Carlos Gil
MARKETS AND ECONOMY
The risk free rate is an integral part of investing for two key reasons; it is the return that a “risk free” asset provides an
investor that wants no exposure to risk, the bird in the hand. For those investors that are willing to assume an
investment with some level of risk, it is used to calculate expected future cash flow returns from that investment and
therefore are integral to calculating intrinsic value of the investment. The lower the risk free rate the higher the value of
our investments because future expected cash flows are discounted at a lower rate. The Australian Government 10 year
bond yield is currently around 3.10%, historically low levels. This low risk free rate is pushing up the intrinsic value of our
owned businesses whilst at the same time the alternative uses of our capital remaining in cash, are paying considerably
lower returns. These conditions are occurring at a time when poor market sentiment and risk aversion has driven
market pricing down for some very good businesses, this scenario provide us with a rather obvious conclusion, we have
never experienced risk free returns as low as these, whilst, for our owned businesses the gap between market value and
intrinsic value continues to widen. In all our Funds we will continue to deploy cash and new investment inflows because
we consider the current opportunities to be highly compelling from a long term, value investment perspective.
Microequities Deep Value Microcap Fund returned a positive +4.20% versus the All Ordinaries Accumulation Index
positive +3.74% in July; this brings the total return net of fees to 130.75% for the Fund compared to 57.74% for the All
Ords Accumulation since inception in March 2009.
Just as our previous month we were unmoved by the negative -3.4% performance in our Fund, we are equally unmoved
by this month’s positive +4.20%. Our key focus is on the fundamentals of the businesses we have invested in and we
fully accept that the market pricing over the short to medium term can be significantly inefficient. During the next
month we will be receiving operational updates from our invested businesses. From the fundamentals of these
businesses we derive at our intrinsic value. For the majority of our businesses (there are a couple of exceptions) we
expect solid growth in earnings. Further information will be provided in next month’s update.
*Deep Value Microcap Portfolio as of 31st
of July 2012
1.4%
39.9%
9.0%11.8%
10.8%
9.5%
3.5%
6.3%
7.7%Cash
Software & Services
Telecommunications
Services
Media
Health Equipment &
Services
Comercial Services &
Supplies
Diversified Financials
Utitlities
Hotels Restaurants &
Leisure
Latest Unit Price
$1.9744 Latest Fund Performance as at July 31, 2012
FUND AOAI* OP*
1 Month +4.20% +3.74% +0.46%
3 Month -4.05% -3.71% -0.88%
6 Month +8.03% +1.41% +6.63%
12 Month +11.49% -0.17% +11.66%
2 yrs comp pa +8.23% +1.87% +6.36%
3 yrs comp pa +20.71% +4.57% +16.15%
Inception +130.75% +57.74% +73.02%
(Returns are calculated after all fees and expenses and reinvestment of
distributions. Inception of Fund March 2009) *AOAI: All Ordinaries
Accumulation Index. *OP: Out-performance. 2 & 3 year performance
calculated as compound per annum.
Past performance is not indicative of future performance.