Multi-Asset Performance

PAC Monthly Performance - January

Clayton Larcombe
February 15, 2022

Multi Asset

In January, the PAC Capital Balanced Fund returned -3.75%, relative to a benchmark return of 0.68%. Also, the PAC Capital Growth Fund returned -4.54% relative to a benchmark return of 0.72%.

Our exposures to Global Infrastructure (-0.37%), Australian Fixed Interest (- 0.51%) and Global Fixed Interest (-1.43%) provided some support during a challenging month. We encountered meaningful underperformance from Australian Property (-9.39%) and International Equity (Hedged) (-6.50%). 2022 began with markets recording one of the worst starts to a calendar year in history.

A combination of (i) COVID Omicron concerns; (ii) rising inflation; and (iii) expectations for rising interest rates, dented investor sentiment and lead to corrections (10%+ falls from the highs) in many equity markets. Omicron aggressively spread throughout the world in December and January, which raised the probability of further lockdowns and impacted growth outlooks. U.S. reported headline CPI rising by 7.0% in December 2021. Although the increase was in line with market expectations, unwavering price rises around the world will put increasing pressure upon central banks to pursue monetary policy tightening.

Notably, whilst U.S. interest rates had been steadily climbing since mid-December, the Federal reserve signalled a hawkish pivot in early January and caused U.S. yields to breakout to the upside, hitting levels not seen since January 2020 (pre-pandemic). We made no meaningful changes to portfolio positioning during January. Our overall risk exposure remains very close to target.

We retained a slight overweight to exposure to international equity and real assets (i.e., property, infrastructure, and commodities) and a structural underweight to emerging market equities.

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PAC Global Innovation Fund

PAC Global Innovation Fund In January, the PAC Innovation Fund returned 5.74%.

Our performance was primarily driven by our core holdings that included: (i) Kambi Group PLC (-7.50%); (ii) Volkswagen AG (3.29%); and (iii) Ionis Pharmaceuticals Inc (4.50%). The market continued to see weakness in the medium-term outlook for Kambi, which has been plagued by client concentration and balance sheet risks. We believe these risks will be appeased in forthcoming quarterly earnings and that Kambi provides a strategic buyer with an excellent acquisition target especially at increasingly depressed valuations. Volkswagen performed well during January as auto manufacturers highlighted their ambitions to aggressively compete for market share of electric vehicles.

We believe Volkswagen offers direct exposure to this megatrend at an unassuming valuation. During January, we added aggressively to Kambi as our assessment of its prospects increasingly diverged from market consensus. We also increased our exposure to Ginkgo Bioworks Holdings Inc and initiated positions in Ionis Pharmaceuticals Inc to gain further exposure to companies exhibited explosive growth and innovation within the biotechnology sector.

PAC Global Esports Fund

PAC Global Esports Fund In January, the PAC Global Esports Fund returned –41.28%.

Our performance was primarily driven by our core holdings that included: (i) Evolution AB (-11.70%); (ii) Skillz Inc (-35.35%); and (iii) Razer Inc (- 5.79%). Our largest position, Evolution AB, continued to defend itself against a slew of allegations into the legitimacy of its business activities. Anonymous short reports were leaked to certain institutional investors and caused downward pressure on the stock price. Skillz continued to face pressure both from multiple compression within the US technology sector, uncertainty around increased customer acquisition costs and the sustainability of the “play to earn” business model. During January, we took advantage of a strong rebound in sentiment surrounding Evolution AB and trimmed our exposure. Further, we increased our exposure to the consumer electronics sector by removing PointsBet Holdings Ltd, adding Razer Inc to the portfolio, and increasing our exposure to Turtle Beach Corp.

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