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Welcome to Betashares Best & Worst for September 2024, bringing you insights into our top and bottom performing funds for the month, as well as a spotlight on some funds with interesting recent performance stories.
The two key macro events in September were the US Federal Reserve’s 50 basis point rate cut on 18th of the month, and the announcement of a fiscal and monetary stimulus package by the Chinese Government on 24th.
This month’s spotlight focuses on three funds set to benefit from the US joining the global easing cycle, while the RBA remains unmoved.
Spotlight Funds (%) | 1 Month | 3 Month | 6 Month | 1 Year | 3 Year (p.a.) | 5 Year (p.a.) | Since Inception** | Inception Date |
AGVT | 0.33 | 3.87 | 2.20 | 8.85 | -3.02 | -1.60 | -1.07 | 5/07/2019 |
ATEC | 3.59 | 11.03 | 12.44 | 41.43 | 4.58 | 16.23 | 4/03/2020 | |
BNKS | 0.06 | 4.65 | 8.21 | 32.97 | 7.72 | 6.40 | 8.26 | 28/07/2016 |
Benchmarks | ||||||||
ASX 200 | 2.97 | 7.79 | 6.65 | 21.77 | 8.45 | 8.38 | – | – |
S&P 500 | -0.11 | 1.93 | 3.84 | 26.85 | 13.43 | 15.33 | – | – |
MSCI World | -0.47 | 2.30 | 2.58 | 23.21 | 10.57 | 12.49 | – | – |
AusBond Comp | 0.31 | 3.02 | 2.16 | 7.11 | -1.19 | -0.40 | – | – |
Source: Morningstar, Bloomberg. As at 30 September 2024. Past performance is not an indicator of future performance of any index or fund. All performance figures quoted in AUD.
Spotlight:
AGVT Australian Government Bond ETFFor those looking to add duration to their portfolios and capitalise on the global easing cycle, long-dated Australian Government bonds should be considered as an access point. This is particularly true as Australia remains one of few developed economies yet to begin cutting rates. The Australia / US 10-year spread has grown to 0.22% at the time of writing, making domestic bonds a potentially attractive play compared to their US counterparts. What’s more, 10-year Australian Government bond yields have rebounded to approximately cash rate levels at 4.32%, which as a simple rule of thumb represents good value when heading into an anticipated rate cutting cycle.
AGVT also has a 25% allocation to State Government and AAA rated supranational bonds, which has helped to deliver outperformance over the Bloomberg AusBond Government and AusBond Treasury indices by over 100 basis points in the past 12 months1.
ATEC S&P/ASX Australian Technology ETFWhile many Australian technology companies suffered from the rising interest rates in 2022, we appear to be well over the crest. Although rates are yet to be cut in Australia, they have been on hold for over a year now and the next move from the RBA is expected to be down. This has acted as a strong tailwind for Australian tech companies, with ATEC appearing in last month’s ‘best’ list and providing total returns of 30% so far in 2024. ATEC provides access to a number of highly innovative and widely recognised companies such as Wisetech Global, Xero and Carsales – the diversification benefits of which should be a key consideration for domestic investors given the mere 3.5% exposure to the technology sector in the S&P/ASX 200 Index2.
BNKS Global Banks Currency Hedged ETFGlobal cutting cycles and lower rates typically mean tighter net interest margins (“NIMs”) for the banks. However, with many bank loans (mortgages, cars) being fixed rate, this may take time to have an impact – in fact, NIMs may initially increase as the lending rates remain high, while banks can pay depositors less as rates fall. Lower rates also bring the likelihood of an increase in borrowing activity and further credit growth, provided the soft-landing scenario plays out.
Investment banking revenues are also up among the global banks, with JP Morgan Chase – the second largest holding of BNKS – beating estimates in their third quarter earnings release, citing a rise in investment banking fees by 31%3.
For those looking to add financial sector exposure to their international equity allocation, BNKS invests in the world’s largest global (ex-Australia) financial institutions which, as of the end of September, offer an average price-to-book of less than half that of the Australian financials4.
Best:
Best* (%) | 1 Month | 3 Month | 6 Month | 1 Year | 3 Year (p.a.) | 5 Year (p.a.) | Since Inception** | Fund Inception Date |
QRE | 11.45 | 6.85 | 1.50 | 3.22 | 12.85 | 10.52 | 3.96 | 10/12/2010 |
XMET | 9.10 | 6.49 | 4.90 | 4.42 | – | – | -0.65 | 26/10/2022 |
URNM | 8.81 | -10.29 | -11.75 | -5.97 | 13.94 | 8/06/2022 |
Source: Morningstar, Bloomberg. As at 30 September 2024. Past performance is not an indicator of future performance of any index or fund. All performance figures quoted in AUD.
QRE Australian Resources Sector ETFThe stimulus measures announced by the Chinese government came as a significant boost to the Australian resources sector, despite uncertainty around the size of the fiscal package. QRE’s performance shows just how close the link is, with just about the entire monthly return coming after the announcement by the Chinese Government on 24th September (11.36% out of 11.45%). The rate cuts in the US and investors’ apparent confidence in the market (given their reaction) also acted as a tailwind for resources. In combination, these two factors led to a rotation away from the Australian banks, with CBA down 2.95% in September, while BHP, the fund’s largest holding, grew by 16% for the month, contributing 6.63% to total returns5.
XMET Energy Transition Metals ETFAs with QRE, the companies within XMET welcomed the Chinese stimulus package with open arms, with the fund returning 9% in the final week of the month post-announcement. MP Materials, a rare-earth materials company was the largest beneficiary, growing 34% for the month and contributing 1.21% to the Fund’s total return6. Looking forward, the resources companies in both XMET and QRE are likely to respond to the Chinese Government’s announcement regarding the size of the fiscal stimulus, as well as the longer-term impact of these measures.
Silver, one of the energy transition metals within XMET’s index, also rose by 7% in September7. As with gold, we typically see silver rally as the USD weakens during a cutting cycle.
URNM Global Uranium ETFPrior to August, URNM had three poor months due to the announcement of a hefty tax on uranium mining in Khazakstan as well as loosening supply, with the US looking to grow their domestic supply chain. However, September saw reprieve as uranium futures rose by 3.15%8.
A recent and potentially significant development is the link between technology companies, AI and nuclear energy. Microsoft signed a deal with Constellation Energy in September to help resurrect a US nuclear power plant in Pennsylvania9. The huge power demand of generative AI has also brought Google and Amazon into the fold, with both companies investing in small modular reactors to supply their datacentres10.
Worst:
Worst* (%) | 1 Month | 3 Month | 6 Month | 1 Year | 3 Year (p.a.) | 5 Year (p.a.) | Since Inception** | Fund Inception Date |
OOO | -6.08 | -15.95 | -15.42 | -19.76 | 4.96 | -9.34 | -12.60 | 11/11/2011 |
FUEL | -4.72 | -4.30 | -5.63 | -0.82 | 14.74 | 5.82 | 5.61 | 16/06/2016 |
DRUG | -3.46 | 3.52 | 4.64 | 17.70 | 6.93 | 10.35 | 8.97 | 4/08/2016 |
Source: Morningstar, Bloomberg. As at 30 September 2024. Past performance is not an indicator of future performance of any index or fund. All performance figures quoted in AUD.
OOO Crude Oil Index Currency Hedged Complex ETF and FUEL Betashares Global Energy Companies Currency Hedged ETF
Given the dependence of energy companies on oil prices, (FUEL’s index has an 84% correlation in monthly returns to brent crude Oil prices11), the same set of events apply to both of the above funds.
Global oil demand has continued to fall, with weak business activity data in Europe exacerbating the diminishing consumption in China, while tensions in the middle east calmed in the first half of the September – all of which led to fears of oversupply12. Brent crude oil futures fell to a near three-year low of below $70 per barrel, dropping by 10% in the first 10 days of September13. In response, OPEC+ decided to postpone planned unwinding of their supply cuts by two months to help stabilise prices14. Israel’s launch of a large scale bombing campaign and ground invasion in southern Lebanon in the second half of the month further pushed up prices, as did the 50bps rate cut in the US and Chinese stimulus announcement, with oil futures finishing the month at around $74 per barrel, down 6.8% for the month all-in.
DRUG Global Healthcare Currency Hedged ETFDRUG experienced a correction in September having peaked on the final day of August. The Fund remains 14.6% up year to date15, but profit taking and a number of negative news headlines affecting the largest holdings led to the ETF’s first month of negative total returns since April, and only the second this year.
Novo Nordisk fell 16% in the month following poor results from its trial of its weight loss drug, Wegovy, which had claimed a 15% loss in body weight in 16 weeks – while the trial resulted in only 6.5%16.
Roche’s trial of its CT-996 obesity pill resulted in some patients experiencing gastrointestinal side effects17, and the world’s largest hedge fund Bridgewater Associates sold the majority of their Eli Lilly shares18.
*Excludes short and geared funds, aside from currency.**Annualised for funds with more than 1 year’s performance history.
1. Bloomberg
2. Morningstar Direct
3. AFR
4. Bloomberg. As measured by the 12-month forward P/B compared to the Betashares Australian Financials Sector ETF (ASX: QFN)
5. Market Index
6. Morningstar Direct
7. ABC Bullion
9. Mining.com
10. Reuters
11. Bloomberg
12. Reuters
14. IEA
15. Betashares
16. Reuters
17. Barron’s
18. Barron’s
Betashares Capital Limited (ABN 78 139 566 868, AFSL 341181) (Betashares) is the issuer of the Betashares Funds. This information is general only, is not personal financial advice, and is not a recommendation to invest in any financial product or to adopt any particular investment strategy. You should make your own assessment of the suitability of this information. It does not take into account any person’s financial objectives, situation or needs. Past performance is not indicative of future performance. Investments in Betashares Funds are subject to investment risk and investors may not get back the full amount originally invested. No assurance is given that any of the companies mentioned above will remain in the relevant fund’s portfolio or will be profitable investments. Any person wishing to invest in a Betashares Fund should obtain a copy of the relevant Product Disclosure Statement and Target Market Determination from www.betashares.com.au and obtain financial and tax advice in light of their individual circumstances.
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