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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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AUT

Australian Equity Fund

Seeking high-quality opportunities in Australian companies with positive structural industry dynamics, strong competitive positions and which can sustainably grow at attractive rates of return.

Fund Profile

APIR ETL0328AU

3YR Return Annualised (Net)
(View Total Returns)

Total Assets
(AUD)

8.85%
$130.2m

1YR Return (Net)
(View Total Returns)

Manager Tenure

30.03%
9yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.07
3.28%

Inception Date 26-Apr-2012

Performance figures calculated in AUD

30-Sep-2021 - Randal Jenneke, Head of Australian Equities,
We remain cautious. Markets are grappling with the competing issues of decelerating economic growth and persistently higher-than-expected, albeit moderating, inflation caused by ongoing supply chain disruptions. At the same time, central banks around the world are gradually starting to remove their emergency level pandemic support, such as tapering their bond buying programmes.
Randal S. Jenneke
Randal S. Jenneke, Portfolio Manager

Randal Jenneke is a portfolio manager and head of Australian equities in the International Equity Division. He is a director of T. Rowe Price Australia, Ltd. He is also a vice president of T. Rowe Price Group, Inc.

 

Strategy

Investment Objective

The Fund's investment objective is long-term capital appreciation through investment primarily in a portfolio of securities of Australian companies listed on the S&P/ASX200 Accumulation Index (ASX200). The portfolio will include the securities of a broad range of companies across the market capitalisation. Additionally the portfolio may contain investments in the Securities of companies outside of the ASX200 including certain New Zealand and ASX dual listed companies.

Investment Approach

  • Our investment approach focuses on bottom-up company fundamentals but recognizes that sector and industry analysis are also critical to understanding growth drivers. The portfolio manager ultimately seeks to construct a growth-oriented portfolio of stocks, ranging across all market capitalization segments and maintaining sector diversification.
  • One of the core tenets of our investment philosophy is that quality growth stocks are frequently mispriced. Our long-term investment approach provides us with the opportunity to take advantage of near-term trends that can often be overemphasized by the market and our competitors.
  • We implement fundamental analysis to identify companies with positive structural industry dynamics, strong competitive positions and those that we believe can grow sustainably at attractive rates of return. In seeking out these higher-quality businesses, we focus on industry attractiveness, competitive advantage, management quality, free cash flow, return on capital and financing/balance sheet structure.
  • Our global research platform enables us to access and use information from local and global perspectives, generating unique insights. The fund comprises some of the highest-conviction ideas from our research platform, as well as the insights of our global sector and regional equity portfolios. We expect these businesses to compound value faster than the overall market and outperform over time, focusing on opportunities where our fundamental views differ from market expectations.
  • We assess valuations relative to other local market opportunities, seeking high-growth companies with attractive valuations relative to their long-term intrinsic value.
  • Systematic and integrated risk management are hallmarks of our investment process.

Portfolio Construction

  • The portfolio may contain investments in the securities of companies outside of the ASX200 including certain New Zealand and ASX dual listed companies.
  • Typically 30-50 holdings, ranging across all market capitalization segments
  • Individual positions range from +/- 5% relative to benchmark
  • Expected Tracking Error: typically 3.0 to 6.0% over rolling three-year period
  • Cash target range: Cash Reserves are typically less than 5% but will not exceed 10% of the Fund's total market value
  • Turnover range: 30 – 50% per annum

Performance - Net of Fees 

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Since Manager Inception
Annualised
Fund % 30.03% 8.85% 10.66% 10.59% 10.59%
Benchmark % 30.56% 9.65% 10.42% 10.19% 10.19%
Excess Return % -0.53% -0.80% 0.24% 0.40% 0.40%

Inception Date 26-Apr-2012

Manager Inception Date 26-Apr-2012

Benchmark: S&P/ASX 200 Index

Data as of 30-Sep-2021

Performance figures calculated in AUD

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 30.03% 8.85% 10.66% 10.59%
Benchmark % 30.56% 9.65% 10.42% 10.19%
Excess Return % -0.53% -0.80% 0.24% 0.40%

Inception Date 26-Apr-2012

Benchmark: S&P/ASX 200 Index

Data as of 30-Sep-2021

Performance figures calculated in AUD

Recent Performance

  Month to DateData as of 22-Oct-2021 Quarter to DateData as of 22-Oct-2021 Year to DateData as of 22-Oct-2021 1 MonthData as of 30-Sep-2021 3 MonthsData as of 30-Sep-2021
Fund % 1.13% 1.13% 18.80% -1.95% 3.16%
Benchmark % 1.15% 1.15% 16.14% -1.85% 1.71%
Excess Return % -0.02% -0.02% 2.66% -0.10% 1.45%

Inception Date 26-Apr-2012

Benchmark: S&P/ASX 200 Index

Benchmark: S&P/ASX 200 Index

Performance figures calculated in AUD

Past performance is not a reliable indicator of future performance.

Source for performance: T Rowe Price. Net of fees performance is based on end of month redemption prices after the deduction of fees and expenses and the reinvestment of all distributions. Figures include changes in principal value. Investment return and principal value will vary, and an account may be worth more or less at termination than at inception. For further details, please refer to the fund's product disclosure statement and reference guide which are available from Equity Trustees or TRPAU.

Daily performance (MTD, QTD, and YTD) data is based on the latest available NAV minus one business day.

Returns shown with gross dividends reinvested. S&P/ASX 200 Index is renamed to S&P/ASX200 Total Return Index.

Returns for time periods greater than one year are annualised.

Fund performance is shown in I Class.

30-Sep-2021 - Randal Jenneke, Head of Australian Equities,
The Australian equity market fell in September, its first monthly decline in a year. Signs of improving demand, as well as supply disruptions, saw Brent oil prices rise significantly over the month. Iron ore prices continued to come under pressure, falling almost 30% due to significant weakness in Chinese steel production associated with deceleration of the Chinese property market and a government directive to limit steel production to 2020 levels. At the portfolio level, performance benefitted from our position in a global leader in English-as-a-second-language tests for international students and migrants. Its shares performed well as plans to reopen Australia’s international border to foreign students started to take shape. Conversely, the rise in bond yields toward the end of the month saw the share prices of some our more highly valued businesses come under pressure, including an instalment credit provider and an accounting software specialist. While this is an unsurprising initial reaction, we do not believe bond yields will rise high enough to be of concern. Ultimately, the fundamentals of these businesses will matter the most to long-term share price performance. In this regard, both businesses look very well-positioned, in our view.

Holdings

Total
Holdings
36
Largest Holding Bhp 8.17% Was (30-Jun-2021) 9.26%
Other View Full Holdings Quarterly data as of  30-Sep-2021
Top 10 Holdings 52.86% View Top 10 Holdings Monthly data as of  30-Sep-2021

Largest Top Contributor^

Aristocrat Leisure
% of fund 6.01%

Largest Top Detractor^

Bhp
% of fund 8.17%

^Absolute, percentages based on the difference between the total net assets of the two largest holdings of the fund.

Quarterly Data as of 30-Sep-2021

Top Purchase

Coles (N)
5.43%
Was (30-Jun-2021) 0%

Top Sale

Domain Holdings Australia (E)
0.00%
Was (30-Jun-2021) 3.89%

Quarterly Data as of 30-Sep-2021

30-Jun-2021 - Randal Jenneke, Head of Australian Equities,

The portfolio is well-positioned in cyclical growth, recovery growth, and high quality stocks that we believe will benefit as economic conditions continue to improve. We have tilted our positioning towards more domestic exposures to reflect the stronger economic performance of the Australian economy and as a result are now overweight domestic cyclicals. To fund these portfolio changes we have taken profit on defensive growth names and somewhat reduced exposure to offshore earners.

As a result of these shifts, as of the end of June 2021, by far our largest relative sector overweight position was in consumer discretionary, with more modest overweight exposures to communication services, health care, and IT. Our key underweights were in financials, materials, consumer staples, and energy.

Materials

We reduced the portfolio's exposure to materials over the quarter following strong rises in several commodities and input prices.� By the end of the second quarter, we had a sizeable underweight in the sector, with our focus on non-gold mining names�

  • We eliminated the position in Amcor.� An increase in the cost of raw materials that are used as inputs in its packaging has dampened the outlook for Amcor. Additionally, its North American beverage profits have come under pressure partly due to poor performance from one of its key customers, Gatorade. We still see longer-term potential with the business once these impacts wash through, however for now we prefer opportunities elsewhere.
  • We sold out of our holding in Rio Tinto. Multiples have risen to a point that suggest risk is now more negatively skewed. The largest risk factor from a macro perspective is an aggressive tightening of Chinese credit. This would threaten RIO's iron ore portfolio, which is a greater proportion of the commodity mix than that of BHP. We prefer BHP at this point given it has more operational stability and exposure to a late cycle earnings recovery via its oil assets.

Real Estate Investment Trusts (REITs)

The portfolio remains underweight the REIT sector but over the course of the quarter we narrowed this underweight via a very selective addition.

  • We initiated a position in Goodman Group, which is leveraged to the global supply chain improvement thematic driven by e-commerce and global trade. This is because the bulk of its earnings are derived offshore and from development. The coronavirus pandemic has accelerated e-commerce fulfilment strategies and broader structural trends such as automation, modernisation and last-mile delivery. The REIT is also well-positioned via a strong balance sheet and ample liquidity to take advantage of any opportunities that arise.

Communication Services

We have an overweight position in communication services and over the quarter we increased our exposure to this space. We view the sector as offering several ways to play the economic recovery theme, including housing and consumer spending.

  • We initiated a position in carsales.com.� We believe the outlook for the stock has improved in the near-term thanks to more supportive conditions in the used and new car market. Our estimates are also above consensus and we anticipate stronger margins than the market is currently pricing in. We believe a recent pull-back in carsales' share price has provided a good entry for a position. Over the medium-term we believe this is an attractive high-quality business that has potential to compound earnings at low double digits and at the same time offers a reasonable dividend yield.

Consumer Staples

As noted above, we continued to tilt the portfolio's exposure towards domestic cyclical companies that are more geared to the Australian economy. This shift included moving further underweight the consumer staples space.

  • We eliminated our holding in supermarket group Woolworths. The stock has re-rated to expensive levels relative to history and peers, including its largest competitor Coles. We lack confidence in its ability to outperform with an absence of clear upside catalysts and therefore made the decision to exit our position.

Sectors

Total
Sectors
10
Largest Sector Consumer Discretionary 22.31% Was (31-Aug-2021) 21.93%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2021

Benchmark: S&P/ASX 200 Index

Top Contributor^

Consumer Discretionary
Net Contribution 1.65%
Sector
0.05%
Selection 1.60%

Top Detractor^

Industrials & Business Services
Net Contribution -0.54%
Sector
-0.00%
Selection
-0.54%

^Relative

Quarterly Data as of 30-Sep-2021

Largest Overweight

Consumer Discretionary
By14.04%
Fund 22.31%
Benchmark 8.27%

Largest Underweight

Financials
By-11.96%
Fund 19.17%
Benchmark 31.13%

Monthly Data as of 30-Sep-2021

30-Sep-2021 - Randal Jenneke, Head of Australian Equities,
We maintain our cautious stance and hence a strong exposure to quality and more defensive names in the portfolio. This has consisted of topping up positions in our health care companies and adding consumer staples and utilities exposure. We are moving further underweight the banking sector as we see headwinds starting to mount and better opportunities elsewhere. Overall, we see the market environment as being ripe for quality defensive companies to perform well.

Countries

Total
Countries
3
Largest Country Australia 95.29% Was (31-Aug-2021) 91.30%
Other View complete Country Diversification

Monthly Data as of 30-Sep-2021

Benchmark: S&P/ASX 200 Index

Largest Overweight

United States
By1.83%
Fund 2.60%
Benchmark 0.77%

Largest Underweight

Australia
By-2.08%
Fund 95.29%
Benchmark 97.37%

Monthly Data as of 30-Sep-2021

Team (As of 01-Oct-2021)

Randal S. Jenneke

Randal Jenneke is a portfolio manager and head of Australian equities in the International Equity Division. He is a director of T. Rowe Price Australia, Ltd. He is also a vice president of T. Rowe Price Group, Inc.

Randal’s investment experience began in 1991, and he has been with T. Rowe Price since 2010, beginning in the International Equities Group. Prior to this, Randal was employed by Schroders in the area of investment management.

Randal earned a B.Ec. in accounting and finance from Macquarie University. He also earned a graduate diploma in applied finance and investment from the Securities Institute of Australia.

  • Fund manager
    since
    2012
  • Years at
    T. Rowe Price
    11
  • Years investment
    experience
    30

Fees

APIR Minimum Initial Investment (AUD) Minimum Subsequent Investment (AUD) Buy/Sell Spread Management Fees
ETL0328AU $500,000 $100,000 Buy +0.10%/ Sell -0.10% 0.60% pa