H&G High Conviction Fund - April 2022 Update

Updated: May 10

OBJECTIVE

We invest in and actively engage with companies that have superior fundamental prospects but are priced at a discount relative to inherent value, usually resulting from non-operating, external events driving a flight of investors. We have significantly outperformed the Australian share market over 14 years.


*Includes the original vehicle, The Supervised Fund, launched in November 2007 by Supervised Investments Australia Limited (SIAL). SIAL was sold in March 2021 to Hancock & Gore Limited, and The Supervised Fund subsequently rebranded as H&G High Conviction Fund.

The strategy of investing in micro capitalisation listed equities has remained consistent.

Performance to 30 April 2022 (after all fees)

1 Month

Financial YTD

Last 12 months

7 years p.a.

Since inception (1 Nov 2007)

H&G High Conviction Fund

0.8%

10.3%

11.7%

9.7%

8.5% p.a.

ASX Small Ordinaries Accumulation Index

-1.5%

1.2%

4.6%

9.3%

2.3% p.a.

Key Contributors to performance during April 2022


Dear Unit Holder,


April was another month of intense market volatility, with stocks falling as global interest rates continued to rise. The H&G High Conviction Fund managed a steady return of 0.8% net of fees, benefiting from a low allocation to technology companies and a high level of cash.


TOP FOUR HOLDINGS


Kiland shares increased by 2% in April, during which the retail component of the company's 7 for 11 rights issue remained open. The company also announced the completion of the sale of its pontoon for US$4.3m. Following this and the current $32m raise, Kiland will be well capitalised to execute the transformation of its burnt forests into high rainfall farmland.


Po Valley Energy shares rose by 7% during the month despite no material updates. Natural gas prices in Europe remain at multi-year highs and we retain our view that Po Valley Energy's assets are of strategic significance for Italy to ensure its energy security.


Bisalloy Steel Group shares fell by 7% in April on no news.


Hillgrove Resources returned 25% during the month after the company announced continued progress towards the resumption of copper mining by the end of the year.


MARKETS


We remain cautious about the short-medium term outlook for the stock market due to pessimism being driven by supply chain issues, persistent inflation, the associated increase in interest rates, and a slowdown in the Chinese economy. You can read more about our macroeconomic views in our December 2021 edition of Markets in Three Charts: "Are Equities Overvalued?". We continue to hold a historically high level of cash (25% of the Fund as at the time of writing), as well as a small allocation towards gold and put options on the S&P 500.


As ever, please don’t hesitate to reach out to us with any questions on the Fund.


Sincerely,


The team at H&G Investment Management


PORTFOLIO






FUND INFORMATION

Fund name

H&G High Conviction Fund

Investment Manager

H&G Investment Management Limited

Fund inception

November 2007 (relaunched April 2021)

Fund pricing

Monthly

Fund type

Open-end unit trust

Investor eligibility

Wholesale and sophisticated investors

Trustee

Equity Trustees

Custodian and sub-custodian

Mainstream Fund Services and JP Morgan

Auditor

Ernst & Young

Management fee

1% plus GST p.a. + fund costs capped at 1% plus GST p.a.

Performance fee

20% of benchmark outperformance, with a high watermark

Benchmark

5% p.a.

Buy/sell spread

0.4%



DISCLAIMER

Equity Trustees Limited (“Equity Trustees”) (ABN 46 004 031 298), AFSL 240975, is the Trustee for H&G High Conviction Fund. Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT).

This monthly performance report has been prepared by H&G Investment Management Ltd (ACN: 125 580 305; AFSL: 317155) to provide you with general information only. In preparing this report, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Neither H&G Investment Management Ltd, Equity Trustees nor any of its related parties, their employees or directors, provide and warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Information Memorandum before making a decision about whether to invest in this product.