The International fund increased the weighting from 31% in October to 34% in November, compared to 22% six months ago.
In its latest market update, fund managers Andrew Clifford, Clay Smolinski and Nikola Dvornak, said: “The longer we go without a meaningful correction, the more we are concerned about the risks of one occurring and, as such, the trend in the portfolio has been to increase the level of protection via short positions and cash”.
They said the fund would also benefit if, contrary to wider views, rising inflation was a long-lasting trend rather than transitory.
“The market is debating whether inflation will be transitory or longer lasting. Our portfolio will benefit from the latter as the crowd’s positioning seems to be towards the former,” they said.
“A combination of looking for unloved stocks and an assessment of the data, showing upward pressure in wages and rents, which tend to be sticky, lead us to feel comfortable with the positioning.”
Australian inflation was 3% in the third quarter, down from 3.8% in the second quarter, but in a November speech, Reserve Bank of Australia governor, Phil Lowe, said he expected inflation was transitory and would not require a change to monetary policy.
“The current increase in inflation is only transitory and a period of contradictory monetary policy will not be required to return inflation to target,” Lowe said.
The management trio said performance contributors for the fund had come from the industrials, financials, materials and IT, specifically semiconductors, and the average stock holding had contributed 13% during 2021.
Industrials was the fund’s largest sector weighting at 19.3% followed by financials at 14.6%, materials at 13.6% and IT at 9.1%.
