Institutional Monthly Update

Performance Review

Plato Australian Shares Enhanced Index Composite (gross of fees and expenses) performed in line with the S&P/ASX300 Accumulation Index in May. The largest contributors to active performance included overweight positions in Mineral Resources and Amcor as well as underweight positions in Block, Woolworths and AVZ Minerals. However, overweight positions in CSR, Charter Hall, AUB Group, Johns Lyon Group and JB Hi-fi detracted from relative performance. The strategy has tracked 0.6% p.a. ahead of its benchmark since inception and delivered an information ratio of 0.6.

Plato Australian Shares Tax-Exempt Composite (gross of fees and expenses) underperformed the S&P/ASX200 Accumulation Index (post franking credits) by 0.1% in May. The largest contributors to active performance included overweight positions in Graincorp and Mineral Resources as well as underweight positions in Block, Rio Tinto and Lynas. However, overweight positions in Aristocrat Leisure and South32 underperformed and underweight positions in Ramsay Healthcare, Transurban and ASX detracted from relative performance. The strategy has tracked 1.5% p.a. ahead of its benchmark since inception and delivered an information ratio of 0.7.

Plato Australian Shares Income Composite (gross of fees and expenses) underperformed the S&P/ASX200 Accumulation Index (post franking credits) by 0.3% in May. The largest contributors to active performance included overweight positions in South32, Amcor, Mineral Resources and BHP as well as an underweight position in Fortescue. However, overweight positions in Macquarie, CSR, Charter Hall, JB Hi-fi and Goodman Group underperformed detracting from relative performance. The strategy has tracked 1.8% p.a. ahead of its benchmark since inception, with an information ratio of 1.0.

Plato Australian Shares Low Volatility Income Composite (gross of fees and expenses) underperformed the S&P/ASX300 Accumulation Index (post franking credits) by 0.6%  in May. The largest contributors to active performance included an overweight position in Amcor as well as underweight positions in ANZ, Rio Tinto, James Hardie and Woodside. However, overweight positions in CSR and Goodman Group underperformed and underweight positions in BHP, Westpac and Commonwealth Bank detracted from relative performance. The strategy has delivered a 23% higher Sharpe ratio than that of the market since inception and has tracked 0.5% p.a. above its benchmark since inception in March 2013.

The Plato Global Shares Income Composite (gross of fees and expenses) delivered a net yield of 1% and a total return of –0.2%, again outperforming a weak index. Since inception, the Fund has delivered 7% p.a. net yield from global equities, which is 5.3% p.a. more than the Benchmark. The Fund continued to generate strong excess income, driven at the sector level by Financials and Consumer Durables. From a country perspective the driver was Europe, led by France and Germany. Stock examples of these exposures include US financial, American Financial Group, and Germany auto business, BMW AG.

The fund outperformed the index, helped by its relative value exposure. As markets retreated, Value stocks again held up better than their growth counterparts (MSCI World Value +2.1% v MSCI World Growth -2.8% in USD). Small cap companies underperformed their large cap counterparts, creating a small headwind for the strategy (MSCI World Small Cap +0.3% v MSCI World Large Cap +1% in USD). The Fund demonstrated positive stock selection in the US, Germany, and Hong Kong. This more than made up for weakness in Sweden and Japan. From a sector perspective relative performance continued to be strong in Healthcare and IT, offsetting weakness in Financials. Plato’s proprietary approach seeks to identify stocks that perform strongly in the period prior to their ex-dividend date. Examples include US healthcare companies, Pfizer and Johnson & Johnson.

The Plato Global Low Carbon Fund (Class A) (‘Fund’) delivered a significant reduction in carbon exposure, reducing both carbon intensity (-75%) and carbon footprint (-75%) versus the index. The fund posted a total return of -0.97, slightly lagging the index in a month when high carbon stocks again outperformed. The fund continues to outperform since inception, in a challenged environment for low carbon names. Carbon intensive names continued to outperform, presenting a headwind for the strategy. This was partially offset by positive stock selection, especially in the low carbon intensity names. The Fund ‘s largest relative contribution to returns came from exposures in Norway and Financials. However, there was a weak contribution in the US, driven by the outperformance of high emitters in the Energy and Materials sectors. The energy trend continued and not holding names, including Shell PLC and Exxon Mobil Corp, detracted from relative performance. Plato’s proprietary approach seeks to lower the portfolio level carbon exposure, whilst identifying stocks that perform strongly. Positive contributors included our lower carbon emitting exposure to the Energy and Utilities sectors via Brigham Minerals and Eversource Energy.