July rebound for local boutique funds

The volatility of the stock market towards the end of the financial year has been further illustrated by results reported well after the June 30 cut-off date by specialist funds operating from Western Australia.

Broadly speaking, the stock market’s plunge in the latter part of the year, especially June, left many local fund managers reeling. Even those that beat their chosen benchmarks were sheepish because they prefer not to show their investors, typically high-net-worth individuals and family offices, negative returns.

However, July appears to have been a happier time with rebounds across several funds managed locally.

Merchant Funds, part of the Merchant Group, is one that has recently revealed its results for the year ending June 30 at its two funds: the long-running Merchant Opportunities Fund and the recently launched Merchant Biotech Fund.

Merchant recently relocated to an address at the border of Cottesloe, an increasingly popular location for Perth’s boutique fund managers.

In its investor blog, Merchant said its opportunities fund was down 20.38 per cent for the financial year compared to the Small Ordinaries Index, which was down 21.56 per cent over the same period.

It appears Merchant’s biotech fund also had a very tough year, although it was difficult to compare because its initial disclosure document was only launched in November last year and it first reported its results on its blog showing its price to the end of January.

At June 30, the unit price for the biotech fund was 61.29 cents, compared to 93.29 cents at January 31. That would seem to be a fall of more than 34 per cent over five months, although it is unclear if the unit price is the only measure of return.

However, Merchant states in its most recent biotech fund blog that the ASX biotech sector was down 40 per cent for the full financial year.

“A combination of negative market sentiment and June tax selling resulted in the market taking a beating in June,” the Merchant biotech blog reported.

“A contrarian could see this as opportunity, and that seemed to play out into July with a rally across most sectors with positivity in the biotech sector.

“Our fund was no exception, down to $0.6129 in June, only to rebound strongly and now sit much stronger at $0.8847 on a huge bounce back throughout July to be up almost 40 per cent from the lows of June.”

It is unclear how much Merchant Funds has under management in the two funds or elsewhere. In its most recent annual review of WA-based funds, Business News carried forward an estimate of $440 million from the financial year ending June 30 2021.

It is latest blog, Merchant said $100 million in funds under management remained its initial target for its new biotech fund.

Another fund manager, Endeavor Asset Management, has offered more insight into its funds as well as announcing its latest offer, Endeavor Absolute Return Fund, has gone live. The Endeavor investor update for July shows its Endeavor Growth Equities fund had largely regained much of the losses of the last financial year when it was 8.1 per cent down compared to the ASX Accumulation index, which was down 7.44 per cent. The growth equities fund was up 1.1 per cent for the 12 months ending July 31.

Endeavor has about $350 million in funds under management.

Among its other fund performances for 12 months ending July 31 were: balanced equities, which was down 1.2 per cent; high conviction, which was down 17.5 per cent; and enhanced yield, which was down 0.57 per cent. During July each of the Endeavor funds appeared to have regained most or all of the losses incurred during June.