Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
Five straight winning weeks for the ASX
Five straight winning weeks for the ASX, Nuix (ASX:NXL) leads IPO frenzy
The ASX 200 (ASX:XJO) adding 0.3% on Friday behind continued strength in the materials and financials sectors, sending the index to its five straight weekly gain, albeit just 0.5%.
The standout by far was Sandfire Resources (ASX:SFR) which added 28.6% as copper prices hit a seven year high on an improving economic outlook.
The commodity is a key input into electricity transmission and vehicle motors which are benefitted from huge global fiscal stimulus focused around infrastructure and energy.
Friday may well be remembered for the record breaking IPO frenzy, with all four companies listing today delivering a ‘stag’ profit for investors.
Investigative analytics and cyber security company Nuix (ASX:NXL) finished 50.9% higher for the day, with Macquarie Group (ASX:MQG) banking over $500 million and remaining a key shareholder.
The other new listings, Maas Group (ASX:MGH) and Doctor Care Anywhere (ASX:DOC) focusing on construction outsourcing and e-health also overcame the markets exhaustion with highly priced e-commerce IPO’s by offering investors something different.
Home Consortium (ASX:HMC) continues to acquire, another triple high in the US despite weak jobs growth
It was a busy week for Home Consortium (ASX:HMC) after demerging their Daily Needs REIT the company entered a trading halt to raise another $125 million for a series of acquisitions.
This time management are focused on healthcare, childcare and long-term Government leased properties. The offer is priced at a discount of just 2.6% and represents a new direction for the historically big box retail focused team.
It was another positive week for US markets, with all three large cap indices pushing to record highs on Friday, the Dow Jones, S&P 500 and Nasdaq up 0.8%, 0.9% and 0.7% respectively; a rarity.
Looking across the weak it was the energy companies in general adding most to returns, yet the Nasdaq (+2.1%) outperformed the S&P 500 and Dow Jones, 1.0% and 1.7% respective over the five days.
Despite the counterintuitive feeling, sharemarkets actually rose on the back of weaker than expected jobs data, where 245k workers were added, well below the 440k expected, the reason?
Investors expect the bad news to force another $900 billion fiscal stimulus out of the US Government before Christmas. If delivered, this would be boon for a Santa Claus rally.
Unemployment in the US fell to 6.7% however was generally being driven by workers no longer seeking work rather than finding jobs.
AirBNB the famous travel booking app is set to list before Christmas in an effort to raise $2.5 billion despite facing the most difficult period imaginable for the company.
Key takeaways: Another commodity super cycle, AUD hurting economy, corporate activity will continue to ramp up
The story of the week was the incredible strength of the commodity sector, but iron ore and copper in particular.
Despite the backdrop of a worsening trade relationship with China, highlighted by this week’s attack on our wine industry, our commodity exports are going from strength to strength.
The iron ore and copper price both reach all-time highs, not solely because of China, as key global suppliers struggle to ramp up production.
Ultimately, the strength is great for the Australian Government coffers, but likely offers little for the economy in general. One major drawback has been the strength of the AUD, which has reached 74.5 US cents this week and is now placing real pressure on Australian exporters.
The combination of a worsening US economy and commodity demand are offsetting the RBA’s attempts to devalue our currency.
The big risk, of course, is the two speed economy we saw in the early 2010’s as the commodity and housing sectors exploded but the rest of the economy struggled with no wage growth and higher unemployment.
The final takeaway has been the sustained increase in corporate activity with Downer EDI (ASX:DOW), Macquarie Group (ASX:MQG) and Kogan (ASX:KGN) just three of the companies selling or buying businesses this week.
The pandemic is offering strong and weaker businesses the chance to reset and focus on their ‘core’ supported by record low interest rates; a trend I expect to continue throughout 2021.
