Switzer Dividend Growth Fund April 2024 Portfolio Update

Welcome to the April 2024 Investment Update for the Switzer Dividend Growth Fund (SWTZ or the Fund).

Performance Summary

The portfolio delivered a return of -4.32%% during the month, compared to the S&P/ASX 100 Accumulation Index (ASX 100) return of -2.91%.

Over the past 12 months, SWTZ has paid a distribution yield of 3.65% or 5.14% including franking credits. Distribution yield is calculated as the distributions received over the 12 months to 30 April 2024 relative to the price at the beginning of the period.

Given its focus on income and capital preservation, over the long term we expect SWTZ to marginally underperform in rising markets and marginally outperform in falling markets.

Portfolio Commentary

The decline in the ASX 100 was mainly driven by the REIT and Consumer Discretionary sectors, down 7.6% and 5.3% respectively. However, the rise in the Utilities sector (+4.8%) partially helped to offset these losses.

In April 2024, economic indicators from Australia and the US influenced global markets. Australia experienced higher-than-expected inflation, with prices rising by 1% in the March quarter, leading to an annual inflation rate of 3.6%. The inflation result and signs of a strong labour market helped fuel interest rate concerns and reduced expectations for rate cuts later in the year.

Meanwhile, the US saw softer Gross Domestic Product (GDP) growth of 1.6% and inflation rising to 3.4% in January-March 2024, causing market turbulence. Geopolitical tensions, such as missile strikes between Iran and Israel, added to investor unease.

At the portfolio level, Fisher and Paykel Healthcare Corporation (FPH) and AGL Energy (AGL) were notable contributors which performed well during the market correction. In the prior month, FPH upgraded profit guidance before its upcoming result announcement in May because of the benefits arising from new product releases. In the medium term, FPH’s earnings should also benefit from the recovery of its depressed profit margins.

AGL enjoyed a positive correction in its share price due to the reversal of overly pessimistic views on future electricity prices. High wholesale electricity prices are now expected to prevail over the next decade as the electricity market transitions from replacing coal fired generators with renewable energy.

Banks, which the portfolio holds at a lower weighting than the Benchmark, also contributed positively, even though they were sold off with the broader market.

Negative contributors to portfolio performance include Reliance Worldwide Corporation (RWC), Block (SQ2) and Xero (XRO). They fell victim to the negative sentiment surrounding rising interest rates, despite no significant company-specific news. However, their long-term fundamentals remain robust.

The focus in the near term is on the upcoming earnings announcements from key holdings like FPH, XRO, and Orica (ORI). The current market correction presents potential buying opportunities, like the one seen in October 2023 when interest rate fears were high.

DISCLAIMER: AGP Investment Management Limited (AGP IM) (ABN 26 123 611 978, AFSL 312247) is a wholly owned subsidiary of Associate Global Partners Limited (AGP) (ABN 56 080 277 998), a financial institution listed on the ASX (APL). AGP IM is the Responsible Entity and Vertium Asset Management Pty Ltd is the investment manager of Switzer Dividend Growth Fund (Quoted Managed Fund) (ARSN 614 066 849) (the Fund).

This material has been prepared for general information only. It does not contain investment recommendations nor provide investment advice. It does not take into account the objectives, financial situation or needs of any particular individual. Investors must, before acting on this material, consider the appropriateness of the material.

Any references to ‘We’, ‘Our’, ‘Us’, or the ‘Team’ used in the context of the portfolio commentary, is in reference to Vertium Asset Management Pty Ltd, as investment manager for the Fund.

Neither AGP IM, AGP, their related bodies corporate, entities, directors or officers guarantees the performance of, or the timing or amount of repayment of capital or income invested in the Fund or that the Fund will achieve its investment objectives. Past performance is not indicative of future performance.

Any economic or market forecasts are not guaranteed. Any references to particular securities or sectors are for illustrative purposes only and are as at the date of publication of this material. This is not a recommendation in relation to any named securities or sectors and no warranty or guarantee is provided that the positions will remain within the portfolio of the Fund.

Investors should seek professional investment, financial or other advice to assist the investor determine the individual tolerance to risk and needs to attain a particular return on investment. In no way should the investor rely on information contained in this material.

Investors should read the Fund’s Product Disclosure Statement (PDS) and consider any relevant offer document in full before making a decision to invest in the Fund. The Fund’s Target Market Determination and other relevant information can be obtained by visiting www.associateglobal.com.