Switzer Dividend Growth Fund December 2023 Portfolio Update

Welcome to the December 2023 Investment Update for the Switzer Dividend Growth Fund (SWTZ or the Fund).

Performance Summary

The portfolio delivered a return of 5.52% during the month, compare with the S&P/ASX 200 Accumulation Index benchmark return of 7.26%.

Over the past 12 months, SWTZ has paid a distribution yield of 3.75% or 5.17% including franking credits. Distribution yield is calculated as the distributions received over the 12 months to 31 December 2023 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 rally observed in November across global equity markets sustained its momentum into December, marking a persistent global upswing which was notably pronounced in Australia. The ASX 200 displayed remarkable strength for the second consecutive month, posting a monthly return of 7.3% in December, set against the backdrop of shifting sentiment as markets anticipate monetary policy easing in the first half of calendar year 2024. The combined November and December return for the ASX 200 essentially accounted for the bulk of the total return for calendar year 2023 of 12.42%. November and December proved to be stellar months for price returns across major equity markets worldwide, with the ASX 200 outperforming other indices.

The US 10-year treasury yield which ended 2023 at 3.8%, experienced a further decline of 48 basis points in December. Similarly, the Australian 10-year bond fell 45 basis points, concluding the year at 3.96%, a notable decrease from its peak of 4.99% on November 1st. Noteworthy performers in Australia during December were the yield-sensitive/growth sectors of Real Estate and Health Care, while the Insurance sector encountered a decline in performance. On a 12-month horizon, Technology and Discretionary were the best performers in 2023. Conversely, the defensive Staples, Utilities, Health and Telecom sectors were the worst performers in 2023, with low single-digit returns. Portfolio performance in December was driven by Financials (+6.21%) as the strongest performing sector, while Consumer Staples (+4.97%) and Energy (+3.42%) were relatively less contributory when compared with a 7.3% return for ASX 200.
A notable stock contributor to the portfolio was our overweight position in Premier Investments (PMV) which delivered strong performance of +9.9% in December. We also benefited from no exposure to the Insurance sector, which was the only sector that posted a negative return for the month. Conversely, the largest detractors on portfolio performance were our overweight positions in Spark New Zealand (+1.2%), Metcash (-1.7%) and Amcor (-0.2%) relative to the ASX 200 Index. Overall, the portfolio is currently more exposed to defensive sectors including Consumer Staples and Communication Services. Our positioning in defensive quality businesses with long term growth and sustainable dividend yields saw a valuation benefit this month, albeit not to the same extent as the ASX 200 which includes exposures to lower-quality, cyclical businesses that have benefited from the strong sentiment expecting monetary easing in FY24.

The conclusion of 2023 witnessed a common theme for global equity markets, wherein higher interest rates exerted a negative impact on equity valuations. However, the recent shift in market sentiment offered support for Price-to-Earnings ratios. Investors are embracing the evidence from more stable momentum in moderating inflation trends and subsequently showing increased appetite for risk assets. As we look ahead, we are approaching the February results season with caution, considering the potential for persistent inflation, which may prolong higher interest rates beyond current market expectations.

Investment Objective

The Switzer Dividend Growth Fund is an income-focused exchange traded managed fund with a mix of yield and quality companies. The objective of the Fund is to generate an above-market yield while maximising franking where possible and deliver capital growth over the long term. We select companies that, in aggregate, generate sustainable dividend income. The Fund is characterised by a strong and diverse portfolio of companies that exhibit good cash flows and strong business models.

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.