Switzer Dividend Growth Fund March 2024 Portfolio Update

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

Performance Summary

The portfolio delivered a return of 3.44% during the month, outperforming the S&P/ASX 200 Accumulation Index (ASX 200) return of 3.27%.

Over the past 12 months, SWTZ has paid a distribution yield of 3.71% or 5.19% including franking credits. Distribution yield is calculated as the distributions received over the 12 months to 31 March 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 ASX 200 extended its positive momentum to five consecutive months. From the market lows in October 2023, the ASX 200 has rebounded by around 15% to reach an all-time high.

A more optimistic growth outlook supported by firmer economic data has helped extend the equity market rally. Since the peak in rate expectations last year, the Price Earnings Ratio (P/E) of the ASX 200 has expanded by ~15% driven by valuation multiple expansion in the Banks, Discretionary Retail, Real Estate and Technology sectors. Notably, optimism of the pending AI revolution led by the US company Nvidia has expanded to include the broad sweep of technology and real estate providers of data centres. At the end of the March quarter, the ASX 200 was trading on a 12 month-forward PE multiple of around 16.7 times, a ~12% premium to its long-term average.

While elevated valuations can be a warning signal that markets are vulnerable either to a correction or that future returns will be more muted, we think it is equally important to consider the state of the economy and the outlook for corporate profits, which at this stage continue to exhibit resilience. With this backdrop in mind, the market has reassessed the likelihood that central banks will cut interest rates aggressively this year, particularly given the strength in labour markets and the buoyancy in residential house prices.

In March the market breadth improved with all sectors moving higher, except Communications (-0.8%). On the positive side, Gold (+16.6%), Real Estate (+9.2%) and Energy (+5.6%) were the strongest sectors.

At a portfolio level, Northern Star Resources, Santos, and Premier Investments were notable strong performers. Whereas Spark New Zealand and Pilbara Minerals weighed on performance.

While the global equity bull market has now extended to 18 months, investor sentiment has changed dramatically over this period. At the beginning of 2023, concern over the impact of multiple interest rates rises to quell inflation had darkened investor risk appetite to be more defensive.

In a spectacular turnaround and a direct challenge to consensus thinking, equity markets were emboldened in 2023 with the Banks, Discretionary Retail and Technology leading the charge forward. As we progress through 2024, the picture of the economy and corporate profits are not only showing signs of resilience, but of expansion. Equity markets are now reflecting this renewed optimism. Accordingly, it is time to “thread the needle” carefully to achieve a prudent balance between defence and growth assets.

Important Update for Investors

On behalf of the board of AGP Investment Management Limited, we wish to to advise of a change to the Switzer Dividend Growth Fund with the appointment of Vertium Asset Management Pty Ltd as investment manager effective 28 March 2024. To find out more, please click here to read the ASX announcement.

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.