10 Jul Munro Global Growth Fund Monthly Report – June 2019
The Munro Global Growth Fund returned 2.4% for the month of June, comprising a return of 3.1% from equities and -0.7% from currency. The MSCI AC World Index (AUD) meanwhile returned 5.2% for the month, with a 5.7% move in equities and -0.5% from currency.
After the weak May performance, markets bounced back in June driven by dovish comments for US Federal Reserve and hopes of a more benign trade outcome as China and the US used more conciliatory language ahead of the G20 summit.
From a stock perspective, Fund strength was driven by large US cloud computing companies, Amazon, Microsoft and Adobe. Alphabet contributed negatively to performance along with several short positions that rallied in a rising market.
On currencies, the Fund had a 50% holding in USD, which led to a modest detraction in performance for the month.
We are encouraged by the strong structural growth prospects of our core investments and look forward to the market resuming its focus on company fundamentals in the upcoming second quarter results season. Difficulty for the Fund has arisen in the last nine months during this period of heightened volatility in equity markets as we have felt compelled to actively protect the downside on numerous occasions. However, this has resulted in the Fund giving up a good part of the upside as ultimately the broader market has looked through the trade tension and interest rate missteps. Importantly, positive overall returns have been maintained throughout this period, despite significant market draw downs.
Going forward, we look for strong stock fundamentals in our key investments to drive returns in the months and years ahead regardless of the prevailing market noise. The key risk to this outlook is that sub-par growth ultimately turns into negative growth as policy missteps continue to escalate.