Contrarius Australia Balanced Fund

The Contrarius Australia Balanced Fund aims to achieve long term returns that are higher than the benchmark*. In doing so, it aims to balance capital growth, income generation and risk of loss, using a mix of assets.

The Contrarius Australia Balanced Fund is an actively managed asset allocation fund that invests in a diversified portfolio of equities, fixed income and commodity-linked investments from Australia and globally. The Fund primarily invests in listed equities and equity related securities, fixed income instruments and commodity-linked instruments. The Fund primarily gains its exposure to global assets by investing in the Contrarius Global Balanced Fund (Australia Registered) which follows a similar investment strategy. 

An investment in the Fund is intended for investors who seek to diversify their portfolio using a single Fund that offers exposure to a mix of asset classes, who are seeking a contrarian investment style, able to take a long-term view and can accept some risk of performance fluctuations and potential capital loss, but typically less than that of an equity fund.

* The Fund's benchmark is a composite index consisting of 36% S&P/ASX 300 Accumulation Index, 24% S&P/ASX iBoxx Australian Government Index, including reinvested coupons, 24% MSCI World Index, including reinvested net income, and 16% J.P. Morgan Global Government Bond Index, including reinvested coupons, each in Australian dollars ("Benchmark").

The Contrarius Australia Balanced Fund aims to achieve long term returns that are higher than the benchmark. In doing so, it aims to balance capital growth, income generation and risk of loss, using a mix of assets.

The Fund's benchmark is a composite index consisting of 36% S&P/ASX 300 Accumulation Index, 24% S&P/ASX iBoxx Australian Government Index, including reinvested coupons, 24% MSCI World Index, including reinvested net income, and 16% J.P. Morgan Global Government Bond Index, including reinvested coupons, each in Australian dollars ("Benchmark").

The Fund aims to achieve its investment objective by employing Contrarius’ valuation-based, contrarian investment philosophy to identify investments that are undervalued relative to their assessed intrinsic value. The Fund has the flexibility to take advantage of opportunities across asset classes and regions, subject to defined investment guidelines.

The Fund primarily invests in listed global equities of publicly listed companies, fixed income instruments and commodity-linked instruments. Contrarius may, in its discretion, invest in derivatives to manage risk. The Fund primarily gains its exposure to global assets by investing in the Contrarius Global Balanced Fund (Australia Registered) ("Global Fund") which follows a similar investment strategy.

The Fund is managed with conviction and the Fund’s holdings are expected to comprise only those selected securities  assessed by Contrarius Australia to offer the highest value from a broad universe of Australian and global assets. The Fund does not seek to replicate the benchmark, is actively managed, and its holdings may differ materially from the benchmark in order to achieve its objective.

Asset allocation ranges:

The Fund and the Global Fund, have no industrial or market sector investment targets. The assets of each of the Fund and Global Fund are typically invested within the following asset allocation ranges:

Note that the portfolio of the Fund or the Global Fund may from time to time move outside of the relevant ranges set about above in pursuit of each fund's investment objective

Significant Features and Benefits of the Fund

By investing in the Fund, investors gain access to an actively managed portfolio of Australian and global securities that are assessed to be the most attractive value and offer a risk-adjusted return potential that is believed superior to the Fund’s Benchmark.

A large proportion of the Fund's portfolio (typically between 40% and 60%) is expected to be invested in Australian assets, with the balanced invested in global assets (but there is flexibility about these proportions). The Fund primarily gains its exposure to global assets by investing the Contrarius Global Balanced Fund (Australia Registered), which follows a similar investment strategy.

The following are significant features of the Fund:

• Access to a consistent investment approach: The Contrarius Group has more than fifteen years of proven experience in consistently applying its contrarian, long-term, valuation based investment philosophy.
• Flexibility in asset allocation: The Fund does not seek to replicate its Benchmark. The Fund’s allocation to asset classes is determined based on where Contrarius Australia finds value and the potential for return as a result of a bottom-up security selection process (within the Fund’s investment guidelines). The Fund’s investment guidelines provide sufficient flexibility to adapt to changing market conditions and the availability of investment opportunities.
• Access to global investment management expertise: The Contrarius Australia investment team undertake proprietary fundamental research to uncover investment opportunities. The Team's expertise is supported by advice from the Contrarius Group. 
• Access to attractive Australian and global investment opportunities: The Fund provides access to attractive investment opportunities across a mix of asset classes that may not otherwise be easily accessible by individual investors.

The following section outlines how Contrarius Australia typically makes investment decisions for the Fund.

Equities

The key characteristics of Contrarius’ investment philosophy are best summarised as being valuation based, contrarian and long-term.

• Valuation based: Shares are selected following detailed proprietary fundamental research conducted by Contrarius Australia’s team of investment analysts. This ‘bottom-up’ fundamental research seeks to determine the underlying intrinsic value of a share. Contrarius Australia seeks to invest in shares that it believes are trading below their underlying intrinsic value and which are considered to be attractive relative to other available opportunities it has evaluated. The larger the discount at which a share trades to its underlying intrinsic value, the more attractive it is assessed to be. Contrarius Australia seeks to sell shares that it believes have reached their underlying intrinsic value or which are less attractive than other opportunities it has evaluated.
• Contrarian: The Fund adopts a contrarian investment approach which remains focused on considering the underlying intrinsic value of a company’s shares, irrespective of current market sentiment. These shares may be out of favour with the market as a result of short-term negative sentiment. As a result of this contrarian approach, the Fund’s investments may be expected to typically look very different from those of the broad market.
• Long-term: Contrarius Australia takes a long-term approach to investing, with a typical investment horizon of four years. It is believed that the ability to outperform in the long-term is largely determined by focusing on the long-term value of a business rather than short–term news flow. In the short-term stock prices tend to be driven primarily by market sentiment and the immediate earnings outlook rather than the underlying value of the business. With a long-term perspective, the Fund is able to be patiently managed with a consistent application of the contrarian investment philosophy.
  
  

The Fund’s exposure to stock markets is based on Contrarius Australia's assessment of the available opportunities and their relative attractiveness compared to other assessed opportunities. The Fund seeks to reduce exposure to, or hedge, stock market risk when proprietary research suggests that stock markets are overvalued and offer a poor risk reward proposition. Similarly, the Fund seeks to increase exposure to stock market risk by reducing the amount of hedging when stock markets are assessed to offer good value relative to other available opportunities. Hedging instruments are primarily used to reduce the Fund’s exposure to the broad stock markets.

Contrarius Australia believes that the main risk of investing in equity securities is the risk of permanent capital loss that arises when equity securities are purchased at prices higher than their underlying intrinsic value. Contrarius Australia’s buying and selling discipline is based principally with reference to the securities’ assessed fair value. Given our investment philosophy, the timing of both purchases and sales may appear 'early'. In the case of purchases, the share price could and often does continue to fall due to short-term negative sentiment and outlook for the business. Provided one’s assessment of intrinsic value was however correct, short-term price declines do not typically represent a permanent loss. The same is true of sales that may be regarded as too ‘early’. Contrarius Australia would rather sell a share when it reaches fair value despite the short-term positive sentiment and outlook for the business. By purchasing shares at a discount to assessed fair value and selling at fair value, Contrarius Australia aims to mitigate the risk of permanent loss that is likely to result from continuing to hold a share that ultimately corrects to fair value.

Fixed income and cash

Similar to our approach to equity securities, Contrarius Australia’s approach to fixed income investment decisions is directed by the aim of enhancing the Fund’s overall risk-adjusted total return. Fixed income securities are assessed based on characteristics including yield, liquidity and potential diversification benefits to the overall Fund. Corporate fixed income securities are selected based largely on views expressed by Contrarius Australia’s fundamental research conducted on the issuer. Government fixed income securities are selected based, in part, on the global economic view developed out of Contrarius Australia’s fundamental research process.

The Fund’s exposure to fixed income markets is based on Contrarius Australia's assessment of the opportunities from securities within the asset class and their contribution to the Fund’s overall risk and reward profile. When fixed income markets are assessed to be overvalued and unattractive, Contrarius Australia may reduce exposure to, or hedge, fixed income risk. Similarly, when fixed income markets are assessed to offer attractive value, Contrarius Australia may increase its exposure to fixed income risk by increasing its exposure to fixed income securities.

Commodity-linked securities:

The Fund may gain indirect exposure to commodities through investments in commodity-linked securities. Note that the Fund may not invest in instruments that compel the acceptance of physical delivery of the underlying commodity.

Past performance is not a reliable indicator of future results. Fund unit prices fluctuate and are not guaranteed. Returns may decrease or increase as a result of currency fluctuations. When making an investment in the Fund, an investor’s capital is at risk. Information on this webpage is provided for general information only and does not take into account individual investor’s objectives, financial situation, needs or circumstances. This information does not constitute personal financial advice nor a recommendation to buy, sell or hold, nor an offer to sell or a solicitation to buy or hold units in the Fund, securities mentioned in it or any other interests. Investors should consider the appropriateness of the information provided on this webpage having regard to their individual objectives, financial situation, needs or circumstances. Investors should refer to the Fund’s Product Disclosure Statement (“PDS”) and Target Market Determination (“TMD”) before making any investment decision. The PDS, daily unit prices and additional information can be obtained by contacting Contrarius Investment Advisory Pty Ltd or from www.contrarius.com.au. Contrarius Australia Equity Fund’s TMD is available at- https://www.contrarius.com.au/InvestWithUs/HowToInvest/. The TMD describes who this financial product is likely to be appropriate for (i.e. the target market), and any conditions around how the product can be distributed to investors. It also describes the events or circumstances where the TMD for this financial product may need to be reviewed.

The Contrarius Australia Balanced Fund - Class A (“Fund”) is a managed investment scheme registered in Australia. The Fund was registered with the Australian Securities and Investments Commission on 9 December 2022. The Australian Registered Scheme Number (“ARSN”) is 664 224 604. The inception date of the Fund is 16 May 2023. Equity Trustees Limited (“Equity Trustees”) (ABN 46 004 031 298), AFSL 240975, is the Responsible Entity for the Fund. Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT). Equity Trustees has appointed Contrarius Investment Advisory Pty Limited (“Contrarius Australia” or “Investment Manager”) (ABN 48 618 145 449 AFSL 506315), an Australian incorporated company, to invest and manage the assets of the Fund. Contrarius Australia is the distributor of the Fund in Australia.

The information provided on this webpage has been prepared by Contrarius Australia in its capacity as the distributor of the Fund. It may not be complete and up to date for the purposes of investors of the Fund. Neither Contrarius Australia, Equity Trustees, nor any of their related parties, directors or employees, provide any warranty of accuracy or reliability in relation to such information, or accept any liability to any person who relies on it.