Ausbil capitalising from Australian equity gains

Interviews

by Lelde Smitts

Transcription of Finance News Network Interview with Ausbil CEO and Head of Equities, Paul Xiradis

Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from Ausbil is its CEO and Head of Equities, Paul Xiradis. Paul welcome to FNN.

Paul Xiradis: It’s good to be back again.

Lelde Smits: Ausbil is one of Australia’s largest boutique fund managers with more than $10 billion in funds under management. Where are you looking for opportunities at the moment?

Paul Xiradis: We’re always looking for opportunities, the market is quite dynamic and it always changes, so there’re always opportunities. Right now, we have seen a big correction in number of cyclical stocks and that’s where we are directing our efforts right now.

Lelde Smits: The Australian share market has continued to climb higher in the first half of this year. Which sectors have contributed to your performance and which have detracted?

Paul Xiradis: I think that in the first six months we have had a bit of a rollercoaster ride, as I was saying. The market overall has improved, but where we have added value particularly in the industrial end, where we’ve had some pretty good winners there overall. We have given back a little bit in the materials end, but not too much. But overall we’re still ahead of benchmark.

Lelde Smits: Ausbil’s Australian Active Equity Fund is benchmarked against the S&P/ASX 300 Accumulation Index. How did the Fund perform relative to the benchmark in the March quarter?

Paul Xiradis: We added value; we’re up about 110 basis points, over and above the benchmark for the quarter. And for year to date, we’re running about 500 points, as in financial year to date, 500 points over and above the benchmark.

Lelde Smits: Which stocks were your standout performers and what was your rationale behind entering these positions?

Paul Xiradis: We’ve been positioned for that cyclical recovery for a period; so therefore a number of those cyclical stocks did perform exceptionally well for us, for over that period. The likes of Boral Limited (ASX:BLD) was a leading contributor, one of the lag outs before such as Leighton Holdings Limited (ASX:LEI) contributed very strongly for us, particularly given the takeover or partial takeover, that was announced during the period. We made some good money out of retail as well, particularly David Jones Limited (ASX:DJS) but we’ve exited that position and we are now underweight retail. But overall, there’ve been a number of different sectors that have served us well.

Lelde Smits: Which stocks have you recently built your position in and why?

Paul Xiradis: One of the stocks that we have been building up over time has been ResMed Incorporated (ASX:RMD), which has been a stock which has been out of favour for quite some time. We’ve built up a nice position there on the view that we think the worst is over, as far as it’s recycling of sales, in the sense compared to previous quarters. And we do believe, relatively speaking in the healthcare sector, that’s one of the most inexpensive stocks in our eyes.

We’ve also been building up a good position in Aristocrat Leisure Limited (ASX:ALL). Again this is a stock we held some years ago and we have rebuilt our position. We do believe that the outlook for that stock is very promising, particularly given that its competitors are actually suffering a bit and Aristocrat is certainly performing well against them.

Lelde Smits: US Fund Manager New York Life Investments acquired Dexia’s interest in Ausbil in February this year. How has the transaction impacted your Australian operations?

Paul Xiradis: It’s been fantastic, I must say. This has been in the making for quite some time and so we’re really pleased to get an organisation such as New York Life, onto our register. They’ve proven to be nothing short of excellent, has been our experience since we’ve been associated with them. I mean we see a lot of benefits that we can gain from them and vice versa.

Lelde Smits: How do you expect to benefit from the backing of one of America’s largest asset management firms?

Paul Xiradis: There’re some soft benefits but there’re also some great other benefits as well. When I mean soft I mean in the sense that we can draw on their experience internationally. We can also draw on their capabilities, which can actually also supplement our process and also our business here in Australia. We can use them as a distribution arm as well, which is clear and that’s one of the key objectives that we have internally. But also when we’re looking to establish some new products and if they do stack up well, which we think they will, we have a source of funding from New York Life which we didn’t have before from Dexia.

Lelde Smits: New York Life Investments has a number of boutique offerings. Which may Ausbil consider introducing into the Australian market?

Paul Xiradis: We’ve identified two or three at this early stage and we are doing some further work on that. But clearly it would be more from an international bent, offering some of their products to the Australian public and also to the investing universe here overall. We think fixed income is also another big area there, which they have some very strong capabilities. So we would be looking to develop an offering of those capabilities here in Australia as well, for them.

Lelde Smits: Finally Paul, US and local share markets are at post-GFC record highs. Are the gains sustainable and where do you see the S&P/ASX 200 Index ending this year?

Paul Xiradis: We still remain very positive towards equities. Part of the reason is that global growth continues to recover and that’s normally a very good backdrop for equities. Our view is that here in Australia, things are slowly but surely on the improve and earnings will eventually recover as well, which will drive the market higher. We think the market presently around 5,400/5,500 will trade around the 5,800 by yearend, is our view based on improving earnings.

Lelde Smits: Paul Xiradis, thank you for the update from Ausbil.

Paul Xiradis: Not a problem, thank you.


Ends

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