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Northward Equity Income Fund Monthly Report – May 2014

Portfolio review
The Northward Equity Income Fund (NEIF) gained 0.64% for the month of May. Option Income for the month was mainly captured from BHP Billiton, Rio Tinto, QBE Insurance, National Australia Bank, Oil Search and Worley Parsons. The fund had significant dividend income from ANZ Bank, Westpac Banking Corporation, National Australia Bank and Macquarie Group during the month of May. The fund’s average market exposure was 42.2% and continues to be less than half the market exposure of its benchmark.
The S&P/ASX 100 Accumulation Index closed up 0.69% for the month. Australian equity markets shrugged of the normal sell in May confession season but lagged offshore markets. The S&P500 gained 2.1% for the month and set a record high, while the Euro Stoxx gained 2% and hit a six year high on the back of supportive comments from the European Central Bank.

Domestically, the Federal budget dominated the headlines with some spending cuts and tax hikes. The major negative for equity markets was for healthcare providers. Iron ore prices fell 12.9% over the course of the month, down to its lowest level since September 2012. The RBA kept the cash rate at 2.5% whilst the Australian dollar ended the month at 93c.

There was plenty of merger and acquisition (M&A) activity and speculation on the local exchange. Aurizon and Chinese steelmaker Baosteel offered $1.42bn for Aquila Resources, Spark Infrastructure acquired a 14.1% stake in Duet Group and Treasury Wines rejected an offer from private equity firm Kohlberg Kravis Roberts (KKR).
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