The Fund fell 1.9%1 over the June quarter, versus a 2.3%1 fall in the Small Ordinaries Index and a 3.2%1 fall in the Small Industrials Index. For the 12 months to June, the Fund was up 18.9%1, outperforming the Small Ordinaries Index by 5.8%1 and the Small Industrials Index by 5.8%1.
Global equity markets rose during the quarter driven by economic data in the US which allayed fears following some softness in the March quarter. The US market rose 4.7%, hitting fresh highs amidst a drop in volatility to seven year lows. This is despite further reductions in bond purchases by the Fed providing comfort that the market strength is based on economic fundamentals rather than financial engineering.
The Australian market rose 0.9% with the market retracing earlier gains in June. Defensive sectors did well (eg property trusts and utilities), as did the energy sector. Mining stocks were weaker driven by a 20% fall in iron ore prices. Cyclical stocks, especially retail, suffered from a round of downgrades amid a slowing domestic economy. The rising AUD impacted healthcare stocks which derive income from overseas.
Corporate activity featured, with bids (some indicative) for Aquila Resources, David Jones, Goodman Fielder, SAI Global, SFG Group, Treasury Wines, and Wotif (in July). We expect further takeover activity given low interest rates, and a banking sector which appears more eager to lend following the dramas of the GFC.