Author: Hugh Dive

• April saw global equity markets rally between 1% and 3% on market views that the interest rate tightening was coming close to an end and slowing inflation globally. Australian shares benefited from stronger consumer sentiment and an increase in national house prices, which in hindsight, contributed to the RBA’s surprise decision in early May to tighten interest rates after pausing at their April meeting.
• The Atlas High Income Property Fund gained by +3.3% in April, with the share prices of many companies held in the Fund starting to recover from the falls seen during the market panic in March. The falls in March were based on the assumption that property and infrastructure trusts could not increase revenues with inflation, and all had short-term variable rate debt. Currently, the average weighted debt maturity across the Fund is 4.7 years.
• The extreme market volatility over the past twelve months is very unusual and a result of a normalising of interest rates and, for many investors, their first experience with inflation. While exasperating, the Fund is populated with companies positioned to navigate changing market conditions with 1) long-term fixed-rate debt, 2) revenues tied to inflation and critically, and 3) valuations backed by actual comparable sales in the direct property market and not works of fiction.

Go to Monthly Newsletters for a more detailed discussion of the listed property market and the fund’s strategy going into 2023.

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• March was dominated by macro events such as falling oil prices and rising interest rates, with the RBA hiking rates another 0.25% in early March. Inflation now looks to be moderating in Australia as the lagged impact of very aggressive monetary policy tightening from 2022 slowly grinds through the system.
• The Atlas High Income Property Fund declined by -4.7% on no stock-specific news, dragged down by the wider property sector that fell by close to -7%. In March, the biggest share price falls were seen in the developers after Charter Hall (-17%) revealed slowing deal flow. The Fund avoids developers and is populated with companies that offer stable earnings, growing ahead of inflation. The February reporting season saw portfolio companies increase dividends by an average of +12% and confirm stable asset occupancy, low gearing and long-dated debt.
• The Fund declared a quarterly distribution of $0.03 per unit for the March Quarter, roughly in line with the December Quarter’s distribution. The distribution will be paid to investors in early April, taking the annual yield to 7% for the year ending March 2023.

Go to Monthly Newsletters for a more detailed discussion of the listed property market and the fund’s strategy going into 2023.

Based on previous recessions, we look at which investments hold up better during periods of economic stress.

How to recession-proof your portfolio

Most recessions are characterised by rising unemployment, but this indicator also lags financial markets. In November 2007, the sharemarket peaked before the global financial crisis and unemployment was 4.7 per cent. The market ultimately bottomed in March 2009 and unemployment reached 8.7 per cent.