MONTHLY REPORT MAY 2018 ATRIUM EVOLUTION SERIES DIVERSIFIED FUND FUND PERFORMANCE Performance 1 Month 3 Months 6 Months 1 Year 2 Years 3 Years 5 Years Volatility Sharpe Ratio AEF 5 Units 0.2% 1.2% 2.0% 4.6% 2.9% 3.3% 5.3% 5.7% 2.9% 1.1 AEF 7 Units 0.4% 1.8% 2.8% 6.5% 4.3% 4.7% 7.4% 7.8% 4.5% 1.2 AEF 9 Units 0.6% 2.0% 3.1% 7.7% 5.1% 5.4% 8.4% 8.9% 5.8% 1.1 Australian 0.1% 0.4% 0.8% 1.5% 1.5% 1.7% 2.0% 2.5% 0.3% 0.0 Australian 1.1% 1.1% 2.8% 9.6% 10.4% 5.9% 8.8% 8.7% 11.6% 0.5 Australian Small Cap 3.7% 4.1% 6.9% 25.4% 13.9% 11.6% 9.7% 4.8% 14.3% 0.2 Australian Property Trusts 3.0% 7.5% 0.9% 5.7% 4.0% 7.7% 11.5% 13.4% 12.2% 0.9 International ($A) 0.4% 2.6% 2.2% 9.8% 11.5% 8.1% 14.9% 14.8% 10.2% 1.2 International (Local) 1.3% 0.8% 2.1% 10.6% 13.9% 7.5% 10.5% 10.6% 10.5% 0.8 Australian Fixed Interest 0.7% 1.2% 0.7% 1.7% 2.1% 2.9% 4.1% 5.3% 2.8% 1.0 Gold -1.3% -1.5% 1.8% 2.3% 3.4% 2.9% -1.3% -2.1% 17.1% -0.3 Moderate Balanced Growth 0.3% 0.8% 0.6% 3.0% 3.6% 2.9% 4.5% 5.2% 2.8% 1.0 0.4% 1.0% 1.0% 4.7% 5.7% 3.8% 6.2% 6.7% 4.3% 1.0 0.4% 1.2% 1.5% 6.6% 7.3% 4.7% 7.3% 7.7% 6.0% 0.9 Source: Atrium, Iress. Performance as at 31 May 2018. date is 24 June 2011. Atrium Evolution Series - Diversified Fund (AEF) performance is after fees and costs and assumes re-investment of all distributions. Market indices represent performance of; The RBA rate, S&P ASX 200 Accumulation Index, S&P ASX Small Ordinaries Accumulation Index, S&P ASX 300 Property Accumulation Index, MSCI World ex-australia net AUD and Local, Bloomberg AusBond Composite Bond Index all-maturities and the US Spot Gold price. Peer Benchmark refer to the Indices. Past performance is not a reliable indicator of future performance. www.atriuminvest.com.au 1
MARKET COMMENTARY Global equity markets continued their upward trajectory despite concerns in the Eurozone relating to the outcome of the Italian election which saw two populist parties agree to form government. US 10-year treasury yields closed lower at 2.9% despite breaching 3% during the month, while Australian 10-year bonds mirrored their US counterparts ending the month lower at 2.7%. Australian equities enjoyed a positive month, the ASX 200 up by 1.1% as Resources continued to lead on the upside, returning 2.6% for the month. The Financial sector continued to be a clear laggard in the Australian market as the Royal Commission into misconduct in the Banking, Superannuation and Financial Services Industry continued to unfold. The Telecommunications sector (-10.2%) was the worst performer as pricing pressure and increased competition continued to weigh heavily on the sector. The MSCI World ex-australia Index (AUD) rose 0.4% as global equity markets continued to move higher led by the US market, which closed the month 2.4% higher despite a small retracement at the end of the month. The US market was led by the strongly performing IT sector (7.4%), which has delivered a stellar 28.2% over the last 12 months to be strongest performing sector in the S&P 500. European markets closed the month slightly higher (0.2%) despite a significant retracement in the last week of May led by weakness in peripheral Europe, notably Italy which was down 8.0% in May as the incoming Government reportedly sought debt forgiveness from the European Central Bank and announced a raft of other populist policies. Emerging markets bucked the trend and closed the month lower, with Brazil (-10.9%) and Mexico (-7.3%) the worst performers with the former negatively impacted by a country wide strike by truckers in response to a reduction in fuel subsidies. Treasury yields retraced over the month, while US Investment Grade spreads marginally increased and High Yield spreads remained unchanged. Italian government yields spiked significantly over the month due to political instability, the Italian 10-year bond increased from below 2% to well over 3% as investors complacency concerning political risk was revealed. German Bund Yields in comparison fell sharply with the 10-year Bund yield closing the month 22bps lower as bond investors deserted the periphery and sought protection in traditional safe havens. The Australian dollar (AUD) closed slightly higher against the US dollar in May. The outlook for interest rate differentials had been a key driver of currency moves of late, and we note that the yield shortfall for Australian 10-year bonds relative to US treasuries increased further during the month. www.atriuminvest.com.au 2
PORTFOLIO COMMENTARY ASSET ALLOCATION Our Diversified Portfolios continued to 100% track positively in May, posting strong returns led by a solid performance 90% from our Australian equity managers, Event Driven Discretionary Global Macro coupled with encouraging results 80% Systematic Global Macro from our Market and allocations. 70% Equity Long-Short The Portfolios domestic equity 60% exposures enjoyed strong positive Sovereign Debt leads from the market as all three 50% managers trended higher. Allocations Investment Grade to the Atrium Equity Opportunities Fund returned a stellar 4.0%, driven 40% Non-Investment Grade by a range of stock specific outcomes and ity 30% and supportive industry data across a Combined Equity range of Portfolio positions. Holdings 20% in diversified financials company Emerging Market Challenger (19.4%), jewellery retailer Lovisa Holdings (20.4%) and diversified retailer Super Retail (17.8%) headed the list of positive share price performance. Allocations to the Bennelong ex-20 Australian 10% 0% Source: Atrium, Iress. Allocations as at 31 May 2018. International Australian Fund also delivered a standout return of 6.4%. The Fund continued to benefit from a large exposure to the Healthcare sector, while the largest holding in Aristocrat Leisure propelled performance, returning 12.7% in May. The Portfolios international and exposures experienced a more mixed performance during the month, impacted by movements in European and Emerging markets, as well as currency volatility on the back of these moves. Both the Antipodes Global Fund - Long Only and Northcape Global Emerging Market Fund were caught on the wrong side of these movements, down by -2.6% and -1.9% respectively. Conversely, the Magellan Global Mandate returned 2.9% in May and outperformed the Index, with positive contributions continuing to come from the manager s exposure to the US Technology sector. Our systematic macro managers were also caught on the wrong side of a stronger US dollar and turbulence in macro markets, while our equity longshort strategies enjoyed a positive month but gave back some gains as risk markets faltered late in the month on the Italian government debt sell off. The P/E Global FX Alpha Fund was the standout performer during the month and capped off a very strong return of 11% for the last 3 months due to its negative view on the Euro. Domestically, the Bennelong Long Short Equity Mandate continued to deliver solid results, with its favourable view on Aristocrat and its negative outlook on Metcash generating strong gains in May. Rates and (Fixed Income) continued to add steadily to performance during a month when bond yields fell in major markets. The JP Morgan Global Strategic Bond Fund was the only detractor to performance within this sector, with the Fund tracking flat until the last week of May when volatility in Emerging Market currencies drove the Fund lower. Our Diversified Portfolios continue to maintain a defensive stance given the lack of attractive risk adjusted market opportunities. We believe that it is prudent to not take excessive risks at this late stage of the investment cycle given the elevated level of risks, and believe that market volatility will rise from these subdued levels. www.atriuminvest.com.au 3
Asset Class Contributions DIVERSIFIED FUND AEF 5 PORTFOLIO - 0.04% 0.17% 0.07% 0.04% -0.09% 0.23% DIVERSIFIED FUND AEF 7 PORTFOLIO - 0.02% 0.55% 0.07% 0.02% -0.21% 0.45% DIVERSIFIED FUND AEF 9 PORTFOLIO Source: Atrium, Iress. Performance as at 31 May 2018. Contribution and figures are calculated before fee estimates and displayed in the Asset Class Contributions table will not equal the reported performance numbers for the Atrium Evolution Series Diversified Fund which are stated after fees. Past performance is not a reliable indicator of future performance. The Manager seeks to actively manage the risks associated with foreign currency and equity market exposures by utilising certain derivative instruments. These adjustments will be captured within the total exposures shown. - 0.01% 0.01% 0.77% 0.06% -0.01% -0.27% 0.56% www.atriuminvest.com.au 4
INVESTMENT OBJECTIVE The investment objective of each of the AEF 5, AEF 7 and AEF 9 Portfolios is to seek to maximise returns while managing the level of risk that the Portfolio is exposed to within a pre-determined limit. Fund Manager Responsible Entity Launch Date 24 June 2011 Fund Size 1 Buy Sell Spread Atrium Investment Management Pty Ltd The Trust Company (RE Services) Limited AEF 5 - $85.2m AEF 7 - $325.8m AEF 9 - $263.4m AEF 5-0.10% / 0.10% AEF 7-0.10% / 0.10% AEF 9-0.15% / 0.15% 1 The Net Asset Value of each of the classes of units in the Fund is calculated by taking the value of the investments and taking away the value of the liabilities that are referrable to the relevant class of units. 2 The management costs consist of a management fee, indirect costs and recoverable expenses and are shown inclusive of GST (10%) less available Reduced Input Tax s (RITC). These estimates may vary from time to time and may be rounded to two decimal places. Actual fees and costs may vary from those stated. Management costs do not include transactional and operational costs. Please refer to the Fund s Product Disclosure Statement (PDS) for more information on fees and costs. 3 Month end redemption prices per unit are quoted. Management Costs 2 AEF 5 2.01% AEF 7 2.06% AEF 9 2.04% ARSN 151 191 776 APIR Code Unit Pricing 3 AEF 5 COL0029AU AEF 7 COL0030AU AEF 9 COL0031AU Weekly AEF 5 $1.0861 AEF 7 $1.1714 AEF 9 $1.2485 Management Costs consist of the following: Management Fee - 1.28% Indirect Costs - AEF 5 0.73% AEF 7 0.78% AEF 9 0.76% Recoverable Expenses - 0% Level 6, Challis House, 4 Martin Place, Sydney NSW 2000 02 9248 8090 www.atriuminvest.com.au ATRIUM EVOLUTION SERIES DIVERSIFIED FUND IMPORTANT INFORMATION The information in this document (Information) has been prepared by Atrium Investment Management Pty Limited (ABN 17 137 088 745, AFSL 338 634). The Trust Company (RE Services) Limited (ABN 45 003 278 831, AFSL 235 150) is the Responsible Entity of the Atrium Evolution Series Diversified Fund (ARSN 151 191 776) (Fund). The Information is of a general nature only and does not take into account the objectives, financial situation or needs of any person. Before acting on the Information, investors should consider its appropriateness having regard to their own objectives, financial situation and needs and obtain professional advice. No liability is accepted for any loss or damage as a result of any reliance on the Information. Investors should consider the Fund s Product Disclosure Statement (PDS) (available from www.atriuminvest.com.au) before making any investment decision. Past performance is not a reliable indicator of future performance. Future performance and return of capital is not guaranteed. www.atriuminvest.com.au 5