Featuring Hugh Giddy & Daniel Moore



Portfolio Managers Hugh Giddy and Daniel Moore discuss the performance of financial markets during financial year 2023, as well as the performance of IML’s large cap funds and key stocks.

Edited transcript

Hugh: Markets finished the financial year quite strong with the world index up about 7% (for the quarter). The Australian market lagged a bit, possibly on the back of some, somewhat unexpected Reserve Bank rate hikes. And it was pleasing to see our funds beating the market’s 1% return by about 40 basis points in the main fund (over the quarter). Markets generally though for the year were very, very strong indeed, weren’t they?

Daniel: Absolutely Hugh. Yeah, so if we looked at the global index, it was up around 17% for the year. The S&P was up 20%, but the Nasdaq beat them all up 26% for the year! So a very strong performance globally. When we looked domestically, the ASX was up around 14%, and the IML share fund was a bit below that around 11%. Which is a reasonable return but a bit below the benchmark.

Hugh: Well, when you look at the benchmark, it was driven, the key areas of strength were the resources sector, particularly battery materials has been all the rage. You know, there’s a bit of a shortage of supply of lithium, but that will ease. And some of the lithium names have shot to being very large companies. And also very strong was technology. You’ve had a great interest and optimism around AI and that’s also lifted our technology stocks in Australia. But, we’ve had some good performances in our industrial names too, haven’t we?

Daniel: Yeah. So for the year, we really did have a number of companies perform very strongly. Brambles, probably our best, was up 38% for the year. The insurers. Those boring insurers were up 28% to 30%, both Suncorp and IAG. Steadfast was up 22%. Lottery Corp and Telstra also up about 16%. And if we think about all those industrials as a basket, I mean, they’re all industry leaders. They’ve all got those nice recurring income streams. And I think the key thing was they had good pricing power and they could, in many cases, lift margins through what’s been relatively tough times. So, those businesses have really done well and helped the funds return for the year.

Hugh: Sure. Sure. Because, I mean, we’ve been talking about how in an inflationary environment, that’s one of the key things, you have to have a company that can hold on to its margin through raising price and also not having too much elasticity of demand on the other side. It’s no good raising your price and people say, well, I’m not buying your stuff anymore.

Daniel: Absolutely.

Hugh: So, and on the on the flip side, we have obviously had some things that hurt. Obviously, I mentioned the lithium names in the resources area. In terms of specific stocks, there were a few, but none doing terribly, but perhaps Amcor stood out. They’ve suffered from customer destocking. When there were shortages in COVID, everyone was hoarding goods and then they bought too much. And so there’s been a bit of destocking for Amcor. But yeah, overall quite a strong year generally and surprisingly so, one could say because inflation is normally not good for markets. Rising interest rates are normally not good for markets, and so the market seems to be pricing in a pretty good outcome on the economic front, that there won’t really be a deep or significant recession, if any recession at all, in most markets despite this much tougher environment of higher interest rates affecting businesses and consumers alike.

Daniel: Absolutely. And I think we’re just starting to see that in Australia. We’re starting to see those interest rates bite a little bit from our channel checks talking to retailers, particularly since May. Since we’ve had a couple of unexpected rate rises. So it’s going to be a very interesting second half of this year.

Hugh: Sure. But I think given a lot of potential headwinds, we’re very comfortable remaining pretty defensive, definitely focused on quality companies that have the attributes that we think they need to survive inflation and to survive tougher times.

Picture of IML Portfolio Managers Simon Conn and Daniel Moore
Blue and black coloured pallets piled high


Subscribe to hear directly from IML’s Investment Team