Regal Investment Fund Reports 1.2% NAV Drop in June 2026 Amid Equity Strategy Challenges and Market Volatility

Analysis of RF1's 1.2% NAV Decline in June 2026 and Contributing Factors

In June 2026, Regal Investment Fund recorded a 1.2% decrease in net asset value, settling at $3.67 per unit on a cum-distribution basis as of 30 June. The fund traded on the ASX at a closing price of $3.44, reflecting a discount relative to its NAV. With a total fund size of A$765 million and 208,154,624 units issued, RF1 remains a significant player among Australian listed investment trusts.

The monthly performance report attributed the NAV decline primarily to losses in equity-focused strategies. Conversely, non-equity strategies such as Private Credit and Water contributed positively, partially offsetting equity losses and underscoring the diversification benefits of RF1's multi-strategy approach. The fund's year-to-date return for calendar 2026 stood at -1.37% net of fees and costs by the end of June.

Impact of June 2026 Global Equity Market Volatility on RF1's Strategies

The update described June 2026 as a period marked by significant global equity market fluctuations. Key drivers included inflationary pressures, shifting interest rate expectations, increased capital expenditure in artificial intelligence hyperscale, the successful SpaceX IPO, and a strengthening US Dollar, all contributing to sector and country rotations. Elevated retail investor participation and leverage further intensified equity market volatility, posing challenges especially for long-short equity strategies.

In Australia, the ASX200 rose 0.5% in June, bringing its FY26 return to 2.8%, which the update noted as underperforming global markets. The ASX Small Ordinaries Index declined 2.0% in June but maintained an 8.1% return for FY26. Resource equities weakened notably, with the ASX Small Resources Index down 13.4% and the ASX 300 Metals and Mining Index falling 7.7%, driven by declines in gold, oil, iron ore, and coal prices. This resource sector weakness negatively impacted RF1, given its 24% NAV long exposure to Materials, the fund's largest sector position.

Market Neutral Strategy Losses in Consumer Staples and Materials Drive June Underperformance

The Market Neutral strategy was identified as the largest detractor in June, posting a gross loss of 5.7%, the worst performance among RF1's underlying strategies. Losses stemmed from long positions in Consumer Staples and Materials sectors. Despite this, the strategy achieved a 10.0% gross return over the prior 12 months, indicating the June drawdown was sharper than typical monthly fluctuations.

Specific detractors included Judo Bank (ASX:JDO), which declined following a profit warning due to a deteriorating loan book, and Capstone Copper (ASX:CSC), whose share price fell alongside copper spot prices. These examples highlight the stock-specific risks inherent in long-short equity strategies during volatile periods, especially when companies issue earnings downgrades before major reporting seasons.

Performance of RF1's Eight Underlying Strategies in June 2026

RF1's portfolio comprises eight distinct investment strategies managed by Regal Partners entities. As of 30 June 2026, allocations as a percentage of NAV were: Emerging Companies (24%), Private Credit (18%), Resources Royalties (14%), Water (12%), Small Companies (11%), Information Technology-adjacent Global Long Short (8%), Global Alpha (7%), and Market Neutral (7%). This diversified allocation aims to reduce equity market correlation while targeting absolute returns over five years or more.

Gross performance for June 2026 was: Small Companies -2.8%; Global Long Short -0.3%; Market Neutral -5.7%; Global Alpha -4.9%; Emerging Companies -0.2%; Water +0.4%; Resources Royalties 0.0%; and Private Credit +0.9%. Positive returns from Water and Private Credit were insufficient to offset losses from equity strategies, culminating in a net fund return of -1.2% for the month. Over the past 12 months, Global Long Short led with a 41.3% gross return, followed by Emerging Companies at 35.4% and Resources Royalties at 24.4%.

Sector Exposure Details in RF1's Balance Sheet as of June 2026

The fund's balance sheet as of 30 June 2026 showed extensive exposure across listed and non-listed assets. Listed positions had a gross exposure of 131% of NAV, with 80% long and 51% short, resulting in a net listed exposure of 29%. Non-listed assets, including Private Credit, Water, and Resources Royalties, contributed 62% of NAV gross and net exposure, bringing total gross exposure to 193% and net exposure to 91% of NAV.

Within the listed portfolio, Materials was the largest long sector at 24% of NAV, offset by a 7% short position for a net 17% exposure. Financials had the largest combined gross exposure at 26% (13% long, 13% short), resulting in a near-neutral net exposure of -1%. Information Technology held a net long of 9%, Industrials 3%, while Consumer Discretionary was the only sector with a significant net short exposure at -6%. Healthcare was net long 3%, with Communication Services and Consumer Staples roughly neutral.

RF1's Strong Long-Term Performance Record Since 2019 Launch

Despite the June 2026 decline, RF1's long-term performance remains a key strength. Since its 17 June 2019 inception, the fund has delivered 16.7% per annum net of fees. Rolling net returns as of 30 June 2026 include 17.3% over one year, 10.6% per annum over two years, 13.8% per annum over three years, 12.6% per annum over four years, and 9.1% per annum over five years.

Historically, RF1's best calendar year was 2020 with a 46.31% net return, including strong months in June (+15.81%) and July (+11.35%). The fund also returned 36.72% in 2021. The weakest year was 2022, with a -14.26% return and a challenging June at -13.05%. Calendar years 2024 and 2025 produced returns of 21.77% and 16.25% respectively. These past results are provided for context, with the fund noting that historical performance does not guarantee future outcomes.

Regal's Perspective on FY26 Australian Reporting Season and Profit Warnings

Regal's update anticipates the FY26 Australian reporting season will continue to exhibit elevated single-stock volatility on reporting days. This is significant for RF1, which holds both long and short positions across numerous Australian and global equities, making individual company results impactful on short-term NAV fluctuations.

The fund manager also highlighted a high incidence of profit warnings from industrial companies ahead of full-year results, reflecting broader market challenges such as cost pressures, a difficult consumer environment, and currency headwinds from a stronger US Dollar. For RF1 investors, the reporting season presents both risks and opportunities, as the fund's long-short positioning may capitalize on accurate predictions of earnings surprises but also face volatility from unforeseen outcomes.

Fund Structure, Fees, and Governance of RF1

Regal Investment Fund is a Listed Investment Trust on the ASX since 17 June 2019. Equity Trustees Limited (ABN 46 004 031 298, AFSL 240975), a subsidiary of EQT Holdings Limited (ASX:EQT), serves as the responsible entity. The investment manager is Regal Partners Funds Management Pty Limited, part of Regal Partners Limited (ASX:RPL), an ASX-listed specialist alternative investment manager. APEX Group administers the fund, with Automic Group providing registry services.

RF1 charges a 1.5% per annum management fee (plus GST) and a 20% performance fee (plus GST) above the RBA Cash Rate, subject to a high water mark. This high water mark ensures performance fees are only paid after recovering prior losses, offering investor protection during underperformance periods. Distributions are made semi-annually. The fund aims to offer exposure to alternative investment strategies targeting attractive risk-adjusted absolute returns over more than five years with limited equity market correlation.

Regal Partners' Alternative Investment Platform and RF1's Role

Regal Partners Limited, the parent company of the investment manager, is an ASX-listed specialist alternative investment manager providing access to hedge funds, credit and royalties, growth equity, and real and natural assets strategies. Leveraging deep industry expertise and networks, the firm accesses diverse alternative opportunities. RF1 functions within this platform as a listed vehicle offering retail and institutional investors on-exchange access to a diversified selection of these strategies.

The investment manager retains discretion to adjust strategy allocations based on market conditions or other relevant factors, meaning the June 2026 allocations—such as 24% to Emerging Companies and 18% to Private Credit—are not fixed and may evolve. The fund's mandate allows introducing new strategies as opportunities arise within the Regal Partners ecosystem.

Current Market Risks for RF1 Investors

The June 2026 results highlight several risks specific to RF1's multi-strategy, leveraged structure. With a total gross exposure of 193% of NAV, adverse market moves can significantly impact NAV compared to traditional unleveraged funds. The Market Neutral strategy's 5.7% gross loss in one month illustrates that even market-neutral approaches can face substantial drawdowns amid heightened volatility, especially when stock-specific events like profit warnings occur.

Exposure to resource equities—via Materials sector positions and the Resources Royalties strategy—poses sector-specific risks amid June's sharp declines in gold, oil, iron ore, and coal prices. The ASX Small Resources Index fell 13.4% during the month, and while Resources Royalties held steady at 0.0% gross for June, prolonged commodity price weakness could impact this portfolio segment. Additionally, the discount between RF1's ASX closing price of $3.44 and its NAV of $3.67 as of 30 June 2026 means investors buying on-market acquire units below NAV, but this discount may fluctuate independently of NAV performance, representing an additional market risk.