MOGL Return Gets Burnt In Global Equity Crash, Reports Negative Capital Growth Of 12.91% For Quarter

Managed Fund MOGL had a rather dramatic end to an already challenging year for global equity investors. The Montgomery Global Equities Fund reported a massive decline of 10.93 percent in the quarterly return ending 31 December 2018. Whereas, the comparative benchmark, the MSCI World Net Total Return Index declined by 11.01 percent over the same period.

This has been no stopping of poor quarterly results as MOGL has also reported its capital growth in negative at 12.91 percent. Since inception, the Fund has declined by 1.94 percent, net of fees with negative capital growth of 6.64 percent. The result signals the ill-health for MOGL as it has been taking a downswing on its target of delivering superior positive returns and preserving the investors’ capital over a long-term.

Commenting on the negative performance of the Fund, the investment manager quoted global equity markets as the reason for the decline. Throughout 2018, the global equity market environment has been severely impacted by the dynamics of President Trump decisions, escalating US-China trade war with the retaliatory inclinations of President Xi. The United States’ Fed hawkish monetary policy, heightened risk aversion and the uncertainty prevailing to Britain complex exit from European Union have been claimed as other essential factors contributing to the 2018 global financial meltdown.

Despite the corrections announced in October and December, the global market continued to drift lower that led MSCI World Net Total Return Index to decline by nearly 10 percent in October and around eight percent in December. These positive corrections pointed out the Trump and Xi efforts to make peace at the G20 summit as well as the declining crude oil prices, giving a source of deflation for the global economy.

By these global dynamics, the investment manager MGIM has re-shaped the probability distribution profile for medium-term global equity returns. It now estimates the median return outcome to likely increase, the probability of negative returns has decreased, and the probability of higher returns has increased.

The Fund explained, “the primary driver of the improvement in the shape of the probability distribution profile is lower stock prices. That is, the market’s expectations for future corporate revenues and profits are significantly lower than they were three months ago. These lower expectations are easier to exceed over time – which would subsequently result in stock prices re-rating higher.”

For 2019, the Fund eyes some negative scenarios on the horizon that have the potential to impact the global liquidity conditions and the equity valuation subsequently. However, the Fund remains optimistic in its view to delivering an attractive return profile to its investors over the long term provided the shape of the probability distribution strictly governs its investments.

The Montgomery Global Equities Fund (Managed Fund) (ASX:MOGL) was launched on 20 December 2017 by the investment manager MGIM Pty Ltd. The Fund aims to outperform the index over a rolling 5-year period through its investment strategy of injecting funds in high conviction stocks listed on major global stock exchanges that are trading at a discount to their intrinsic value. The maximum chunk of fund’s portfolio is carved out of communication services companies including Vivendi, Insperity, and Facebook sitting on the top. MOGL fund size is $82.7 million. The final distribution amount ending 31 December 2018 for Montgomery Global Equities Fund (Managed Fund) was announced to 7.1 cents per unit.

On the news of negative quarterly results, MOGL declined 0.621% to last trade at $3.200 on 24 January 2019. Moreover, the stock price has fallen by 3.01% over the past 12 months.

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