Regal Investment Fund · ASX:RF1
Regal Investment Fund — Corporate Update (March 2023)
49 slides from Regal Investment Fund's corporate update, Mar 31, 2023
Slide 1: Regal Investment Fund (ASX:RF1) Investor Update & Q&A
Regal Investment Fund (ASX:RF1) Investor Update & Q&A March 31, 2023 This presentation deck accompanies an audio recording at 11:00am AEDT on March 31, 2023. To view the full webinar please click on the link here to register. To access a replay of this recording, please reach out to: investorrelatio
Slide 2: Investor Update and Q&A
Investor Update and Q&A March 2023
Slide 3: Welcome
Welcome Brendan O’Connor, CEO, Regal Partners
Slide 4: Disclaimer
Disclaimer Equity Trustees Limited (“Equity Trustees”) (ABN 46 004 031 298), AFSL 240975, is the Responsible Entity for the Regal Investment Fund and has authorised the issue of this document (Information). Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22607 797 615), a publicly liste
Slide 5: Agenda
Agenda 1. Regal Partners Update 4. RF1 Outlook Brendan O’Connor – Chief Executive Officer Philip King – Chief Investment Officer 2. RF1 Overview 5. Investor Q&A Philip King – Chief Investment Officer 3. Market Update Philip King – Chief Investment Officer - Emerging Companies Jessica Farr-Jones - Em
Slide 6: Speakers
Speakers BRENDAN O’CONNOR PHILIP KING JESSICA FARR-JONES GAVIN GEORGE DR CRAIG COLLIE Chief Executive Officer Chief Investment Officer Portfolio Manager Portfolio Manager Portfolio Manager Regal Partners Regal Funds Emerging Companies Private Credit Healthcare Regal Funds Regal Funds Regal Funds 5
Slide 7: 1. Regal Partners Update
1. Regal Partners Update Brendan O’Connor, CEO, Regal Partners
Slide 8: Regal Partners Limited (RPL.ASX)
Regal Partners Limited (RPL.ASX) ASX-Listed Specialist Alternatives Manager Regal Partners Limited is an ASX-listed, specialist alternative investment manager with approximately A$5.4bn in funds under management1. • Regal Partners (RPL.ASX) was formed on 3 June 2022, following the merger of ASX-list
Slide 9: Regal Partners Limited (RPL.ASX)
Regal Partners Limited (RPL.ASX) Three ASX-listed Alternative Investment Strategies across the Group Regal Investment Fund Regal Asian Investments Limited VGI Partners Global Investments (ASX:RF1) – LIT (ASX:RG8) – LIC Limited (ASX:VG1) – LIC • Portfolio FUM: $590m1 • Portfolio FUM: $463m1 • Portfol
Slide 10: RF1 total return since listing
ASX:RF1 RF1 aims to provide investors with exposure to a selection of alternative investment strategies with an objective to produce attractive risk-adjusted absolute returns over a period of more than five years with limited correlation to equity markets Since listing on 17 June 2019, RF1 has deliv
Slide 11: RF1 Performance Since Inception
RF1 Performance Since Inception Net of fees, as at 28 February 2023 A$/share RF1 PERFORMANCE SINCE LISTING 4.0 (NET ASSET VALUE, ADJUSTED FOR DISTRIBUTIONS) Launch date 17 June 2019 3.5 Regal Investment Annualised Return Since Inception1 Fund (RF1.ASX) 3.0 +18.8% +90.7% Regal Investment Fund (RF1)1
Slide 12: Regal Investment Fund (ASX: RF1)
Regal Investment Fund (ASX: RF1) Exposure to a range of Alternative Investment Strategies REGAL INVESTMENT FUND (ASX:RF1) UNDERLYING ALTERNATIVE INVESTMENT STRATEGIES MARKET GLOBAL LONG SHORT SMALL EMERGING LONG SHORT WATER RESOURCES PRIVATE NEUTRAL ALPHA EQUITY COMPANIES COMPANIES HEALTHCARE STRATE
Slide 13: Increased allocation to uncorrelated investment strategies
Increased allocation to uncorrelated investment strategies Investments in Water, Resources Royalties and Private Credit RF1 Strategy Allocations RF1 Strategy Allocations As at 31 October 2020 As at 1 March 2023 Long Short Healthcare Strategies added since inception of RF1 Private Credit, 3% Water St
Slide 14: 2. Market Update
2. Market Update Phil King, CIO, Regal Funds
Slide 15: Yields continue to pressure equity markets
Yields continue to pressure equity markets NASDAQ and S&P 500 (index levels rebased to 100) vs. 10 yr US Treasury yield (inverted) 120 NASDAQ (LHS) S&P 500 (LHS) 10 yr US Treasury yield (RHS) 2.00 2.50 110 Peak in 10 yr US Treasury yields 3.00 100 3.50 90 4.00 80 4.50 70 5.00 Mar-22 Apr-22 May-22 Ju
Slide 16: Earnings revisions remain in-line with historical averages
Earnings revisions remain in-line with historical averages Distribution of FY1 consensus EPS upgrades/downgrades % with EPS upgrade % with EPS unchanged % with EPS downgrade 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2H08 2H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16 1H17 1H18 1H19 2H20 2H21 2H22 1H08 1H
Slide 17: Strong sales have been offset by cost inflation
Strong sales have been offset by cost inflation ASX200 Industrials growth vs pcp (median) Sales growth Operating leverage EBITDA growth 25 20 15 10 5 0 -5 -10 1H08 1H09 2H10 2H11 2H12 2H13 2H14 2H15 2H16 2H17 2H18 2H19 1H20 1H21 1H22 1H23 2H08 2H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16 1H17 1H18 1H19 2
Slide 18: Interest burden rising but still relatively low vs history
Interest burden rising but still relatively low vs history ASX200 Industrials net interest expense as % of EBIT 27 24 21 18 15 12 9 6 2H07 2H08 2H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16 1H17 1H18 1H19 2H20 2H21 2H22 1H07 1H08 1H09 2H10 2H11 2H12 2H13 2H14 2H15 2H16 2H17 2H18 2H19 1H20 1H21 1H22 1H23 S
Slide 19: Takeover activity continues but IPOs have evaporated
Takeover activity continues…but IPOs have evaporated Announced M&A involving an Australian target (A$bn) 359 400 Public Non-Public 357 300 257 274 238 228 213 200 203 184 200 161 158 149 120 114 122 124 100 33 0 CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22 CYT
Slide 20: Equities continue to be attractive
Equities continue to be attractive Equity yield vs. real bond yield Equity risk premium 10% AU 10YR Indexed Bond Yield Earnings Yield (12mths fwd) 10% 8% 8% 6% 6% 4% 4% 2% 2% 0% 0% -2% -2% 2013 2015 2017 2019 2021 2023 2013 2015 2017 2019 2021 2023 Source: Goldman Sachs as at March 2023 (monthly dat
Slide 21: Current valuations vs history vary across sectors
Current valuations vs history vary across sectors ASX 200 firms ASX 200 Industrials trade at forward P/E of 13.6x, trade at forward P/E of 22.3x, 20x 6% below the 20 yr avg 32x 26% above the 20 yr avg 18x 28x 16x 24x 14x 20x 12x 16x 10x 12x 8x 8x 2000 2002 2004 2006 2008 2020 2022 2000 2002 2004 200
Slide 22: Value starting to outperform
Value starting to outperform MSCI value vs. growth indices relative price performance in local currency 200 Growth outperforming World Value vs. Growth 180 160 140 120 100 80 60 1974 1979 1984 1989 1994 1999 2003 2008 2013 2018 2023 Source: Bloomberg as at March 2023 (quarterly data). Past performan
Slide 23: High PE firms still trading above long-term averages
High PE firms still trading above long-term averages High PE firms trade at an avg forward PE of 34.8x, 37% above the 20 yr avg 52x 44x 36x +37% vs. 28x 20 yr avg 25.5x 20x 12x 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2020 2021 2022 2023 1996 1997 1998 1999 2010 2011 2012 2013 2014 2015 201
Slide 24: Changing market leadership
Changing market leadership Market capitalisation by sector – share of total index (ASX 300) (%) 80 Financials Mining and Energy 1 70 60 50 40 30 20 10 0 1917 1922 1927 1932 1937 1942 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 2022 Source: Bloomberg as at March 2023, R
Slide 25: Copper prices over the last 100 years
Copper prices over the last 100 years USD / pound (logarithmic scale) 5.0 1999-2011: +460% 1949-1980: +420% 0.5 0.1 1921 1932 1942 1952 1962 1972 1983 1993 2003 2013 2023 Source: Broker Research, Bloomberg as at March 2023 (annual data, nominal terms). Past performance is not a reliable indicator of
Slide 26: 2022 – An 'Annus Horribilis' for Australian Small Caps
2022 – An ‘Annus Horribilis’ for Australian Small Caps Performance of the ASX Small Ordinaries Index vs ASX 100 Index Small industrials trade at a 22% discount to large industrials, Jul 2021 – March 2023 among the lowest levels in 10 years 0 110 S&P/ASX 100 105 -0.2% -5 100 -10 95 20 yr average -15
Slide 27: 3. Emerging Companies
3. Emerging Companies Jessica Farr-Jones, Portfolio Manager
Slide 28: Regal Emerging Companies Strategy
Regal Emerging Companies Strategy Investment Universe LISTED PRE-IPO EXPANSION MICROCAPS INVESTMENTS CAPITAL Emerging Companies Strategy combines — IPOs, placements and block — Private companies which are on — Companies which have a the attributes of trades in listed companies with a path to IPO, ty
Slide 29: Regal Emerging Companies Strategy: Funds and Performance
Regal Emerging Companies Strategy Funds and Performance TOTAL RETURN SINCE INTERNAL RATE OF FUND & PERFORMANCE1 INCEPTION DATE STATUS INCEPTION RETURN Regal Emerging Companies Fund Nov 2016 Closed, Capital Returned +208% 19%2 Regal Emerging Companies Fund II Apr 2018 Closed, Returning Capital +46% 1
Slide 30: Elevated sector activity and recent private liquidity events
Elevated sector activity and recent private liquidity events Depressed valuations within the Within a rising interest rate emerging companies sector has environment, where equity markets driven a significant increase in remain closed, we have achieved takeover activity by both strategic several favo
Slide 31: Outlook for the Emerging Companies Strategy
Outlook for the Emerging Companies Strategy 1. Increasing demand for liquidity solutions due to deceleration of exit activity and market dislocations in current macro environment extending the lifecycle of private companies 2. Pricing inefficiencies are exemplified in private markets during times of
Slide 32: 4. Private Credit
4. Private Credit Gavin George, Portfolio Manager
Slide 33: An Introduction to Private Credit
An Introduction to Private Credit WHAT IS PRIVATE CREDIT? • Lending capital in private transactions 1. • Non equity asset class with a significant degree of contractual returns (e.g. via interest payments, scheduled amortisation) • Typically secured over all or substantial part of a company’s assets
Slide 34: Private Credit Features
Private Credit Features PRIVATE CREDIT MAY PROVIDE AN ATTRACTIVE RISK 10 YEAR ANNUALISED RETURN VS VOLATILITY ACROSS ASSET CLASSES1 ADJUSTED RETURN PROFILE 14% 12% Regular interest payments, usually priced as a PRIVATE CREDIT floating rate which limits duration risk and can TARGET RETURNS (P.A.) act
Slide 35: Opportunities in Private Credit
Opportunities in Private Credit 1. Growing Funding Gap in Australia 2. Significant Headroom to Grow Rapidly 3. Inflation and unprecedented rate hikes - Banking sector in Australia is the dominant provider of - Private credit is currently a small portion of the Australian - Current rate hike cycle ha
Slide 36: Regal Private Credit Opportunities Fund
Regal Private Credit Opportunities Fund Overview and Introduction • Fund launched in October 2022, with RF1 allocating an initial $15m in March 2023. • Fund invests in private credit opportunities, specifically targeting corporates owned by private equity firms, loans to small / mid-cap market compa
Slide 37: 5. Healthcare
5. Healthcare Dr Craig Collie, Portfolio Manager
Slide 38: Regal Healthcare Long Short Strategy
Regal Healthcare Long Short Strategy Key Highlights STRATEGY STATISTICS 1 STRATEGY HIGHLIGHTS AND COMPETITIVE ADVANTAGE Strategy Launched Unique investment Leveraging Regal’s investment Science-driven investment Nov 2017 strategy team and operational infrastructure approach RF1 Investment Date 1 Sep
Slide 39: Higher returns relative to major indices
Higher returns relative to major indices Since inception returns Max drawdown1 Regal L/S Healthcare 76.7% -10.6% MSCI Asia Pacific Total Return 5.0% -32.5% MSCI Asia Pacific Healthcare 9.9% -37.5% ASX300 Accumulation 49.9% -27.0% Source: Bloomberg. As at 28 February 2023. Past performance is not an
Slide 40: Healthcare Earnings Highly Resilient During Recessions
Healthcare Earnings Highly Resilient During Recessions HEALTHCARE SECTOR EARNINGS HAVE GROWN IN EACH OF HEALTHCARE SECTOR OUTPERFORMS THE LAST SIX RECESSIONS DURING RECESSIONS Utilities 9% Consumer staples Median peak to trough 5% 20% decline in 4-quarter Health care earnings in six recessions 4% 17
Slide 41: Valuations in Asia Look Attractive
Valuations in Asia Look Attractive JAPAN HEALTHCARE SECTOR P/E AT 10 YEAR LOWS1 CHINA & KOREA HEALTH NOW TRADING BELOW COVID LEVELS 40 Current P/E of 12.3 is 49% lower than 10y average of 24.2 Health sector performance since pre-COVID2 35 USA US 33% 30 25 Europe Europe 4% 20 -12% China 15 -17% Korea
Slide 42: Inflation is Creating Interesting Opportunities in the Sector
Inflation is Creating Interesting Opportunities in the Sector 2023 EPS REVISIONS SINCE JULY 1ST LC Biotech +1% Managed Care 0% Pharma -4% Hospitals -5% Life Science Tools -6% MedTech -7% CROs -9% Animal Health -9% Dental -17% S&P500 S&P500 - 7% Healthcare Source: Goldman Sachs research - 4% 41
Slide 43: Australian Labs Look Particularly Exposed to Inflation
Australian Labs Look Particularly Exposed to Inflation COST BREAKDOWN1 OPERATING MARGINS1 Other 8% 26 Utilities 3% Transportation 3% Consensus expects 24 Maintenance 3% Depreciation 5% margins to settle 86bps higher than pre-covid¹ 22 Rent 7% 20 Consumables Percentage % 19% Margins trending down in
Slide 44: 6. RF1 Positioning
6. RF1 Positioning Phil King, CIO, Regal Funds
Slide 45: RF1 Portfolio & Investment Characteristics
RF1 Portfolio & Investment Characteristics As at 28 February 2023 Market Neutral CURRENT EXPOSURE BY STRATEGY (NAV) 17% Long Short Equity 5% SECTOR LONG SHORT NET Percentage of Positive Months 7 -2 5 Small Companies Communication Services 64% 16% Emerging Companies Consumer Discretionary Consumer St
Slide 46: Delivering Unitholder Value
Delivering Unitholder Value RF1 STATISTICS RF1 NAV AND SHARE PRICE – ADJUSTED FOR DISTRIBUTIONS A$/share Premium/(discount) to NAV Launch date 4.0 30% S&P/ASX 300 Total Return Index rebased to RF1 NAV (A$/share │ LHS) 17 June 2019 Regal Investment Fund NAV (A$/share │LHS) 3.5 RF1 share price, premiu
Slide 47: Key Pillars of a Successful Listed Investment Vehicle
Key Pillars of a Successful Listed Investment Vehicle Investment Performance Investor Engagement & Capital Management RF1 Fund Size1 Communication Initiatives $590m Deliver attractive risk-adjusted Experienced sales and Defined distribution policy absolute returns over the marketing team medium term
Slide 48: Investor Q&A
Investor Q&A Submit your questions via the side menu on the webcast player BRENDAN O’CONNOR PHILIP KING JESSICA FARR-JONES GAVIN GEORGE DR CRAIG COLLIE Chief Executive Officer Chief Investment Officer Portfolio Manager Portfolio Manager Portfolio Manager Regal Partners Regal Funds Emerging Companies
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