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  • Sean Rapley

May 2022 - Luke's Fund Performance Update

Updated: Jul 1, 2022

The ASX 200 Accumulated Index was down 2.4% for the month of May, and Luke's Fund was down 6.9% over the same period, bringing the Fund’s returns for FY2022 to 3.4% to date, compared to the ASX 200 Accumulated Index return for year to date of 2.7%.

The breakdown of our holding’s contribution to performance over the May is outlined in Figure 1 below:

Figure 1 – Contribution Breakdown Bar Chart

The Metals X, was the largest drag on the portfolio. It was a significant error to add this holding into the teeth of tightening financial conditions. Calidus Resources and IntelliHR were also significant detractors to the portfolio over May, for differing reasons. A flagging gold price and strong US Dollar weighed on Calidus, whilst concerns surround IntelliHR cash position whilst remaining a long way away from breakeven.

This month, we moved our Talga Group position out of the Inflationary portfolio and into the reflation/ goldilocks portfolio, given the business is cash burning, and pre-production. Reviewing the performance according to our Macro Style reveals the portfolios were down across the board, however, the Deflationary style portfolio suffered the least damage.

Figure 2 – Macro Segment Contribution Breakdown Bar Chart

Portfolio Breakdown

The breakdown of the portfolio as a the end of the month is outlined in Figure 3 below. Over the month, our exposure to investments that perform well in Goldilocks / Reflationary environment increased to 35% due to repositioning Talga Group into the reflationary / Goldilocks macro portfolio.

42Macro analysis is guiding for a worsening liquidity, profit, and growth outlook, and we will most likely transition from an inflationary environment to a deflationary environment, as central banks ratchet up their fight against inflation. Luke's Fund remains underexposed to Deflationary assets, noting, the majority of our deflationary assets are within Luke’s Global Fund, given the ‘risk on’ characteristics of the Australian dollar. Nevertheless, we intend to increase our Deflationary style asset position over the coming month, in Luke' s Fund.

Figure 3 – Portfolio Macro Segment Pie Chart

We do however, intend to retain the current holdings in our Goldilocks / Reflationary macro style for the long term, subject to company specific changes. Goldilocks / Reflationary macro style holdings are all long duration assets, that we are prepared to accept will underperform in the short to medium term, but we expect will provide above average market returns in the long term.


We made the following portfolio changes over March:

  1. We sold out of Metals X. It was too late in the cycle to be building an industrial metals position.

  2. We sold some of our gold position and sold out of Calidus Resources, based on the poor short term outlook for gold prices, and in anticipation operating cost pressures.

  3. We added exposure to oil exposure through the ETF OOO, and increased our position in Santos as part of our Inflation macro holdings.

  4. We trimmed our Elders Ltd position after a strong result and recent rally in share price.

  5. We sold out of Camplify.

  6. We began building a position in BEAR ETF, as part of our Deflation macro style

We held 24% cash at the end of May.


Notable news from our holdings included:

Elders Ltd

Elders released its half year accounts, reporting revenue of $1.5 BN, up 38%, and NPAT of $91.2 M, up 34% on prior corresponding period.

Management guided for a strong second half, supported by strong commodity prices and favourable cropping conditions.

Talga Group Ltd

On May 22, Talga Group announced their graphite resource has increased 54%, following a recent drilling program. The Mineral resource estimate increased to 30. 1million tonnes @ 24.1 % Cg.


The process of writing up a monthly report forces us to review our positions and the current risk outlook. Delays in our reporting can delay our response to changing conditions. Maintaining discipline in our review process is an important part of managing risk. A lesson we have learned in recent months.

If you have any opinions on the companies we hold, or what like to know more, we would love to hear your feedback.



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