Performance summary

The CC Sage Capital Absolute Return Fund returned -2.77% in May versus the RBA Cash Rate of 0.34%, an active return of -3.11%, reversing the strong gains generated in April.*

The CC Sage Capital Equity Plus Fund returned -0.38% in May versus the S&P/ASX 200 Accumulation Index of 1.15%, an active return of -1.53%, reversing the strong gains achieved in April*.

Portfolio underperformance was driven by a low success rate rather than any single large exposure. Across the month, there continued to be large short-term swings driven by thematics such as the impacts of AI, and macroeconomic uncertainty around the potential reopening of the Strait of Hormuz, but the most significant impact came from heavy trading volumes associated with a very large and well-publicised transition portfolio at the end of the month.

Growth group was the largest detractor to performance in May.

While the software sector in the US was undergoing a major relief rally on the expectation that AI would be less disruptive, the Australian market went the other way, with weakness across several of Sage Capital’s Growth holdings. Long positions in Telix Pharmaceuticals (ASX: TLX -13%), Xero (ASX: XRO -6%) and Zip Co (ASX: ZIP -5%) all reversed prior gains. The disconnect with the US software sector highlights that flow dynamics from transitions (driven by large buying/selling activity) were likely more a driver than views on earnings.

Resources group acted as a drag, with volatility driven by the closure of the Strait of Hormuz.

The mining sector rallied strongly as a whole, underpinned by market optimism around the Strait of Hormuz reopening. Within Resources, Sage Capital’s short positions in the large bulk commodity companies were the main portfolio detractors. These stocks maintain a broader iron ore exposure, which remained flat to down over the month, suggesting that once again liquidity flow dynamics were at play. This was partially offset by Sage Capital’s base-metals long positions performed well however as supply disruption and data-centre-driven power demand pushed prices higher, with long positions in Capstone Copper (ASX: CSC +30%), Sandfire Resources (ASX: SFR +20%), Alcoa (ASX: AAI +21%) and Rio Tinto (ASX: RIO +11%) all rising strongly.

Defensives group was weighed down by stock-specific de-ratings.

The Defensives group performance was weighed down by sharp declines in several small long positions, following disappointing updates: ASX Ltd (ASX: ASX -24%) was hit by increased cost guidance, The a2 Milk Company (ASX: A2M -24%) suffered from a US product recall, and Tabcorp (ASX: TAH -32%) faced an AUSTRAC investigation. Conversely, the data centre long positions, Goodman Group (ASX: GMG +7%) and NEXTDC (ASX: NXT +7%), provided an offset and held up well.

Modest drags from Global Cyclicals and Domestic Cyclicals.

Within Global Cyclicals, a long position in Brambles (ASX: BXB -27%) was the principal detractor, which increased capex on labour constraints for repairs. This was partly offset by strong gains in Orica (ASX: ORI +10%) and Dyno Nobel (ASX: DNL +15%) on mining demand. Within Domestic Cyclicals, an underweight position to discretionary retail dragged, while a long position in Qantas (ASX: QAN +12%) was a partial offset.

Yield, Gold and REITs groups delivered a meaningful contribution to portfolio performance.

A material underweight position in the banks added value as the sector pulled back following tax change announcements from the Federal Budget. A long position in Computershare (ASX: CPU +15%) which rose on higher US yields and receding fears of the threat from tokenisation added value. Within the Gold group, short positions in Northern Star (ASX: NST -10%) and Regis Resources (ASX: RRL -12%) added value as the sector softened, and within REITs a short position in Dexus (ASX: DXS -10%) contributed after an adverse court outcome forced them to divest further assets.

For more detailed commentary and analysis, view the latest performance reports:

• CC Sage Capital Absolute Return Fund monthly report
• CC Sage Capital Equity Plus Fund monthly report

* Past performance is not indicative of future performance. ^ Sage Capital uses a custom grouping system for long and short positions (Defensives, Domestic Cyclicals, Global Cyclicals, Gold, Growth, REITs, Resources and Yield). With a focus on the principal macro earnings drivers for each stock, Sage Groups allow for comparisons to GICS for selecting stocks within a sector.