Performance summary

The CC Sage Capital Absolute Return Fund returned -1.60% in October versus the RBA Cash Rate return of 0.31%.*

The CC Sage Capital Equity Plus Fund returned -0.47% in October, versus the S&P/ASX 200 benchmark return of 0.39%.*

Contributors and detractors to performance

The Sage Group^ that contributed most to performance for the month was the Yield group, while the key detractors were the Resources and Defensives groups.

Positive contributors were based on long positions in ANZ Group (ASX: ANZ +10%) and Challenger (ASX: CGF +8%). ANZ rallied after its investor day, which detailed strong medium-term returns and plans to cut $1.5 billion in costs. CGF also performed well after APRA released new capital standards which are set to boost returns on its annuity products.

In the Resources Group, underperformance was largely driven by the portfolio’s current positioning in critical minerals where Sage Capital held long positions in rare earths and short positions in lithium stocks. The sector saw significant volatility - rare earths surged early but gave back gains after US President Donald Trump secured concessions from China on export controls, while lithium ended near its highs on optimism for stronger battery storage demand. Sage Capital’s views and positioning remain unchanged on the Resources Group.

Underweight positions in Pilbara Minerals (ASX: PLS +31%) and Liontown Resources (ASX: LTR +19%) hurt portfolio performance. Lithium miners are now factoring in unsustainable long-term spodumene prices, ignoring the historical experience with swing supply from Africa and the potential expansion of low-cost brine projects. A long position in Santos (ASX: STO -6%) also weighed on the portfolio after the XRG Consortium bid fell through.

In the Defensives Group, a long position in CSL (ASX: CSL -10%) was a detractor. Given recent share price weakness, Sage Capital has established a long position in the portfolio, reflecting the strong underlying value of the core immunoglobulin business. A surprise downgrade on US vaccination rates has raised questions about earnings visibility and communication of current issues. However, the stock remains compelling, with earnings upside supported by margin recovery, cost reductions, and manufacturing efficiencies from the Horizon 1 & 2 programs.

Across the ASX 200 as a whole in October, Resources and Global Cyclicals were strong while Growth and Domestic Cyclicals groups were the weakest. Leading into the month, markets globally had been on a strong run driven by enthusiasm on AI, dovish monetary tilts (even as inflation was rising again) and hope that the US tariff policy would either be not too painful, or would moderate if it was.

Portfolio Positioning and Outlook

Sage Capital performance has been disappointing year to date with the portfolios underperforming in April and August particularly after a strong initial start to the year. Both months experienced pronounced volatility driven by Trump’s tariff announcements in April and sharp market reactions during the August reporting season. A particular area of portfolio weakness has been Resources, where large macro thematics around Trump's trade tariffs and shifting Chinese investment trends have created extreme volatility and the portfolio has been positioned on the unfavourable side of those moves. We have tightened our risk in this group to limit the impact of highly volatile commodity prices, while focusing on rebuilding positions that support our long term performance objectives.

Another notable characteristic of the market this year has been a strong bull market run, with the S&P/ASX 200 joining global rallies in equities, Bitcoin and gold. Small cap stocks have been particularly strong, driven in large part by heightened retail investor activity. Historically, periods like this have been challenging from an alpha standpoint, where dispersion is low and stock prices rise in unison, independent of fundamentals. We’ve seen (and underperformed) in such periods in the past, but history shows we have also delivered strong performance as these periods have ended, both during our time at Sage Capital and in our previous investing history dating back across market cycles since the 2000's.

We see signs that exuberance is fading and a more rational investing atmosphere is developing. The liquidity that has fuelled markets appears to have run its course as monetary conditions remain tight. In this environment, opportunities on both the long and short side can be rewarded. We remain very confident with the Sage Capital process, continuing to prioritise bottom-up stock selection within our Sage Groups while maintaining tight risk control across the portfolio.

​​​Read the fund reportsfor additional commentary.

• 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 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.