Performance summary

The CC Sage Capital Absolute Return Fund returned -0.57% in September versus the RBA Cash Rate of 0.36%, an active return of -0.93%.*

The CC Sage Capital Equity Plus Fund returned -2.84% in September versus the S&P/ASX 200 Accumulation Index of -2.42%, an active return of -0.42%.*

September market performance was heavily driven by interest rate rises both in Australia and the US. Healthcare and energy were the only sectors to produce positive returns over the month, while technology was the weakest performing sector. In terms of attribution, the strongest contributors to performance were the Sage Groups^ Yield and Domestic Cyclicals, while Defensives was the primary detractor.

Yield and Domestic Cyclicals were positive contributorsto performance

Within Yield, key positive contributors were long positions in QBE Insurance Group (ASX: QBE +5%), which benefitted from the rise in bond yields, and AMP (ASX: AMP +9%), which rose on the back of growing confidence in the earnings potential of its Chinese joint venture and improved capital allocation. Within Domestic Cyclicals, a long position in Ampol (ASX: ALD +7%) was a key contributor to performance. The stock benefitted as hopes of a reopening of the Strait of Hormuz faded during the month, while ongoing Houthi attacks in the Red Sea and continued Ukraine attacks on Russian refineries helped support elevated refining margins.

Global Cyclicals group was a strong performer for theportfolio

Across Global Cyclicals, long positions in Ansell (ASX: ANN +11%), and Orica (ASX: ORI +6%), both added value. Ansell continued its strong momentum from its earnings result, supported by an ongoing share buyback while Orica calmed some short-term market concerns by announcing new ammonium nitrate supply contracts in North America after the force majeure from CF Industries, a large US fertiliser and nitrogen products company.

Resources group dragged down by aluminium and lithiumweakness

The Resources group ended the month as a slight detractor amid high volatility. Alcoa (ASX: AAI -12%) was a primary drag on performance as it lost its gains from the previous month as aluminium prices weakened on concerns of returning supply from the Middle East and growing output in Indonesia. Meanwhile, the lithium sector experienced softness after downgrades to battery storage and EV sales forecasts, dragging rare earth stocks with it on sentiment. Despite these headwinds, Sage Capital’s long and short positions across the lithium space added a small net positive during the month, alongside a short position in iron ore

Defensives group largest detractor in performance

The Defensives group performance was negatively impacted by long positions in NextDC (ASX: NXT -22%), and Light & Wonder (ASX: LNW -17%). NextDC fell as the market weighed a sharp step-up in capex to build contracted capacity, funded in part by a A$1.1 billion convertible note, its third capital raise in four months; hedging of the notes added selling pressure. Light & Wonder fell after a sell down by a long-term shareholder left the market with some indigestion while US interest rate rises and higher gas prices left investors skittish on consumer facing stocks.

Growth group shorts offset Xero weakness

The other key detractor was a long position in Xero (ASX: XRO -31%), which fell to a seven-year low as the market extended its concern about AI disruption of small business software and higher bond yields weighed on its valuation given its long duration growth. However, a broad range of short positions across the Growth group performed well in the rising bond yield environment, resulting in a small positive attribution.

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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.