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CI BRUNSWICK FUNDINVESTOR LETTER 2022
2CI Brunswick Fund INVESTOR LETTER 2022CI Brunswick Fund vs. the ASX 200 Accumulation Index**PortfolioAnnual Percentage Return#Benchmark Value AddedFY 2022FY 2018FY 2014FY 2010FY 2006FY 2020FY 2016FY 2012FY 200810 Year*FY 2021FY 2017FY 2013FY 2009FY 2005FY 2019FY 2015FY 2011FY 2007Since Inception^Since Inception*-1.1%16.0%26.8%18.7%35.3%6.1%12.5%12.4%-12.9%14.9%28.6%13.4%32.0%-19.4%47.6%5.1%14.3%16.1%45.7%1170%15.2%-6.5%13.0%17.4%13.1%23.9%-7.7%0.6%-6.7%-13.4%9.3%27.8%14.1%22.8%-20.1%26.4%11.5%5.7%11.7%28.7%299%8%5.4%3.0%9.4%5.6%11.4%13.8%11.9%19.1%0.5%5.6%0.8%-0.7%9.2%0.7%21.2%-6.4%8.6%4.4%17.0%871%7.2%*Annualised ^Cumulative (1 July 2004) **Before fees and expenses #S&P ASX 200 Accumulation IndexPast performance is not reliable indicator of future performance.Cover image source: Central Coburg
3CI Brunswick Fund INVESTOR LETTER 2022Brunswick Fund Investors,Peter CooperCo-Portfolio ManagerCIO & Founder Cooper InvestorsJustin O’BrienCo-Portfolio ManagerStuart McLachlanResearch AnalystSince the Brunswick Fund’s inception 18 years ago, we have reported to you on a quarterly basis. Going forward we will report in detail on an annual basis while keeping the quarterly reports to a more succinct form.In this inaugural letter we have outlined the Fund’s performance for the year and described in some detail the Fund’s strategy.Broadly, the aim of the Brunswick Fund is to compound your wealth over time. More specically we aim to apply Cooper Investor’s [CI’s] VoF investment philosophy in a relatively unconstrained universe which includes small, mid and large capitalisation stocks in Australia and New Zealand, and up to 25% International stocks.The Fund does not short-sell stocks (prot when stocks fall), utilise nancial derivatives or leverage – it is “vanilla” in that sense. We like to think of the Brunswick Fund as being more like the tortoise than the hare. The level of return or absolute performance of the Fund is very important, but we also aim to achieve returns with moderate risk and some degree of consistency. Our expectation is this approach is more likely to be a ‘winner’ over the longer-term.The Brunswick Fund remains capacity constrained (currently hard closed), which means we are not taking any more net external applications after accounting for redemptions and cash distributions. This will help us maintain performance and assist us taking advantage of liquidity events (IPOs, secondary raisings, other dislocations) and quality small and mid-cap stocks.We are excited about the opportunity set for the Fund and remain passionate and steadfastly protective of what we think is a unique investment trust. We’re looking forward to the next 18 years!JULY 2022
4CI Brunswick Fund INVESTOR LETTER 2022The aim of the Brunswick Fund is to apply CI’s VoF investment philosophy in a relatively unconstrained universe including small, mid and large capitalisation stocks in Australia and New Zealand, and up to 25% International stocks.VoF is a discipline to process complex qualitative and quantitative information on stocks and industries.VoF stands for: 1. Value latency; 2. Operating, industry and strategic trends; and 3. Focused industry and management behaviour.The VoF process provides a useful framework to: a. assess companies for their value latency, i.e. investments that provide upside due to their ability to generate more cash back than they outlay, taking into account cash ow, growth options, assets, risks and the cost of money; b. identify and observe operational, industry and strategic trends. We are interested in indicators, themes, milestones, catalysts, events and corporate actions that either precede an improved outlook for the company/industry or conrm underlying sustainable trends; and c. appraise company management for focused management and industry behaviour. We are looking for focused leaders that demonstrate a clear focus, vision, authenticity, energy, passion and competency for the business/industry.The Brunswick Fund’s approach is to:1. Leverage CI’s VoF research across the ~20 CI investors doing thousands of 1:1 company meetings every year;2. Back proprietorial management teams – managers with an ownership mindset; and3. Allocate across three capital pools – compounder, reversionary and real asset and income.VALUE LATENCYOPERATING, INDUSTRY & STRATEGIC TRENDSFOCUSED MANAGED BEHAVIOURCI Investment Philosophy and the Fund’s Strategy
5CI Brunswick Fund INVESTOR LETTER 2022“Brunswick” historyBrunswick is an inner suburb of Melbourne, named in 1840 by Thomas Wilkson after Caroline of Brunswick, a prior Queen of England. In the early years Brunswick was a working-class suburb lled with areas of commerce including many brickworks, industrial sites and retailers. As well as the birth place of Peter Cooper, Brunswick embodies many of the qualities we look for in the Fund – everyday products and services, genuine people with strong values, businesses run by proprietors, where value is being created in the economy.The portfolio stocks can be grouped into three key areas or capital pools:The capital pools assist our ability to compare and contrast the VoF attributes of various opportunities. We look to build diversity within each and allocate capital across the pools as opportunities present.Three capital poolsCompoundersGrowth + StalwartsReversionaryCyclicals + Low-risk turnaroundsReal Assets & IncomeBond-like equities + Asset playsUnderappreciated growthLow risk sources of reversionary valueUncorrelated, endowment-like assetsRunway for organic growth Quality businesses Asset BackingDefensive sectorsCapital or supply scarcityBalance sheet repairProprietorial managers (family and founders and owner-operator cultures)Lower correlation to marketsInation protection (income or assets)Ability to grow asset value over timeEvidence of valuation anomaliesPathway of value creationIdentiable value based on traditional metricsCorporate events (spin-offs, restructuring etc)Specic pathway for value creation (eg cost out)Specialist (expert), aligned management teamsProprietary Management TeamsWe seek to partner with focused managers that display enduring proprietorial qualities with the ability to deliver the value latency options afforded by good operation, industry and strategic position/trends. The management and governance cultures of the companies we seek fall into 3 broad categories:1. Family-linked and founder-led companies. 2. Owner-operator cultures. 3. Specialised, focused managers who are resetting governance and management priorities. All of these proprietorial management styles have the following behavioural qualities:• Focus – intentional and know what they are doing.• Humility – positive attitude, courageous, authentic, energetic and focused on long-term value.• Alignment with and respect for shareholder interests.• Deep, nuanced knowledge of the business/industry.• Value and risk-based capital allocation (often counter-cyclical).• Invest in skills, talent and innovation.
6CI Brunswick Fund INVESTOR LETTER 2022The Brunswick Fund is composed of a relatively eclectic mix of stocks that are businesses operating in a broad array of end markets. However, there are some sectors that feature more prominently – for example the allocation to the aged accommodation sector.We aim for both diversity (size, geography, business model, subset of value/capital pool) and concentration in key clusters or areas that we think are particularly attractive and where we think our specialist knowledge can add value.The Fund’s benchmark, which is the reference we use for performance, is the ASX200 Accumulation index. In contrast to the above chart, around half of the ASX200 index is represented by a few banks and a handful of large commodity/resource companies.Although it is an important hurdle for the Fund’s performance, the benchmark does not signicantly inuence the way we manage the Fund and we don’t spend a lot of time thinking about how the Fund is positioned relative to the benchmark.What you ownCHART 1: Brunswick Fund by SectorSource: CI dataNon-bank financialsAged accomodationHealthcareEnergy & Transition AssetsTelcos & Data InfrastructureChemicalsHotels, restaurants, leisureHoldco's and LICsInfrastructureDistributionNon-energy commoditiesNiche industrialsTransportSocial real estateSoftwareMining ServicesNiche consumer
7CI Brunswick Fund INVESTOR LETTER 2022The most signicant event in FY22 for global stock markets was the substantial rise in ination across many economies around the world, including the US and Europe and many developing countries. Ination spiked initially from both the supply/demand shocks created by covid-19 and the government and central bank policy response, and was particularly evident in the freight and logistics sector. Inationary forces accelerated post Russia’s invasion of Ukraine as both countries are signicant producers and exporters of energy, soft and hard commodities and other raw materials.Stocks directly exposed to this ination therefore benetted, while for most other companies/stocks, ination is a cost.The ination spike prompted a shift in Central Bank policy from “easing” to “tightening”, setting an expectation that interest rates will rise. As an example, the yield on 10-year Australian government bonds increased from around 1.6% 12 months ago to close to 4% today. The higher cost of capital or rate of return expectation had a large impact on the valuation of “long duration” companies, or companies where prots are expected well into the future. Long duration bonds also fell in value.The top 10 holdings in the Fund as at 30th June 2022 in alphabetical order are as follows:1. BHP 2. Brickworks 3. Computershare 4. CSL 5. Infratil 6. Lifestyle Communities 7. Orica 8. Ryman 9. Tabcorp10. TPG group Market context
8CI Brunswick Fund INVESTOR LETTER 20220%1%2%3%4%5%6%7%8%Australia US NZ Sweden UK E urop e EmergingWars, natural disasters, ination, banking crises, recessions, pandemics… the list of risk events is endless (we seem to have had most of them recently!). On top of these economy-wide forces companies also face industry and their own specic prot cycles. It is not surprising stock prices are volatile.However, this volatility is also the reason long-term investors earn a return higher than less risky investments in cash or government bonds. The question of ‘how much of a premium’ is an important one – it never feels enough when you are in the middle of the storm. Equity returns – some historyData from Credit Suisse Global Returns Handbook shows that since 1900 Australian equities returns are the highest in the developed world, with the US following as a close second. There are obviously many factors that inuence the level of returns by country including the natural advantages and resources of the country, rule of law, stability of banking and regulation, and management of the economy.Investment risk and returnCHART 2: Real Equity Returns since 1900 (% p.a., geometric or compound average)Source: Credit Suisse Global Investment Returns Yearbook 2022
9CI Brunswick Fund INVESTOR LETTER 2022Over the same 122 year period Australia’s ination averaged 3.7%, taking the nominal annual equities return in Australia to 10.8% p.a. More recent experience has been well below this level though:Ination – some historyAs the chart below illustrates, ination has largely been a benign force in Australia since the late 1980s. Ination above 5% (current level) has been rare and quickly reverted back to the 2-3% level that has been the norm.Ination is complex and reects both habit and expectation. If everyone expects prices to rise and is in the habit of increasing prices, then ination is likely to be stickier. It is clear that many aspects to the economy today are different than they were 40 years ago – globalisation, technology, and lower degrees of regulation could all support a quicker normalisation of ination. But the truth is we don’t know for sure how things will play out.CHART 3: Australian Consumer Price Index (% ination, 12 months)Source: Reserve Bank of AustraliaTABLE 1: Nominal Australian Equity Returns (% p.a., geometric or compound average)Period Nominal Return % p.a.Last 122 yearsLast 10 yearsLast 20 yearsLast 5 yearsLast 3 years10.8%9.35%8.21%7.15%3.8%Source: Credit Suisse Global Investment Returns Yearbook 2022, Factset data Last 3,5,10,20 years based on ASX All Ordinaries Factset data-15-10-5051015202519231926192919321936193919421945194819511955195819611964196719701974197719801983198619891993199619992002200520082012201520182021
10CI Brunswick Fund INVESTOR LETTER 2022So is ination good or bad for equities investors?To answer this question we need to look back in time, particularly to decades of higher ination in the 1910’s, 1950’s, 1970’s and 1980’s:During the 1950’s and 1980’s equities returns were strong, more than offsetting inationary forces with nominal returns well above the 122 year average. During the 1910’s equities still produced a positive real return. However, the real return from bonds was substantially negative.The 1970s stands out both for the level of ination and the fact that real bond and real equities returns were negative – note in nominal terms they were still positive returning ~5% p.a. Similar to today, the 1970’s ination spike was a shock.Interestingly, through the 1970’s the component of return via dividend was relatively high:CHART 4: Australian Real Equity, Bond and Ination by Decade (% p.a., geometric average)Source: Credit Suisse Global Investment Returns Yearbook 2022-10 %-5%0%5%10%15%1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010sReal Eq ui ty Real Bon ds InflationSource: Credit Suisse Global Investment Returns Yearbook 2022CHART 5: Australian Dividend, Real Capital Gain, and Ination by Decade (% p.a., geometric average)-15.0%-10.0%-5. 0%0.0%5.0%10.0%15.0%20.0%1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010sDividend Real Cap Gain Inflation
11CI Brunswick Fund INVESTOR LETTER 2022FY22 PerformanceThe Fund’s performance in the FY22 year was a tale of two halves. In the rst half the Fund performed strongly, up around 15% before giving this back in the second half.The table below shows the Fund’s performance by capital pool.The Fund’s compounding stocks performed poorly during the second half of the year and particularly during the March quarter, along with many compounding stocks across the market (domestic and offshore).Over the past 12 months we have reduced the Fund’s allocation to compounders, largely because we could no longer observe value latency in the stocks that were sold. Capital was redeployed into opportunities in both the reversionary pool (cyclicals and low-risk turnarounds) and the real asset and income securities pool (asset plays and bond-like equities).CHART 6: Capital pool allocationTABLE 2: CI Brunswick Fund performance by capital pool% at Close 1 Year Return % *3 Year Return % *5 Year Return %Compounders 41% -9.20% 7.80% 11.50%32% 22.20% 19.10% 8.60%22% -4.20% 10.20% 12.90%100% -1.10% 10.50% 10.48%100% -6.47% 3.34% 6.83%Real Assets & Income SecuritiesReversionaryCI Brunswick FundASX200 Accumulation Index*Annualised Source: CI data, NAB Asset Servicing. Past performance is not reliable indicator of future performance.Source: CI data0%1 0%2 0%3 0%4 0%5 0%6 0%7 0%Ju l-1 7Se p-1 7No v-1 7Jan- 18Mar-18May-18Ju l-1 8Se p-1 8No v-1 8Jan- 19Mar-19May-19Ju l-1 9Se p-1 9No v-1 9Jan- 20Mar-20May-20Ju l-2 0Se p-2 0No v-2 0Jan- 21Mar-21May-21Ju l-2 1Se p-2 1No v-2 1Jan- 22Mar-22May-22Capital Pool WeightsCo mpo u n de rs Reversionary Rea l As se ts
12CI Brunswick Fund INVESTOR LETTER 2022As an example the Fund sold its holding in US-based Intuit, a global leading accounting software provider to small business. In prior years, the Fund had owned Intuit’s key competitor Xero. Having returned up to 6x the initial investment when we sold our last shares, some of this capital was re-deployed into Intuit. In a short space of time however, Intuit’s share price had doubled, again leaving little in the way of latent value.Despite the recent drag on performance from compounders, the pool remains an important part of the Fund’s strategy. Compounding stocks have been strong drivers of the Fund’s performance over the longer-term and most of the top 10 contributors (3 and 5 year periods) are compounders. As we outlined in the Fund’s March 2022 quarterly, we completed the table below to illustrate the long-term record of the Fund’s compounding stocks over multiple interest rate cycles. The table shows the returns of 12 of the Fund’s compounders. Note: the Fund hasn’t held these stocks for the entirety of the period, the table has been compiled just to illustrate why we hold these stocks.The last column on the right shows that during the March quarter the Fund’s compounding stocks performed poorly (on average falling by 17.2%) – the other two capital pools did a good job offsetting this performance. However, the other ve columns illustrate why these stocks remain an important part of the Fund’s strategy. Over most time periods this group of stocks returned around 20% p.a., and even if you bought this group just prior to the GFC in 2007, on average they still delivered 14% p.a. Mathematically, a 15% p.a. return means you are doubling your money every 5 years. At 20% p.a., you are doubling every 4 years. Stocks that can achieve this over long timeframes are relatively rare.The performance of the other two pools was broadly pleasing. The real asset and income securities pool held stable through the 2022 drawdown, while the reversionary pool added value.TABLE 3: Compounding stock shareholder returns25yrs 20yrs 15yrs 10yrs 5yrs YTD 22 Mar Q 22AverageMedian# of stocks19.3% 17.4% 14.1% 22.8% 19.5% -2.9% -17.2%20.6% 18.0% 13.3% 21.6% 19.2% -1.5% -18.3%8 8 9 10 12 12 12Source: Factset data, As at April 2022. Past performance is not reliable indicator of future performance.
13CI Brunswick Fund INVESTOR LETTER 2022Good compounders are rareA further examination of the stocks in the ASX and NZX illustrates that the best, and most consistent compounding stocks are rare. We looked at the returns for stocks that have 20 years (or very close to 20 years) of history. We worked our way down the market capitalization list of both the ASX and the NZX until we had 100 stocks.As the table below illustrates, only 10% of these stocks, ie just 10 stocks, produced compound returns over 20% p.a. over the last 20 years. There were an additional 19 stocks that returned 15-20% p.a.This group excludes stocks subject to takeover / delisting, but it also excludes stocks that have disappeared due to poor performance.CHART 7: Capital pool returnsSource: CI data. Past performance is not reliable indicator of future performance.TABLE 4: ASX300 & NZX50 stocks with 20yrs of returns20 yr Compound return % p.a. Number of Stocks> 2015 – 2010 – 155 – 10<5Total1019223514100Source: Factset data-40 %-20 %0%2 0%4 0%6 0%8 0%100%120%140%160%Ju l-1 7Se p- 1 7No v -1 7Jan -18Mar- 18May- 18Ju l-1 8Se p- 1 8No v -1 8Jan -19Mar- 19May- 19Ju l-1 9Se p- 1 9No v -1 9Jan -20Mar- 20May- 20Ju l-2 0Se p- 2 0No v -2 0Jan -21Mar- 21May- 21Ju l-2 1Se p- 2 1No v -2 1Jan -22Mar- 22May- 22Capital Pool Cumulative ReturnCo mpo u n de rs Reversionar y Rea l As se ts ASX 200
14CI Brunswick Fund INVESTOR LETTER 2022The above analysis illustrates the challenge of a pure buy and hold strategy of domestic compounders given the strategy would require high levels of concentration and a high hit rate. Also, all of these stocks at various points have suffered large drawdowns (price falls).Our strategy is to nd quality compounders across multiple areas including small and midcap stocks, domestic and offshore as well as across business model and sector. While we have held several compounders for more than 10 years, we can also buy and sell depending on how they are tracking in their own cycles. Quality compounders sold off by the market with clear sources of value latency, can represent particularly attractive VoF propositions.Compounder poolThe compounding pool is a diverse source of stocks that we believe can create long-term value by growing in attractive markets at good rates of return. Growth rates can vary from very high levels (>30% for some software businesses) to GDP+ (~5%) for Stalwarts. However, rather than focusing on absolute levels of growth, we focus on value latency, i.e. where this growth is underappreciated by the market. The allocation to the compounding pool fell during the year as stronger opportunities presented in other pools and value latency was more difcult to identify. Currently, the Fund is exposed to a number of key clusters or groups including 1) Ageing & Health, 2) Interest-rate linked nancials, and 3) Everyday needs, niche industrials:CHART 8: Compounding pool by sectorSource: CI dataRetirement accomodationHealth/biotech productsAccounting & HR softwareGaming softwareStock exchangeFinancial processingInsurance brokingHome lendingBusiness lendingSpecialty insurancePlumbing/HVAC DistributionFreight & LogisticsCar products & services
15CI Brunswick Fund INVESTOR LETTER 2022Aged AccommodationThe Aged accommodation group includes a range of assets that provide accommodation to people aged 65+, which is growing at twice the rate of underlying population growth. At the high end of affordability, Ryman is a specialised operator of mixed retirement village (independent living) units and aged care accommodation in Australia and New Zealand. Lifestyle Communities is a developer and operator of land-lease communities to the low to middle end of the market. Land-lease communities allow owners to unlock capital as the owner purchases below the cost of their existing homes, buying only the house and leasing the land. The leased land provides a highly stable and growing annuity stream to Lifestyle Communities.Interest-rate linked nancials This group of stocks are stalwart-like, primarily providing services in insurance, nancial processing and lending, earning both fees and interest income. Steadfast is Australia’s leading network of insurance brokers and underwriting agencies to small and medium business. QBE is a global provider of specialty insurance and reinsurance, commercial and SME personal lines and other risk management products.Computershare is a leading provider of nancial administration services related to share registries, stock transfer, corporate trust and employee share plans. Computershare earns income from both services provided (fees) and interest on cash balances held. Liberty Financial is a leading domestic non-bank lender providing both residential mortgages and secured nance for example car loans to mostly retail clients.Niche industrials and brandsThis group of companies are leaders in areas of ‘business-to-business’ service or niche branded products. Mainfreight is a provider of less than container load (LCL) freight services in New Zealand, Australia, Europe and the US. In addition, Mainfreight operates logistics (warehousing) facilities, and freight forwarding (Air and Ocean). Although highly competitive, Mainfreight focuses on higher service, higher margin business.Ferguson is the leading distributor of plumbing products in the US. Ferguson also operates businesses in Heating, Ventilation and Air Conditioning (HVAC) products and civil or waterworks services. Reversionary poolThe Reversionary pool includes the following key sub-groups:1. Spin-offs2. Productivity Improvers ~ restructuring and operating opportunities3. Industry and EventsDuring the year, we allocated more capital to opportunities in this capital pool.
16CI Brunswick Fund INVESTOR LETTER 2022CHART 9: Reversionary pool by sector0%10%20%30%40%50%60%Spin-off Productivity Improvers Indu stry & eventsSpin-offsSpin-offs or demergers involve the separation and listing of a division from the parent. There is much research that supports outperformance of spin-offs over-time relating to a “re-focusing” dividend that combines operating improvements (e.g. cost-outs) with improved capital allocation (spin-offs are sometimes starved of capital) and more aligned incentives for management.During the year we sold our investment in Graincorp at roughly 2.5x our investment. Graincorp is involved in the storage, handling, and marketing of Australian grain to domestic and overseas markets. We invested in Graincorp prior to the demerger when the stock was at the tail end of a signicant drought. Graincorp demerged its Malt business ‘United Malt Group [“UMG”]’, which the Fund also held. Unfortunately, both COVID-19 and the current inationary environment presented signicant challenges for UMG. The Fund also sold its position in UMG during the year.The Fund is invested in two global spin-offs backed by Mitch Rales, founder of Danaher (US$200bn market capitalisation company in the healthcare sector). Firstly, ESAB a global leader in arc welding equipment such as Cigweld® and cutting automation technology and consumables. Secondly Enovis, a leading medical technology company focused on orthopedic products used for musculoskeletal health, joint reconstruction, vascular health and pain management.Source: CI dataWagering, 7%Industrial equipment, 7%Wagering, 7%Pathology, 10%Industrial chemicals, 16%Energy transition, 15%Casinos, 7%Oil & Gas, 4%Diversied miningMining services, 7%Telecom services, 15%Retail, 2%
17CI Brunswick Fund INVESTOR LETTER 2022Productivity improversProductivity improvers, which we also refer to as ‘low-risk turnarounds’ are situations where we’ve identied an opportunity for a company to create value either via nancial restructuring or operating improvements (costs/margins, asset efciency).TPG group is the third largest player in Australia’s telecommunications services sector operating the Vodafone, TPG, iinet, AAPT, Internode, Lebara and felix brands. TPG owns a signicant national mobile and bre asset network. Australian Clinical Labs is the third largest player in the Australian pathology market. ACL provides pathology services to hospitals, GPs and specialists, via 1300 collection centres and six central laboratories.Industry and eventsIndustry and events cover both cyclical industries, where we look to invest after an industry has started to recover (bottoming of commodity prices for example) and event situations such as covid-19 that create specic opportunities in specic sectors or companies (for example the travel sector).The Fund owns a number of positions in diverse commodity and energy providers who operate low cost, long-life mines producing iron ore, copper, nickel, coal, oil, LNG, natural gas, and ammonium nitrate as well as companies who provide engineering, construction, blasting, maintenance and other services to the mining sector. Real Assets and Income Securities poolThe Real Assets and Income Securities pool invests in 1) specialty real estate in ageing, health and social sectors, 2) data, renewables and other infrastructure, 3) quality asset discounts and holding companies.We seek a combination of strong income streams from rent, deferred management fees, tolls, airport fees and regulated access fees. Income generally grows somewhere between underlying ination and the level of economic growth. In addition, operators can earn development fees as new assets are added into their portfolios.
18CI Brunswick Fund INVESTOR LETTER 2022Specialty Real estateAt the low end of affordability, Eureka Group provides accommodation to individuals that have limited assets and are entirely dependent on the aged pension. Eureka group acquired its assets over time well below replacement cost. Residents pay a rental stream to Eureka that is independent of house prices. Aspen, also operates at the affordable end spanning caravan/tourist parks, rental accommodation in the form of apartments and land-lease communities.Arena REIT owns property leased to large childcare operators such as Goodstart and primary healthcare providers such as Healius. InfrastructureThe infrastructure exposures include the biggest data centre provider to the Australian government CDC, Trustpower, owner of hydropower electricity generation in New Zealand, Wellington and Heathrow airports, toll roads concessionaires in Canada and the US, a bulk and container port in New Zealand, and electricity generation assets in Australia.In addition the Fund’s holding in Canadian listed Brookeld provides exposure to the world’s second largest private markets asset manager and direct exposure to diverse investments in global infrastructure, property and renewable energy.CHART 10: Real asset and income securities pool by sectorSource: CI data
19CI Brunswick Fund INVESTOR LETTER 2022Quality asset discounts and holding companiesBrickworks is a holding company with a cross-listing structure linked to one of Australia’s oldest listed companies, Washington Soul Pattinson. Brickworks is one of the largest producers of bricks in Australia for residential and commercial building and the 4th largest producer of Bricks in the US. In addition, Brickworks owns a land development business in a joint venture with Goodman Group, leased to a range of tenants. Brickworks cross-holding in Washington Soul Pattinson also provides exposure to a diverse range of other businesses. Brickworks trades at a sizeable discount to the sum of these various holdings. Risk and portfolio attributesThere are many ways to think about risk. Some considerations include statistical measures summarizing returns prole, drawdowns (maximum fall), and historical volatility at the portfolio level:TABLE 5: Portfolio risk attributesSource: CI data* Cumulative (1 July 2004), before fees and expenses # S&P ASX 200 Accumulation Index Max Drawdown for the Brunswick Fund occurred December 2007 to February 2009.Portfolio #BenchmarkTotal Return*Max DrawdownBest MonthWorst MonthPositive MonthsNegative MonthsAnnualised Volatility+1,170%-40.0%+10.9%-18.9%68.1%31.9%+12.1%+299%-47.2%+10.2%-20.7%63.9%36.1%+13.9%CHART 11: Brunswick Fund Historical VolatilitySource: CI data5%10%15%20%2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Volatility (3 yr)Brunswick FundASX 200Brunswick FundASX 200 Acc. Index0%4%8%12%16%0% 4% 8% 12% 16% 20%Annualised ReturnAnnualised VolatilityCI Brunswick Fund vs ASX200 (since inception)
20CI Brunswick Fund INVESTOR LETTER 2022One important aspect to the Fund’s performance historically has been that most of the attribution comes from performing better in down-markets:However, it is important to note that the Fund will not outperform in 100% of down-markets. Historically it has done this in 80% of down-markets (based on monthly returns). Despite what was a challenging FY22 across many asset classes, and a high degree of uncertainty in terms of the near term economic outlook, history gives us condence that with volatility also comes opportunity. Across each of our three pools, we see opportunities to deploy capital at what we expect will be attractive returns. Having three pools rather than one forces capital into the best risk adjusted – VoF – stocks, and we continue to deepen our knowledge and expertise in each pool to build diversity both within and across the pools. Financial markets are in a constant state of change and we need to be aware and present to what is needed today. Guiding us is our VoF investment philosophy, which we believe is as relevant today as it was when formulated several decades ago. Thankyou for your ongoing condence and support and please do not hesitate to contact us should you have any questions.Best Regards, THE BRUNSWICK FUND TEAMCHART 12: ASX300 & NZX50 stocks with 20yrs of returnsBased on 204 monthly data points, 138 up months, 76 down monthsAs at April 2022Source: CI data-1.78%-3.37%2.99%3.08%-4 .0%-3 .0%-2 .0%-1 .0%0.0%1.0%2.0%3.0%4.0%Brunswick Fund ASX 200Average Up MonthAverage Down Month
21CI Brunswick Fund INVESTOR LETTER 2022DisclaimersFinancial product advice contained in this documentThis document has been prepared by Cooper Investors Pty Limited ACN 100 409 890 AFSL 221794, the trustee and investment manager of The Brunswick Fund (Fund). The opinions, advice, recommendations and other information contained in this document, whether express or implied, are made by Cooper Investors Pty Limited and by its ofcers and employees (Cooper Investors) in good faith in relation to the facts known to it at the time of preparation. Cooper Investors has prepared this document without consideration of the investment objectives, nancial situation or particular needs of any individual investor, and you should not rely on the opinions, advice, recommendations and other information contained in this document alone. This document contains general nancial product advice only.This document does not constitute an offer of units in the Fund to investors. Offers of units in the Fund are made in the information memorandum (IM) for the Fund. You should obtain the IM and consider the important information about risks, costs and fees in the relevant IM before investing. Cooper Investors recommends investors seek independent, legal, nancial and taxation advice from appropriate professional advisers before making any decision about investing in the Fund.Past performance warningAny information in respect of past performance is not a reliable indication as to future performance and any forecasts, prospects or forward-looking statements in this document (if any) are based upon Cooper Investors’ current views and assumptions and involve known and unknown risks and uncertainties, many of which are beyond Cooper Investors’ control and could cause actual results, performance or events to differ materially from those expressed or implied. These forward-looking statements are not guarantees or representations of future performance and should not be relied upon as such.To whom this document is providedThis document is only made available to persons who are wholesale clients within the meaning of section 761G of the Corporations Act 2001 (Cth). This document is made available on the condition that it is not passed on to any person who is a retail client within the meaning of section 761G of that Act.Limitation of liability and copyrightTo the maximum extent permitted by law, Cooper Investors disclaims all liability and responsibility for any direct or indirect or consequential loss, damage, cost, expense, outgoing, interest, loss of prots or loss of any kind which may be suffered by any person through relying on anything contained in or omitted from this document. This document may not be reproduced or used for any other purpose without the express permission of Cooper Investors.