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NESTOR Australia - Quarterly Report 1/2021

The Nestor continued to outperform the Australian index in the March quarter by exactly 4%, rising 12.3%.

 A large number of equities were responsible for this. In general, the mood on the world's stock markets remains positive, although the bond markets were very weak - especially in the USA. In general, the massive stimulus provided by central banks and many governments to the respective economies is seen as very positive for the earnings prospects of many companies, and the market continued to rotate towards so-called cyclical and value stocks.

This development was also implemented in the fund - currently, few tech companies or extreme growth stocks with only low turnover or profits are held.

Nestor Australia continues to have a strong overweight in commodity stocks, which is more than twice as high as the index (where they are weighted at 20%) at approx. 44%. The substantial underweight in the banking segment ( approx. 25% of the index ) is still very pronounced at approx. 6.6% in the fund. However, historically the fund has usually had an even lower weighting.

Gold shares are currently weighted at only 12% in the fund. We have not written off gold, but rising interest rates will certainly keep us busy for quite a while - in addition, Bitcoin seems to be absorbing some demand for gold. The gold price of around A$2,300/ounce remains attractive for the development of new gold deposits, so we will continue to be active in this segment. In the long term, we also continue to see very good value in the current gold prices. The currently very low volatility of the major equity markets could also change rapidly, so that gold should again attract more interest as an investment medium. We also see the risk of a sustained rise in inflation, coupled with extreme levels of government debt.

The fund sold positions in Nuix Ltd ( software ), Redbubble Ltd ( e-commerce ), Fortescue ( iron ore ), Centaurus Metals ( nickel ) and Evolution Mining ( gold ) during the quarter. The only coal stock in the portfolio, Atrum Coal, was also sold. In principle, the fund has no problem owning coking coal producers - especially since this coal is indispensable in steel production, in contrast to energy production, for which thermal coal is used. However, a change in mining laws has made it highly unlikely that the company's excellent deposit will come into production in the foreseeable future.

Newly included are shares in Venturex Resources, which is developing a copper project - managed by an outstanding team, and in Mineral Resources, an excellent producer of iron ore and lithium.

The year 2021 will be particularly influenced by the massive economic stimulus programmes worldwide. This is likely to continue in 2022 - perhaps for longer. In this environment, we see the danger of further rising interest rates in the bond markets and rising inflation figures. In addition, the topic of electric mobility is gaining momentum. This should be a particularly good environment for the commodities sector, so we will certainly remain true to our long-term strategy of a massive overweight in the sector.

We have been taking account of the potential uncertainties of the markets in a thoroughly fragile environment for some time with a high liquidity of up to the permitted 15% at times. This very high ratio will allow the fund to invest in potential market setbacks.

Occasionally the question of the buzzword ESG comes up. Formally, this is very difficult to implement in a commodity-oriented fund. Good management is an extremely important building block in the Nestor Australia investment process. In 2021, this includes a high focus on ESG-related issues as they become more prominent. Key ESG moments have also already been implemented in the past by responsible corporate governance. Since the topic is also being discussed more actively in the commodities sector - and certainly rightly so! - Since the topic is being discussed more and more actively in the commodities sector - and certainly rightly so - and is being demanded in some cases, we see performance relevance here as well. In this respect, the topic also occupies quite a large space in Nestor Australia, without ESG guidelines being formally implemented.

Wilhelm Schröder, Schröder Equities GmbH