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1. Small banks feeling the pain, but this is not GFC 2.0…

The SVB/other bank collapses dominated news this week. The Firetrail team were busy investigating whether these issues were isolated or systemic, and whether our portfolio companies are exposed. In short, we are comfortably underweight banks in our portfolios, and our holdings have zero to very minimal exposure to SVB.

But what actually happened? When interest rates are persistently low, a bank can juice returns by investing short-term customer deposits into longer-term fixed rate loans/bonds, earning a ‘maturity premium’. But when interest rates suddenly rise, the long-term bonds fall in value and the bank suddenly has less assets to cover customer deposits.

2022 saw the most aggressive interest rate hikes in history, and the value of long-term bonds held by banks has fallen significantly. SVB was over-invested in long-term securities and suddenly didn’t have the assets to cover customer withdrawals. It is important to note there are strict regulations for larger banks so mismanagement like this doesn’t occur. SVB fell outside these regulations.

Source: Charles Schwab

Source: FDIC

2. Goods demand is slowing, but travel/leisure is flying…

Post-COVID travellers could not care less about bank asset/liability mismanagement – they’ll be at the beach bar! Air travel is surging and still has a way to go before reaching pre-COVID levels in most regions. The US has led the way and revenue per kilometre is now back to 2019 levels. But Australia still has some ground to make up. Strong demand and lighter competition in the Australian market has Qantas (held in the Firetrail High Conviction and Firetrail Absolute Return Funds) reaping the rewards.

Source: IATA

Companies mentioned are illustrative only and not a recommendation to buy or sell any particular security.

3. Investors are seeing the glitter in gold…

Gold has been the ultimate defensive asset and store of value for millennia. Recession fears and cracks in the banking system have led to a spike in the gold price from $1,650 to $1,919 in the past 6 months. We think gold plays an important defensive role in portfolios. Gold miners with high-quality assets like Newcrest Mining (held in the Firetrail Australian High Conviction and Firetrail Absolute Return Funds) are set to benefit from heightened uncertainty and a stronger gold price. We published an insight piece on the case for gold in 2023 this week, which you can read here: If it glitters, it’s Gold.

Source: Factset, Firetrail

Companies mentioned are illustrative only and not a recommendation to buy or sell any particular security.


This article is prepared by Firetrail Investments Pty Limited (‘Firetrail’) (ABN 98 622 377 913, AFSL 516821) as the investment manager of the Firetrail Australian High Conviction Fund (ARSN 624 136 045), the Firetrail Absolute Return Fund (ARSN 624 135 879), the Firetrail Australian Small Companies Fund (ARSN 638 792 113) and the Firetrail S3 Global Opportunities Fund (ARSN 653 717 625) (‘the Funds’). Pinnacle Fund Services Limited ('PFSL') (ABN 29 082 494 362, AFSL 238371) is the product issuer of the Fund. PFSL is not licensed to provide financial product advice. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited (‘Pinnacle’) (ABN 22 100 325 184). The Product Disclosure Statement (‘PDS’) and Target Market Determination (‘TMD’) of the relevant Fund are available via the links below. Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund.

Links to the Product Disclosure Statement: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

Links to the Target Market Determination: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

For historic TMD’s please contact Pinnacle client service Phone 1300 010 311 or Email

This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person’s objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance.

Whilst Firetrail, PFSL and Pinnacle believe the information contained in this communication is reliable, no warranty is given as to its accuracy, reliability or completeness and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Firetrail, PFSL and Pinnacle disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information. This disclaimer extends to any entity that may distribute this communication.

Any opinions and forecasts reflect the judgment and assumptions of Firetrail and its representatives on the basis of information available as at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future.

Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this communication is prohibited without obtaining prior written permission from Firetrail. Pinnacle and its associates may have interests in financial products and may receive fees from companies referred to during this communication.

This may contain the trade names or trademarks of various third parties, and if so, any such use is solely for illustrative purposes only. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with, endorsement by, or association of any kind between them and Firetrail.