ISSUE Q1 FY22
INVESTMENTS
OCTOBER 2021
KNOW WHEN TO HOLD 'EM THE LATEST MACH 1 FUND RESULTS THROUGH Q1 FY22
+8 QOQ FUM G R O W T H 1,4
+3.4% QOQ V E H I C L E R E T U R N 1,2
THIS QUARTER'S PODIUM
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CTi MACH 1 FUND
LEX PEDERSEN
TRUSTEE
lex@ CHROMETEMPLE.com +614 04 84 64 24
Specialised Investment and Lending Corporation Pty Ltd AFSL number 407100 ACN 149 520 918 investors@ silcgroup.com.au
DISCLAIMER CHROME TEMPLE Investments Pty Ltd ACN 640 888 026 (Investment Manager), a corporate authorised representative (number 001284056) of Specialised Investment and Lending Corporation Pty Ltd ACN 149 520 918 (AFS licence number 407100) (Trustee and AFSL Holder). The authority of the Investment Manager is limited to general advice and deal by arranging services to wholesale clients relating to the CHROME TEMPLE Investments Mach 1 Fund (Fund) only. Specialised Investment and Lending Corporation Pty Ltd ACN 149 520 918 is the trustee of the Fund and the issuer of the information memorandum and supplementary information memorandums. This document contains general information only and is not intended to provide any person with financial advice or offer of any kind. Prospective investors should carefully consider the contents in the information memorandum and supplementary information memorandums in full and seek professional advice prior to making any decision regarding an investment in the Fund. No reliance may be placed on this document for any purpose nor used for the purpose of making a decision about a financial product or transaction. Information relating to the Fund contained in this document has been prepared without taking into account the objectives, circumstances, financial situation or needs of any person, and may differ to information contained in the information memoranda. This document may also contain forward looking statements regarding our intent, belief or current expectations with respect to market conditions. Past performance and/or forwardlooking statements are not a reliable indicator of future performance. Except as required by law and only to the extent so required, neither the Investment Manager, Trustee, AFSL Holder nor its affiliates warrant or guarantee, whether expressly or implicitly, the accuracy, validity,
timeliness, merchantability or completeness of any information or data (whether prepared by us or by any third party) within this document for any particular purpose or use or that the information or data will be free from error. Further, the Investment Manager, Trustee and its affiliates expressly disclaim any responsibility and shall not be liable for any loss, damage, claim, liability, proceeding, cost or expense arising directly or indirectly and whether in tort (including negligence), contract, equity or otherwise out of or in connection with or from the use of the information in this document.
REFERENCES IMPORTANT: Past performance is not indicative of future performance and the expected returns of the Fund may not occur as expected or at all. An investor's balance in the Fund may decrease as well as increase in value. All statements that indicate expressly or by implication an expectation of investment returns are based on reasonable assumptions and commercial judgement and no representation is made or assurance given that such statements, views, projections or forecasts are correct or that the expected returns will arise or that investment balances in the Fund may not decrease. You must read the Disclaimer and the contents of the Information Memorandum in full to understand the risks involved in an investment in the CTi Fund. 1 Past performance is not indicative of future performance. 2 Returns are calculated before fees. Mach 1 Fund returns represent the percentage increase in value as at 30 September 2021 vs their 30 June 2021 valuations. For Fund vehicles that were acquired after 30 June 2021, returns represent the percentage increase vs acquisition price. For Fund vehicles that sold before 30 September 2021, returns represent their sale price vs their 30 June 2021 valuations.
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3 Prices are before fees. For the S&P/ASX 200, FTSE100, NASDAQ and Gold (in AUD) indices prices were rebased to 100 and calculated off of the returns from 17 May 2021 to 30 June 2021 to 30 September 2021. For HAGI and Hagerty indices, prices were rebased to 100 and calculated based on the change in the indices values as at 30 April 2021, 30 June 2021 and 30 September 2021. Mach 1 results were rebased to 100 based on the returns calculated at 30 June 2021 and 30 September 2021. 4 Results are before Fees. For the S&P/ASX 200, FTSE100, NASDAQ, Gold (in AUD), HAGI and Hagerty indices calculated as their 30 September 2021 prices vs 30 June 2021 prices. Stock market indices obtained from Yahoo Finance and Wall Street Journal. HAGI and Hagerty obtained from their respective websites. 5 Based on the returns and values presented in the Mach 1 FY21 Annual Report, which are calculated on the same basis as the current report. 6 Hagerty Online. “Monterey auctions rake in $343M.” August 2021. 7 Hagerty Online. “The 2021 Monterey Auctions.” August 2021. 8 Target Returns are calculated as gross vehicle returns and do not represent annual returns unless otherwise stated. All statements that indicate expressly or by implication an expectation of investment returns are based on reasonable assumptions and commercial judgement and no representation is made or assurance given that such statements, views, projections or forecasts are correct or that the expected returns will arise or that investment balances in the Fund may not decrease. 9 Realised returns exclude fees and represent the percentage increase between the sale price and acquisition price. Past performance is not a reliable indicator of future performance.
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Contents
NOTES FROM THE PORTFOLIO MANAGER 04
Portfolio Manager, Lex Pedersen, reviews the latest quarter's results
PORTFOLIO IN REVIEW 06
Overview of the Fund's portfolio composition, performance to date and current industry trends
THIS QUARTER'S PODIUM 10
Three cars rev'ing up our pulse and the Fund's returns
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THE CTi THESIS CONTINUES TO BE VALIDATED AND WE'RE EVER EXCITED
FEATURE | NOTES FROM THE PORTFOLIO MANAGER
best examples of cars not yet on the collectible radar. Whilst others wait for certainty and flock movements, we move amongst the sheep to seek what we firmly believe will be sound investments. Opportunity abounds.
THE AUTOMOTIVE WOLF AMONGST THE SHEEP BY: LEX PEDERSEN With any successful investment, good timing is a constant. It is no different for CTi. Whilst the world reels with uncertainty and unconventional patterns, we find ourselves able to capitalise. Out of fear of an automotive bubble many either divest or stay out of market, but we see the opportunity to accumulate the
As with any investment, there is an art to sifting the good from the great. With the commuter car market showing the first cracks of a re-correction, some cars of distinction are coming to market and the on-market hunting opportunities seem abundant.
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"As sure as the tide will come in today, emissions constriction is removing these cars from production, almost daily."
These same market factors present an opportunity to release some Mk-IV specimens to bolster the Fund's realised returns. In Q2 FY22, we expect to divest 23 of the Fund's vehicles for gain.
POST PANDEMIC COLLECTOR WORLD
rates indicate that there isn't just pent up demand but a tilted shift towards the vehicles displaying aspects targeted by CTi. Aspects such as scarcity, analogue driving inputs and high calibre specimens are fetching greater attention and in turn values. These are the early signals of what we refer to as "the awakening".
As has been the CTi belief, a post pandemic world has seen a shift in both life and investment principles. Life is too short for boring cars and, similarly, boring investments. In line with the warning bells of over-exposure to stocks, the need for diversified portfolios and inflation proof, uncorrelated asset classes has grown.
European activity lags North America, yet it is expected to follow suit. Knowing this, we feel supremely confident that there is still time to capitalise on the domestic opportunity here in Australia before expanding FUM and international trading.
Early indicators out of the US validate this belief. Car prices, volumes and clearing
As ever, thanks for your continued support. Exciting times lie ahead.
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FEATURE | PORTFOLIO IN REVIEW
Q1 FY22 The Mach 1 Fund derives value from three value-
RESULTS THROUGH 30 SEPTEMBER 2021
creating Fund strategies - buying well, holding well & selling well. For the Fund's first reporting period (Q4 FY21), the results were exclusively generated from the first of the three strategies - sharp acquisition - because the Fund
HOLD STRATEGIES TAKING OFF
only began to acquire vehicles in May 2021. During the Q1 FY22 (first full quarter), vehicle appreciation from the Fund's hold strategy began to emerge and take centre stage on the Fund's performance and results. While acquisition returns offer strong upfront upside, over time, we expect that the hold strategy should generate much higher returns overall. CHROMETEMPLE.COM
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VEHICLE PERFORMANCE CTi valuations are based on the m id-point of the third-party assessm ent valuation range.
PRICES REBASED TO 1001,2,3
P R I C E
$115 (CTi Mach 1)
$109 (Hagerty) $104 (ASX/S&P 200) $103 (HAGI) $101 (Gold) $101 (FSTE100)
$100
30 JUNE 2021
30 SEP 2021
Q1 FY22 17RESULTS MAY 2021 The Mach 1 Fund generated a 3.4%
1,2
quarter over quarter return through Q1 FY22 as hold strategies begin to influence performance. During this time, the Fund 1,4
outperformed the ASX /S&P 200 by 13x.
CLASS Mk- I Mk- I I Mk- I I I Mk- I V
QTY % 21% 36% 36% 7%
FUM WEIGHT 26% 30% 34% 7%
RETURNS 3.2% 1.9% 4.8% 4.7%
100%
97%
3.4%
n/ a
3%
n/ a
1,2
Because of looming uncertainty over the economy,
investments
that
are
uncorrelated to the market and offer natural portfolio hedges, like cars and gold,
generally
outperformed
VEHICLES Cash + GST
stock
markets in Q1 FY22. For this reason, while
The differing car indices results reflected
stock markets generated <1% QoQ returns
sentiment in their respective markets. US-
through 30 September, gold generated a
based Hagerty grew off the back of the
2.7% return and cars (Mach 1, HAGI &
successful return of million dollar cars at
Hagerty) averaged a 3.3% return.
auction.
1,2,4
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The 4.8% gain for Mk-III was a result of both acquisition returns and the July sale of the Aston Martin DBS (ex fees - 20% return vs acquisition price and 6% 1,2 increase from the Q4 FY21 valuation).
capital appreciation can be expected even if subsequent months see more modest gains on existing vehicles.
Although the Mk- II class generated the Fund's lowest QoQ return (+1.9%) it still 1,2,4 outperformed the ASX /S&P 200 by 7x.
FUM grew by +8% from 30 June 2021 to 30 September 2021. The growth was a product of both an appreciation in vehicle value and increase in investments in the Fund since 30 June 2021.
The Fund expects to see increased realised gains from the Mk-IV class in the coming quarter with several assets to be released to market.
Q4 FY21 OVERVIEW In our FY21 annual report (available upon request), we offer an in-depth review of the Fund's results, here we provide an extract of that report. Q4 FY21 represented the first quarter with results for the Fund, having initiated acquisitions in May 2021. The Fund enjoyed an 11% valuation lift in 45 days, with all Mach 1 Fund classes experiencing 1,5 positive gains. Buying well during the period required an extensive network to source the best examples off-market, and close monitoring of price movements and collector sentiment to identify targets that have short and long term return potential whilst still priced at pre-bubble prices. Short-term gains can still be expected as buying well remains a key Fund pillar, but as the Fund evolves, and vehicle hold strategies kick in, significant long-term
FUNDS UNDER MANAGEMENT
MARKET OUTLOOK We continue to hold the view that the existence of a bubble is mostly true for commuter vehicles and second tier vehicles, neither of which are targets for the Fund. With much of the market cautious, we see opportunity to continue the acquisition of tomorrow's classics now. The recent results of the Monterey Auction support this view. Incredible enthusiasm among collectors was observed across the spectrum, with a return of those with the deepest pockets.6 Several analogue supercars exceeded their high estimates, demonstrating that the demand for a third pedal is growing and can add a huge premium to modern cars. (CTi thesis validation continues.) 6,7 Encouragingly, experts, collectors and dealers alike indicated that the growth is a widespread reassessment of priorities and desire for inflation proof investments, like cars.7
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PORTFOLIO COMPOSITION As at 30 September 2021
Mk-IV 7.2% Mk-I 26.3%
Mk-III 35.3%
% of Vehicle Weight
% of FUM Mk- I Mk- I I Mk- I I I Mk- I V
26% 30% 34% 7%
TOTAL VEHI CLE % OF FUM
97%
CASH + GST % OF FUM
3%
Mk-II 31.2%
Mk-IV 7.2%
Vehicle Quantity Mk- I Mk- I I Mk- I I I Mk- I V TOTAL FUND VEHI CLES
21% 36% 36% 7%
Mk-III 35.7%
Mk-I 21.4%
% of Vehicle Quantity
100% Mk-II 35.7%
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FEATURE: THIS QUARTER'S PODIUM
UP CLOSE & PERSONAL
"This Quarter's Podium" is easily both the most fun and hardest section to complete in our investor updates. How could we not be excited to get a chance to talk cars - tell you all their little secrets and accentuate their glorious features! But, also how do we pick just three?
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20 1 4 Ferrari F1 2 Berl i n etta 2 0 0 8 A s t o n Ma r t i n D B S 2014 Ducati 1199 Panigale
The three vehicles featured in the Q1 FY22 report were built with one question in mind "what if..."
Thanks to these questions, in this section we are featuring:
>
A car that created the most visceral front-engined GT car experience in the world (inspired by Enzo Ferrari's words - "the horse doesn't push the cart, it pulls it").
And when it came to the Aston Martin DBS, the engineers asked "what would a tough guy in a diner suit drive?"
>
A car that is as sophisticated and sleek as it is aggressive (what else would you expect from a proper James Bond car).
For the Ducati this meant, what if you could build a bike that barely meets the Superbike world championship minimum weight, but takes the power output to extreme levels?
>
A motorcycle that world champs waited in a queue for a chance to ride (so few were produced, that it didn't meet the homologation numbers required by rules).
With the F12 Berlinetta, the team at Ferrari asked what if you could make the fastest Ferrari production car ever?
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CTi MACH 1 FUND
2014 FERRARI F12 BERLINETTA # Produced: 418 (total) AU Delivered: Unknown Year produced: 2014 Transmission: Automatic Horsepower: 731hp Odometer: 2,345 km Provenance: Impeccable Service History: FSH
>8%
CURRENT R E T U R N 1,2
>50%
TARGET R E T U R N 1,8
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> 2 y r s T A HR OG LE DT
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V A L U MSRP E
Target Return
>50%
1,8
Acquisition Price
June 2021
2014
Enzo Ferrari felt that the proper place for the engine in a sports car was in the front, not the back (science says otherwise). But, wanting to produce a car that could rival the Enzo car that once held several records in the testing books, the Ferrari engineers produced the F12. When it launched, it was the fastest car in the Prancing Horse’s stable. It hits 100 kmph from a standstill in 3.1 seconds and runs the quarter mile in 11.3 seconds at a screaming 212 kmph (max 340 kmph). While the immense power of that 6.3-liter V-12 overwhelms off the start, the F12 accelerates like few other cars, naturally aspirated or otherwise. The power delivery
2024
can be brutal, and when shifting manually in race mode the transmission has no qualms about delivering a kick to your posterior with each hard shift. In many ways, the F12 feels like a rocket ship disguised as a grand tourer. It's the only car Jeremy Clarkson said "could do with less power." It looks absolutely stunning in the metal; it’s Pininfarina-designed body (last car they did for the stable) offers equal doses of modern race-bred aggression and the classic front-engined proportions. Lift the hood and you're greeted by a breathtaking temple to horsepower. A true masterpiece, this car and is set to push well past it's original RRP.
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CTi MACH 1 FUND
2008 ASTON MARTIN DBS # Produced: 2,534 (total) # Manual: 984 Year produced: 2008 Transmission: Manual Horsepower: 510hp Odometer: 38,501 km Provenance: Strong Service History: FSH
+20%
REALISED R E T U R N 1,9
74 days
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ACTUAL HOLD
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V A L U MSRP E
Actual Return
+20%
1,9
Acquisition Price
2008
The Aston Martin DBS V12 is arguably the most iconic modern Aston, thanks in part to Mr James Bond in Casino Royale and the fact that the V12 engine, mated to an analogue manual gearbox are simply drop dead gorgeous. A bit like Daniel Craig's edgier, darker, more intense James Bond, this car was designed to convey strength, power, and agility. When the DBS V12 Coupe debuted in 2008, it was Aston Martin's technology flagship vehicle. The car was based on the DBR9 model but featured a lower and wider bodywork. It shared its wheelbase and roofline with the DB9 and featured redesigned front bumper - with wider air scoops - and an integrated rear lip spoiler.
May 2021
July 2021
Only 300 were released in 2008, (2,533 over its five-year production life). Manual versions of the DBS V12 Coupe are rarer yet, with only 984 produced globally. Our first DBS sold for a 20%1,9 return in 74days, representing a 6% 1,2 increase in 30days from its Q4 FY21 valuation. But don't worry, like James Bond, we replaced it with an even more remarkable example. We feel strongly that the latest addition to the Mk-III "pre-classic" class will see significant demand globally as subsequent iterations of Astons stray from this period of excellence.
Part of my brief was to make [it] look more edgy, like a tough guy in a dinner suit
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- MAREK REICHMAN,ASTON MARTIN DESIGN DIRECTOR
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DUCATI 1199 PANIGALE SUPERLEGGERA The Superleggera is an ultraexclusive version of the 1199 Panigale R. At the time of it's release Ducati claimed it had the best power to weight ratio of any production motorcycle in history. It was so over the top that it wasn't even eligible for World Superbike competition. The concept was to showcase Ducati’s technical capabilities by pushing the envelope. The result produced 186hp and 90 pound-feet of torque at the rear wheel. Given free reign with exotic materials, engineers shed 30lbs and the weight-saving allowed it to rev to 12,500 rpm and top out at 299kmph making it almost inconceivable that it's street-legal.
# Produced: 500 (total) AU Delivered: 15 Year produced: 2008 Horsepower: 200+hp Odometer: 8,772 km Provenance: Strong Service History: FSH
Target Return
>50%
V A L U MSRP E Acquisition Price
2008
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May 2021
2024
1,8
LIFE IS TOO SHORT FOR BORING CARS AND BORING INVESTMENTS
LEX PEDERSEN lex@ CHROMETEMPLE.com +614 04 84 64 24
TRUSTEE Specialised Investment and Lending Corporation Pty Ltd AFSL number 4 07100 ACN 14 9 520 918 investors@ silcgroup.com.au
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