Dear investor

This issue of the newsletter includes an update on the Fund’s portfolio and its performance for the quarter ended 30 June 2022. The Fund donated $1.02m to Third Link portfolio charities last quarter, bringing our total donated since inception to $17.78m.

Please note that this quarterly update is later than usual because of our fund-of-funds structure, meaning we must wait for many different funds to report on their financial year income distribution and performance so that we can report on ours. We apologise for the delay.

Given the recent market volatility, you will note a less-than-pleasing underperformance of the Fund over the three months to 30 June 2022, relative to the S&P/ASX 300 Accumulation Index. Indeed, Third Link has underperformed the S&P/ASX 300 Accumulation Index over all periods out to 12 months. The key reason for this is that we are primarily exposed to small-to-medium sized industrial companies, which have borne the brunt of the severe market sell-off of the last year. We expect such companies to rebound strongly when the market eventually recovers. As such, I am confident that the Fund's investment strategy is still appropriate to deliver the Fund's investment objective to outperform the Index over rolling five-year periods.

This quarter's key portfolio changes included fully redeeming our investment in the L1 Capital Australian Equities Fund and investing in the L1 Capital Catalyst Fund, a high conviction, long-only equities fund focused on unlocking company value through shareholder activism. We did this switch at the request of the manager as the fund we were invested in was being closed down. We also increased the percentage of the Fund held in cash or cash equivalents from 3.2% to 8.1%, primarily as a result of our need to fund year-end distributions and our reluctance to invest new application money received recently while the economic picture remains uncertain with the threat of permanently high inflation.

Thank you for investing with Third Link and allowing your fees to make a difference.

Regards,
Chris Cuffe AO, Founding Director and Portfolio Manager
Third Link Investment Managers Pty Limited

Portfolio update

The objective of Third Link Growth Fund (“the Fund”) is to provide a well-managed investment in Australian listed shares. To achieve this, the Fund extensively invests with professional third party investment managers.

As at the end of June 2022, the portfolio was invested as below:

The Fund paid an income distribution of $0.0792 per unit for the quarter ending 30 June 2022.

In the quarter to 30 June 2022, the Fund also fully redeemed its investment in the L1 Capital Australian Equities Fund and invested in the L1 Capital Catalyst Fund.

A description of each of the fund managers we invest with can be found on our website. Each of these managers rebates their management fees and performance fees, effectively meaning they are managing the assets of the Fund for free. It is through this extraordinary generosity, together with that of other service providers, that Third Link is able to make sizeable donations to the charitable sector without diluting the returns to investors from the Fund.

Fund performance

The aim of the Fund is to outperform, after fees and over rolling five year periods, the S&P/ASX 300 Accumulation Index¹. As at the end of June 2022 the Fund performance relative to the Fund benchmark was as below:

Figures greater than one year are expressed as annual compound returns. No allowance is made for tax. The benefits of franking credits from dividends received have not been included.

¹ The S&P/ASX 300 Accumulation Index covers the largest 300 shares listed on the Australian market. Being an accumulation index, it measures changes in both the value and income of the shares.

² February 2012 reflects the date when the Fund's investment strategy changed from multi-sector growth to Australian equities.

batyr and Third Link: 10 years of support

batyr is a for-purpose mental health organisation, created by young people, for young people. It works in prevention and early intervention, focussing on hurdles such as stigma, low mental health literacy, and ill-equipped communities, which stop young people from taking charge of their mental health and seeking help when needed. This year, 2022, marks a decade since Third Link began its support of the organisation.

“In Third Link’s research of the sector ten years ago, we saw that there was a service gap in the provision of preventative mental health programs for young people,” said Chris Cuffe AO, Founding Director and Portfolio Manager, Third Link. “Ten years later and we can see what a great decision it was to back a new organisation with a powerful idea to educate and empower young people about their mental health.”

We sat down with Nic Brown, batyr’s CEO, to understand more about the organisation and how Third Link’s support has helped batyr to thrive.

Third Link: Third Link has supported batyr since its early days. How did Third Link funding contribute to batyr's success and growth?

Nic Brown: Third Link has been critical for batyr’s success. You saw the need for a new way of tackling mental health issues with young people and how we could do things differently. Crucially, you also understood the challenges of a start-up not-for-profit. Sebastian Robertson, our founder and a young entrepreneur, needed this early-stage investment to realise the organisation’s potential.

As we are preventative, it isn’t easy to measure the impact that batyr and other similar programs deliver. We often suffer from a lack of investment and interest that crisis support and acute care programs receive. However, Third Link believed in the power of what we could achieve before we had the data to back it up. Our programs deliver incredibly positive outcomes, in no small part due to the early resourcing we received to build a strong team and a robust infrastructure. 

Third Link began its support of batyr when we were a team of three staff with a small group of batyr Speakers. Our team now numbers close to 250, and we’ve trained over 1,000 young people to share their story. Over the last ten years, our programs have reached over 300,000 young people. Our participants continue to experience excellent outcomes, including reductions in stigma and positive attitudes toward help-seeking of nearly three times the national average.

Third Link provides long-term, untied funding to many of our charity partners. We carefully analyse the organisation's capacity and capability to tackle an issue aligned with our philanthropic strategy, and then we get out of the way and let the organisation, as subject matter experts, deploy that funding as they see fit. This doesn't mean we are hands off, rather we aim to build and maintain relationships of mutual trust, openness and communication with our charity partners. Why do you think untied funding like this is so crucial for not-for-profit organisations like batyr?

One of the most important things about this relationship is the ‘untied’ nature of Third Link’s funding support, where the funds are provided to us for allocation as required throughout the year, rather than the funding being attributed solely to particular projects. 

As you have said, it is not a hands-off relationship. Third Link maintains a close connection with the batyr leadership team to ensure appropriate financial management. However, the flexibility allows the batyr team to allocate the funding to the areas we determine to be of highest need. Third Link trusts us to use their funding to maximise our impact and focus on long-term strategy; while ensuring that we have a sustainable delivery model. 

Like all businesses, NFP's face challenges and opportunities that can't always be foreseen. Being able to deploy funding quickly into new areas is critical to ensure we adapt to the changing needs of young people. Flexible funding also allows us to be innovative, test and learn and improve things along the way.

In addition, the multi-year funding commitment has provided us with valuable revenue certainty to better plan for the future.

With the support of funders like Third Link, what do the next 10 years look like for batyr? 

batyr has ambitious impact goals for the next 10 years. Preventative education is a vital part of suicide prevention and improving the mental health of young Australians.

The need is greater than ever with an increase in the prevalence of mental health issues over the past few years and suicide continuing to be the leading cause of death for young people. A recent report indicated one in four young people had considered suicide in the past two years. We want to ensure we play a critical role in educating young people on how and where to get support, ways to manage their mental health daily and provide hope for their future. 

By 2030 batyr is set to increase its reach to three million young people across 70% of Australian high schools, in all states and territories and working with all Australian universities. This growth is an increase of 10 times our current position, but we know we are well placed to provide these solutions for young people. 

We want to continue to deliver these impactful programs and maintain our work with Governments, service providers and researchers to ensure we have an impact across communities and significantly influence the systems in which young people live, work and play. 

We are in this position to now scale and grow again to reach these ambitious goals thanks to the ongoing financial support and belief from funders like Third Link. We look forward to many others continuing or joining this mission with us.

Important Information: ­This information has been issued by Third Link Investment Managers Pty Ltd (Third Link), ABN 31 128 965 702, AFSL 321611 as investment manager of the Third Link Growth Fund (Fund).  This information provided is general information only.  It does not constitute financial, tax or legal advice or an offer or solicitation to subscribe for units in the Fund. This information has been prepared without taking account of your objectives, financial situation or needs. Before acting on the information or deciding whether to acquire or hold a product, you should consider the appropriateness of the information based on your own objectives, financial situation or needs or consult a professional adviser. There can be no assurance that the Fund will achieve its targeted rate of return and no guarantee against loss resulting from an investment in the Fund. All investments carry risks. Past fund performance is not indicative of future performance. Fundhost Ltd ABN 69 092 517 087, AFSL No. 233045 is the Responsible Entity for the Fund. Applications can only be made on the application form dated 30 June 2022 accompanying the Fund Product Disclosure Statement (PDS) dated 30 June 2022. Potential investors should consider the PDS and the Additional Information to the PDS (AIB) before deciding whether to invest, or continue to invest in the Fund. The PDS and AIB can be obtained from www.thirdlink.com.au or by contacting Third Link. The TDM can be found at fundhost.com.au/fund/the-third-link-growth-fund/

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