July 2026 Report - Avangard AI Systematic Fund

A.L.F.R.E.D. is the systematic technology layer that evaluates market regime and conditions. The regime below reflects A.L.F.R.E.D.'s assessment of the prevailing market environment. It is not designed as a short-term market call. The portfolio manager, Alfred Ego, uses this A.L.F.R.E.D. as a prime determinant for in regime classification and security selection. While the ASX 200 index rallied late in July to post its fourth consecutive monthly gain, Avangard's internal breadth analysis found the majority of individual ASX-listed names were trending down over the month. Gains were concentrated in a small number of large, liquid names. As such, the model responded with a reduced net market exposure, an elevated cash weighting, and added hedges against a US equity market correction.

July was a strong month for the benchmark. The ASX 200 Index extended its run to a fourth consecutive monthly gain, touching a five-month high of 9,086 points during the month. Our July result was driven by contributions across roughly a dozen sector, factor and thematic exposures. Gains were made from an ASX large-cap index exposure, gains from the energy sector and from an international equity exposure. These were offset by losses in the model's tactical US market hedges and some smaller-cap industrials and resources-services exposure. This was not a case of one concentrated wrong-way bet driving the shortfall, but a portfolio with genuine two-sided dispersion across its signal set, in which the largest single detractor was a deliberately sized hedge rather than an unintended concentration. Looking deeper into the ASX 200's headline strength, we found participation to be historically narrow, with the majority of individual ASX-listed names trending down over the month even as large cap stocks held modestly positive and gains were concentrated in a small number of large, liquid names. Our models read this kind of divergence, index strength built on narrow participation, as a signal to reduce net exposure and favour liquidity and capital preservation over full participation. This is what drove the fund's elevated cash weighting and cautious position sizing through the month. The biggest detractor in the portfolio was its bear-market hedge exposure to US equities. Despite poor breadth and elevated market volatility, US equity markets continued to build strength over the month. This is worth stating plainly rather than smoothing over: the model is currently paying a cost to carry protection against a downside risk scenario that has yet to materialise. Our interpretation is that this is a reasonable trade-off in a developing Defensive Market Regime. We believe the cost of being hedged in a deteriorating bull market regime is preferred to the cost of being fully invested, unhedged and wrong. But we are acutely aware hedges are a live cost and not a free option. Three specific conditions would move Avangard away from its current defensive positioning. First, if the model's trend-strength reading on US equity indices extends higher, even from current elevated levels, that momentum shift would reduce the case for maintaining the size of the present hedge. Second, if domestic market breadth broadens meaningfully beyond the current large-cap concentration, that is, if a materially greater share of individual ASX-listed names return to a positive trend rather than the current minority, that would support increasing net exposure and reducing the cash weighting. Third, if smaller-cap industrials and resources related companies stabilised and trended higher, that would warrant greater exposure there. While Avangard runs predictive price continuation and reversal models across thousands of securities, we are not price or trend predictors. They are the specific triggers the model is watching. Heading into August, the Fund continues to run a defensively postured book: a meaningful cash weighting, positioning phased in gradually and hedges sized against the growing prospect of a narrow rally giving back its gains. Positioning will be reviewed at each weekly rebalance as the underlying breadth and regime signals evolve, and the model will adjust net exposure up or down as those signals dictate, rather than on a predictive market call.