Diversified Portfolios - InvestSMART Balanced - 30 September 2016

InvestSMART Balanced Portfolio September Report



International equity markets were down for the month while Australian equities were up slightly. Over the quarter both international and Australian equities posted positive returns. There seems to be no shortage of issues that have the potential to impact markets in the short-term (US election, monetary policy from the US Fed, ECB and Japan, what's next for Brexit, European bank solvency). The real difficulty is ascertaining if or when any of these are a catalyst for anything more severe. We continue to remain focused on valuations of asset classes and their prospective returns with the view that should any of those short-term issues transpire into something more serious it is likely that the most over-valued asset classes are likely to be hit the hardest.

The InvestSMART Balanced Portfolio returned -0.6% over the month of September and 2.4% over the quarter. The overweight to Australian equities and underweight to property contributed positively to portfolio performance. The portfolio's exposure to international equities was the main detractor from portfolio performance. Within international equities, non-US equities generally fared better than US equities which is a positive for the portfolio as we are underweight US equities.

A-REITs posted their second month of negative returns with the portfolio's exposure down -4.3% in September. Global REITs fared slightly better but still posted a negative return of -3.0% for the month. During September we reduced the portfolio's exposure to REITs by around 2% on the basis that we view valuations in the REIT sector at the more expensive end. While REITs continue to offer reasonably attractive yields with modest growth prospects we believe that asset classes such as REITs and infrastructure are being treated like bond-proxies and are likely to be more sensitive to interest rates. In addition, once franking credits are taken into account, the broader Australian equity market offers a more attractive yield with relatively better valuations.

Within fixed interest the portfolio's exposure to Australian government bonds returned -0.2% for the month and 1% over the quarter, while the exposure to Macquarie Income Opportunities Fund contributed positively by outperforming the broader bond market, returning 0.2% for the month and 2.1% over the quarter.

During September we removed iShares Europe ETF (IEU) and iShares MSCI Emerging Market ETF (IEM) and replaced them with the Vanguard FTSE Europe Shares ETF (VEQ) and the Vanguard FTSE Emerging Markets ETF (VGE) respectively. The switch was predominately due to the lower fee structure of the Vanguard ETFs.


The investment objective is to achieve a return of 2% above the RBA Cash rate perannum over five year rolling periods by investing in a diverse mix of asset classescovering Australian equities, international equities, property, infrastructure,alternatives, fixed interest and cash.

Growth of $10,000

Income Reinvested

Asset Allocation as at 30 SEPTEMBER 2016

Source: Praemium, RBA
Returns are before expenses and fees. Returns are shown as annualised if the period is over 1 year. * Since Inception (SI) date is 29 December 2014.


The portfolio remains overweight Australian equities on the basis that valuationsappear reasonably compelling when compared to other asset classes and given theattractive yield characteristics of the asset class. Within fixed interest the portfolioholds Australian government bonds and has an exposure to Australian credit andoverseas securities. The portfolio is also underweight REITs. The portfolio is expectedto do well in an environment where Australian equities outperform other asset classesand where credit outperforms government bonds. Within international equities theportfolios have a bias towards emerging markets and an underweight to US equities,therefore the portfolio will benefit when US equities underperform broader equitymarkets and emerging markets do well.

Current market pricing implies that the portfolio's RBA Cash Rate 2% objective isachievable over the long-term but only through a reasonable allocation to relativelyvolatile equity investments. This means that investors should be comfortable withabove average volatility, which could result in a short-term fall in the portfolio's valueof around 20%.



InvestSMART Balanced Portfolio -0.62% 2.40% 5.24% 6.31% 5.12%
Morningstar Multisector Balanced Index -0.39% 1.98% 5.45% 7.10% 5.58%
Excess to Benchmark -0.23% 0.42% -0.21% -0.79% -0.45%
RBA Cash Rate 2% 0.29% 0.90% 1.87% 3.92% 4.04%
Excess to Objective -0.90% 1.49% 3.37% 2.39% 1.08%

Peformance Summary to 30 September 2016



Contribution to Return 1 Month to 30 September 2016

Important Information

While every care has been taken in preparation of this document, InvestSMART Financial Services Limited (ABN 70 089 038 531, AFSL 226435) (“InvestSMART”) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and see professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. This document has been prepared for InvestSMART by InvestSense Pty Ltd ABN 31 601 876 528, Authorised Representative of Sentry Asset Management Pty Ltd AFSL 408 800. Financial commentary contained within this report is provided by InvestSense Pty Ltd. The information contained in this document is not intended to be a definitive statement on the subject matter nor an endorsement that this model portfolio is appropriate for you and should not be relied upon in making a decision to invest in this product. The information in this report is general information only and does not take into account your individual objectives, financial situation, needs or circumstances. No representations or warranties express or implied, are made as to the accuracy or completeness of the information, opinions and conclusions contained in this report. In preparing this report, InvestSMART and InvestSense Pty Ltd has relied upon and assumed, without independent verification, the accuracy and completeness of all information available to us. To the maximum extent permitted by law, neither InvestSMART, InvestSense Pty Ltd or their directors, employees or agents accept any liability for any loss arising in relation to this report. The suitability of the investment product to your needs depends on your individual circumstances and objectives and should be discussed with your Adviser. Potential investors must read the PDS, Approved Product List and FSG along with any accompanying materials. Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income, but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Past performance of financial products is not a reliable indicator of future performance. InvestSense Pty Ltd does not assure nor guarantee the performance of any financial products offered. Information, opinions, historical performance, calculations or assessments of performance of financial products or markets rely on assumptions about tax, reinvestment, market performance, liquidity and other factors that will be important and may fluctuate over time. InvestSense Pty Ltd, InvestSMART Financial Services Limited, its associates and their respective directors and other staff each declare that they may, from time to time, hold interests in Securities that are contained in this investment product.

Suited to investors with a higher tolerance for variation in year to year returns, the InvestSMART Balanced Portfolio offers exposure across a range of asset classes such as cash, fixed interest, property and domestic & international equities.

The portfolio provides the potential for moderate to high capital growth in the medium term, with a typical allocation of up to 59% in growth assets, and a recommended minimum timeframe of 3-5 years.

All InvestSMART Diversified portfolios are continually managed by our expert team of analysts and overseen by our Investment Committee, to ensure you have the right mix of securities to meet the investment objectives with the benefits of strategic asset allocation expertise and low cost rebalancing.

Find out how this portfolio may fit within your investment strategy. Contact us at support@investsmart.com.au or 1300 880 260 to speak to one of our product specialists.


Style: A diversified portfolio invested across a range of asset classes
Benchmark: The Morningstar Multisector Balanced Index
Objective: To return 2% above the RBA Cash rate over rolling 5 year periods
Risk Rating: Medium
Suggested Timeframe: 5 years +
Income Potential: Medium
Growth Potential: Medium
Investment Fee (inc. GST): 0.65% - 0.97%
(depending on amount invested)
Estimated Expense Recovery $30 - $60 per investor per year
Minimum Investment: $5,000
Estimated income per annum 3.89 %
Asset Class Allocation
Australian Equities 44.69%
International Equities 16.42%
Property 2.81%
Cash 21.83%
Fixed Interest 14.21%


SMS Code Sent…

We have sent you a code via SMS to {{user.DayPhone}}

please enter this code below to activate your membership

If you didn't receive SMS code please

Log in to access this content

Looks you are already a member. Please enter your password to proceed

Hi {{ user.FirstName }}

Verify your mobile number to unlock a FREE trial

Looks like you've already taken a free trial

Please sign up for full access

Updating information

Please wait ...