Core Growth Portfolio - Adjustment April 2018
The objective of the Core Growth Portfolio is to deliver returns greater than the RBA cash rate 3% over a five-year rolling period by investing in a diverse mix of asset classes. At the time of writing, this implies an annualised return objective of around 4.50%.
We achieve this by constructing a portfolio with a ‘growth’ risk profile. That is, one with a greater allocation toward equities as opposed to bonds.
While also aiming to keep costs lows, we constantly scan the market for new securities that allow us to achieve our performance objectives at a lower cost than our peers.
The changes
Bonds
We are selling the relatively expensive Macquarie Income Opportunities Fund (MAQ0277AU) and reinvesting into the Vanguard Global Aggregate Bond ETF (Hedged) (ASX: VBND). VBND is comprised of a range of international fixed rate bonds.
Equities
To simplify our International Equity exposure, we have elected to switch into the Vanguard MSCI Index International Shares ETF (ASX: VGS). This ETF is designed to track the MSCI World ex Australia index, providing large and mid-cap equity exposure to 22 developed market countries.
The outcomes
- Maintain our alignment of asset classes to the standard benchmark
- A drop in the portfolios indirect cost ratio from 22bp to 19bp
- Reduction in expected transaction fees
You’ll see these changes occur over the next few days.
Frequently Asked Questions about this Article…
The main goal of the Core Growth Portfolio is to deliver returns greater than the RBA cash rate plus 3% over a five-year rolling period by investing in a diverse mix of asset classes.
The Core Growth Portfolio aims to achieve its return objectives by constructing a portfolio with a 'growth' risk profile, which involves a greater allocation toward equities as opposed to bonds.
The recent changes to the bond investments include selling the Macquarie Income Opportunities Fund and reinvesting into the Vanguard Global Aggregate Bond ETF (Hedged), which consists of a range of international fixed rate bonds.
The international equity exposure has been simplified by switching to the Vanguard MSCI Index International Shares ETF, which tracks the MSCI World ex Australia index, providing exposure to large and mid-cap equities in 22 developed market countries.
The expected benefits of the recent portfolio adjustments include maintaining alignment with standard benchmarks, reducing the portfolio's indirect cost ratio from 22bp to 19bp, and lowering expected transaction fees.
The Macquarie Income Opportunities Fund was replaced to reduce costs and improve the portfolio's performance by investing in the Vanguard Global Aggregate Bond ETF, which offers a more cost-effective international bond exposure.
The expected annualised return objective for the Core Growth Portfolio is around 4.50%, based on the RBA cash rate plus 3% over a five-year rolling period.
The recent changes to the Core Growth Portfolio are expected to take effect over the next few days.
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