After posting a positive return during the month of December, local equity markets started the year in negative territory, down 5.5% for the month of January. Similarly, International equities were down for the month of January with developed market equities returning -3.2% and emerging market equities returning -3.8%. Concerns over slowing growth in China and deflationary pressures in developed economies continued to weigh on markets.
Australian REITs performed relatively better than equities over the month while global property negative returns. Australian property posted a return of 0.9% (as measured by the S&P/ASX 300 A-REIT Accumulation Index) over the month, while global property posted a return of -3.3% (as measured by the FTSE EPRA/NAREIT Developed REITs AUD Hedged NR Index).
Within fixed interest, Australian bonds posted a return of 1.2% over the month of January (as measured by the Bloomberg AusBond Composite Bond Index) while global bonds returned 1.7% (as measured by the Barclays Global Aggregate Bond Index AUD Hedged). Cash returned 0.2% over the month as measured by the Bloomberg AusBond Bank Bill Index.
The InvestSMART Diversified Balanced portfolio returned -2.67% over the month of January, underperforming the benchmark. The exposures to international equities and Australian equities were the main drag on the portfolio over the month as concerns over slowing growth in China and deflationary pressures in developed economies continued to weigh on markets.
Within the InvestSMART Diversified Balanced portfolio the Australian equity exposure via the MSCI Australia 200 ETF returned -5.48% over the month which was the single biggest dectractor to performance in the portfolio. Within international equities, the iShares Core S&P 500 ETF and Vanguard All-World ex US Shares Index ETF were the best performing securities. The MSCI Emerging Markets ETF continued to drag on the performance of the portfolio.
Within property, global property (via the SPDR Dow Jones Global Real Estate Fund ETF) returned -4.15% for the month of January. The Australian property exposure (via the Vanguard Australian Property Securities ETF) performed better returning 1.58%for the month.
Within fixed interest, the iShares Composite Bond ETF returned 0.9%, while the Macquarie Income Opportunities Fund returned -0.5%. The BetaShares Australian High Interest Cash ETF returned 0.2% over the month.
Growth of $10,000
Asset Allocation as at 31 January 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.
No changes were made to the portfolio during the month of January but the portfolio continues to remain overweight Australian equities on the basis that valuations continue to appear reasonably compelling when compared to other asset classes. The portfolio remains underweight fixed interest given that the return prospects from bonds are likely to be low given where current yields are and are unlikely to provide a sufficient return above cash in order for an investor to achieve their cash plus objective.
|PERFORMANCE TO 31 JANUARY 2016||1 MONTH||3 MONTH||6 MONTH||1 YEAR||SI* (P.A.)|
|InvestSMART Balanced Portfolio||-2.66%||-3.61%||-4.68%||-0.52%||2.02%|
|Morningstar Multisector Growth Index||-1.44%||-2.22%||-2.72%||1.51%||3.25%|
|Excess to Benchmark||-1.22%||-1.39%||-1.96%||-2.03%||-1.23%|
|RBA Cash Rate 3%||0.34%||1.01%||2.03%||4.13%||4.17%|
|Excess to Objective||-3.00%||-4.62%||-6.71%||-4.65%||-2.15%|
Peformance Summary to 31 January 2016
The InvestSMART Diversified Balanced portfolio returned -2.67% over the month of Janaury, underperforming the benchmark and the RBA Cash Rate 1% objective. Since inception the InvestSMART Diversified Balanced portfolio is behind of its benchmark by 1.20% and its cash-plus objective by2.12%.
The investment objective is to achieve a return of 2% above the RBA Cash rate per annum over five year rolling periods by investing in a diverse mix of asset classes covering Australian equities, international equities, property, infrastructure, alternatives, fixed interest and cash.
Contribution to Return 1 Month to 31 January 2016
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