Diversified Portfolios - InvestSMART Balanced - 31 August 2016

InvestSMART Balanced Portfolio August Report
By · 1 Sep 2016
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1 Sep 2016
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After posting a strong 6.4% return in July the Australian equity market retraced 1.6% in August, while international equity markets were up 1.3%. Emerging market equities returned 2.7% for the month outperforming their developed market counterparts.

The InvestSMART Balanced Portfolio returned 0.2% over the month of August. Despite being overweight Australian equities which posted a negative return, the portfolio still managed to post a positive return relative to the benchmark. The main contributors to performance were the overweight to emerging markets and credit within fixed interest.

Australian REITs and global REITs posted a negative return over the month, the portfolio's underweight to the sector contributed marginally to performance relative to the benchmark. We believe that the REIT sector looks fully stretched and will be looking to reduce exposures further in the month of September.

Within fixed interest the portfolio's exposure to Australian government bonds returned 0.5%, while the exposure to Macquarie Income Opportunities Fund outperformed the broader bond market, returning 0.8%. Cash returned 0.2% for the month, cash returns are expected to be lower in the coming months on the back of the RBA reducing the official cash rate to 1.5% at the start of August.

Since inception the portfolio continues to track ahead of its cash 2% objective by around 1.7%.


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 31 AUgust 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 expected to do well in an environment whereAustralian equities outperform other asset classes and where credit outperformsgovernment bonds. Within international equities the portfolios have a bias towardsemerging markets and an underweight to US equities, therefore the portfolio willbenefit when US equities underperform broader equity markets and emergingmarkets 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 0.15% 1.59% 7.62% 5.70% 5.77%
Morningstar Multisector Balanced Index -0.05% 1.65% 7.07% 6.35% 6.10%
Excess to Benchmark 0.20% -0.06% 0.55% -0.65% -0.34%
RBA Cash Rate 2% 0.30% 0.92% 1.92% 3.97% 4.07%
Excess to Objective -0.15% 0.66% 5.70% 1.74% 1.70%

Peformance Summary to 30 June 2016




Contribution to Return 1 Month to 30 June 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.

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