Diversified Portfolios - InvestSMART Conservative - January 2017

InvestSMART Conservative Portfolio January Report

COMMENTARY


PORTFOLIO COMMENTARY

After a strong December, markets generally retreated in the month of January with Australian equities returning -0.8% for the month and international equities returning -2.4%.

The InvestSMART Conservative Portfolio returned -0.3% over the month of January. The overweight to Australian equities dragged on the portfolio slightly as markets were down but the underweight to the US and overweights to Emerging Markets and Europe contributed positively.

Australian REITs posted a negative return over the month of -4.7% which was a continuation of the trend we saw in the latter half of last year as investors inflation expectations have risen, bond proxies such as REITs have been impacted. This sensitivity to interest rates is why the portfolio is underweight REITs.

Within fixed interest the portfolio's exposure to Australian government bonds returned 0.6% for the month as did the exposure to Macquarie Income Opportunities Fund. It is worth noting that the exposure to the Macquarie Income Opportunities Fund has returned 5.2% over the past year compared to 2.2% for the broader Australian bond market and relative to cash which returned 2.0% for the year. Overall the Macquarie Income Opportunities Fund has been a positive contributor not only in terms of return but also in risk-adjusted terms in that it has generally been less volatile than bonds.

Since inception the portfolio continues to track ahead of its cash 1% objective by around 1.0% after investment fees.

 

 

PORTFOLIO POSITIONING

The portfolio remains overweight Australian equities on the basis that valuations appear reasonably compelling when compared to other asset classes and given the attractive yield characteristics of the asset class. Within fixed interest the portfolio holds Australian government bonds and has an exposure to Australian credit and overseas securities. The portfolio is also underweight REITs. The portfolio is expected to do well in an environment where Australian equities outperform other asset classes and where credit outperforms government bonds. Within international equities the portfolios have a bias towards emerging markets and an underweight to US equities, therefore the portfolio will benefit when US equities underperform broader equity markets and emerging markets do well.

Current market pricing implies that the portfolio's RBA Cash Rate 1% objective is achievable over the long-term but only through a reasonable allocation to relatively volatile equity investments. This means that investors should be comfortable with above average volatility, which could result in a short-term fall in the portfolio's value of around 14%.

Growth of $10,000


Income Reinvested




Asset Allocation as at 31 JANUARY 2017




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.



PORTFOLIO OBJECTIVE

The investment objective is to achieve a return of 1% above the RBA Cash rate perannum over three year rolling periods by investing in a diverse mix of asset classes covering Australian equities, international equities, property, infrastructure, alternatives, fixed interest and cash.

 


PERFORMANCE TO 31 JANUARY 20171 MONTH3 MONTH6 MONTH1 YEARSI* (P.A.)
InvestSMART Conservative Portfolio -0.31% 1.91% 0.71% 6.06% 3.98%
Morningstar Multisector Moderate Index -0.37% 1.20% -0.37% 5.20% 4.24%
Excess to Benchmark 0.06% 0.70% 1.08% 0.86% -0.27%
RBA Cash Rate 1% 0.21% 0.63% 1.27% 2.73% 2.94%
Excess to Objective -0.52% 1.28% -0.56% 3.33% 1.03%

Peformance Summary to 31 January 2017



Contribution to Return 1 Month to 31 January 2017


Important Information

While every care has been taken in preparation of this document, InvestSMART Financial Services Pty 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 any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared to 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, and if appropriate seek professional advice. 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. InvestSMART 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, or their directors, employees or agents accept any liability for any loss arising in relation to this report. 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. InvestSMART 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. InvestSMART, its associates and their respective directors and other staff may, from time to time, hold interests in Securities that are contained in this investment product.


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