Diversified Portfolios - InvestSMART Growth - 31 October 2016
Both Australian equities and international equities were down for the month of October returning -2.2% and -1.4% respectively. The worst performing of the main asset classes was A-REITs which returned -7.7% for the month.
The InvestSMART Growth Portfolio returned -1.6% over the month of October which was ahead of benchmark. 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 underweight to REITs as well as the exposure to floating rate bonds within fixed interest.
Australian REITs and global REITs both posted a negative return over the month of -7.7% and -5.5% respectively. The portfolio's underweight to the sector contributed to the performance relative to the benchmark. We continue to remain underweight the sector on the basis of valuations and sensitivity to interest rates.
Within fixed interest the portfolio's exposure to Australian government bonds returned -1.6%, while the exposure to Macquarie Income Opportunities Fund outperformed the broader bond market, returning 0.3%. Cash returned 0.2% for the month.
Since inception the portfolio continues to track ahead of its cash 3% objective by around 0.6% after investment fees.
The investment objective is to achieve a return of 3% above the RBA Cash rate per annum over seven year rolling periods by investing in a diverse mix of asset classes covering Australian equities, international equities, property, infrastructure, alternatives, fixed interest and cash.
Growth of $10,000
Asset Allocation as at 31 OCTOBER 2016
Source: Praemium, RBA
Returns are after fees and before expenses. 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 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 REITsThe 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 3% objective is achievable over the long-term but only through a high allocation to relatively volatile equity investments. This means that investors should be comfortable with a high degree of volatility, which could result in a short-term fall in the portfolio's value of around 25%.
|PERFORMANCE TO 31 OCTOBER 2016||1 MONTH||3 MONTH||6 MONTH||1 YEAR||SI* (P.A.)|
|InvestSMART Growth Portfolio||-1.60%||-2.51%||2.29%||0.42%||5.73%|
|Morningstar Multisector Growth Index||-1.85%||-2.61%||2.33%||1.93%||6.72%|
|Excess to Benchmark||0.25%||0.10%||-0.03%||-1.51%||-1.00%|
|RBA Cash Rate 3%||0.38%||1.13%||2.34%||4.90%||5.09%|
|Excess to Objective||-1.98%||-3.64%||-0.05%||-4.48%||0.64%|
Peformance Summary to 31 October 2016
Contribution to Return 1 Month to 31 October 2016
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