Diversified Portfolios - InvestSMART High Growth - 30 November 2016
Global and Australian equity markets were up over the month of November, returning 4.5% and 2.8% respectively. The US surprisingly performed particularly strongly on the back of Trump's win in the US presidential election on the basis that tax cuts and other stimulatory measures may prove to be inflationary.
The InvestSMART High Growth Portfolio returned 2.0% over the month of November. While the portfolio had a reasonable result for the month the underweight to US equities which was one of the best returning segments, impacted the portfolio relative to the composite market benchmark. The main contributors to performance was the overweight to Australian equities and the underweight to fixed interest which were impacted by rising bond yields.
Australian REITs posted a positive return over the month of 0.75% which was a slight rebound from the -7.7% they lost in the previous month. The portfolio's global property exposure returned 1.2% for the month.
Within fixed interest the portfolio's exposure to Australian government bonds returned -1.5%. The exposure to Macquarie Income Opportunities Fund outperformed the broader bond market, returning -0.5%%, which was a key contributor to the portfolio's overall return. Cash returned 0.16% for the month.
Since inception the portfolio is slightly behind its cash 4% objective by around 0.5�ter investment fees.
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. The portfolio is also underweight REITs. The portfolio is expected to do well in an environment where Australian equities outperform other asset classes. 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 4% objective is achievable over the long-term but only through a very 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 28%.
Growth of $10,000
Asset Allocation as at 30 NOVEMber 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 24 October 2014.
|PERFORMANCE TO 30 NOVEMBER 2016||1 MONTH||3 MONTH||6 MONTH||1 YEAR||SI* (P.A.)|
|InvestSMART High Growth Portfolio||2.01%||-0.53%||0.89%||3.74%||6.58%|
|Morningstar Multisector Agressive Index||2.94%||0.37%||1.53%||5.27%||8.68%|
|Excess to Benchmark||-0.93%||-0.90%||-0.64%||-1.53%||-2.10%|
|RBA Cash Rate 4%||0.45%||1.36%||2.80%||5.88%||6.09%|
|Excess to Objective||1.56%||-1.89%||-1.91%||-2.14%||0.49%|
Performance Summary to 30 November 2016
The investment objective is to achieve a return of 4% above the RBA Cash rate per annum over rolling ten year 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 30 November
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