Diversified Portfolios - InvestSMART Income - 31 January 2017

InvestSMART Income Portfolio January Report



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 Diversified Income portfolio returned -0.4% over the month of January. Australian equities detracted from performance for the month. It is worth noting that the portfolio does not have any exposure to international equities, while the benchmark does, this was a positive in the month of January.

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.

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 1.2% after investment fees.


The investment objective is to maximise annual income while minimising capital losses 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.


The portfolio continues to hold a significant weight to Australian equities given its high yielding characteristics relative to other asset classes as well as what we believe to be reasonably attractive valuations. Taking into account the additional benefit of franking credits, holding Australian equities as part of an overall income portfolio allows investors to generate a higher level of income than they would from more traditional sources of income, such as fixed interest and cash, especially in a low interest rate environment. However, investors need to accept that there will be higher levels of volatility than what a traditional "income" portfolio may have had in the past.

Within fixed interest the portfolio holds Australian government bonds and has an exposure to Australian credit and overseas securities. The portfolio is expected to do well in an environment where Australian equities outperform other asset classes and where credit outperforms government bonds. The portfolio will lag the benchmark when international equities do well as the portfolio does not currently hold any international equity exposure. The portfolio has a significant allocation to equities therefore investors should be willing to accept a reasonably high degree of capital volatility, which could result in a short-term fall in the portfolio's value of around 18%.

Growth of $10,000

Income Reinvested

Asset Allocation as at 31 JANUARY 2017

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.

InvestSMART Income Portfolio -0.41% 1.98% -0.67% 7.08% 4.11%
Morningstar Multisector Moderate Index -0.37% 1.20% -0.37% 5.20% 4.24%
Excess to Benchmark -0.04% 0.78% -0.30% 1.88% -0.14%
RBA Cash Rate 1% 0.21% 0.63% 1.27% 2.73% 2.94%
Excess to Objective -0.62% 1.35% -1.94% 4.35% 1.16%

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 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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