Diversified Property & Infrastructure - Adjustment March 2018

Property & Infrastructure assets are traditionally less volatile than other asset classes, with underlying earnings that are relatively defensive and often linked to inflation.

That being said, recent negative performance in the sector has come to the surface and our portfolio has suffered. These un-foreseen shocks are the reason we promote taking a diversified approach to investing. By diversifying across various asset classes at weights appropriate to your risk profile, you can reduce the volatility that arises from single asset class investing and the stress that comes with attempting to time markets. 

The InvestSMART Diversified Property & Infrastructure Portfolio is designed provide investors with Property & Infrastructure exposure, seeking to track the returns of a composite benchmark comprised of Global and Domestic Property & Infrastructure Indices. The portfolio provides investors with exposure to a selection of securities across various sectors and geographies.

Figure 1: Diversified exposure

We have noticed that our portfolio has varied materially from our stated benchmark over recent months. Though we are trying to beat our peers rather than a benchmark, we use the benchmark to ensure that we have the correct weighting in shares and ETFs in our portfolios.

Upon investigation of our benchmarks, we have noticed that the International exposure within the portfolio is comprised of securities that do not fully hedge their currency exposure whereas the current global benchmark constituents do.

To correct this, we will change the current global benchmark to include unhedged indices.

As we do not charge performance fees on outperformance to our benchmark, this change will have no impact on the management of the portfolio. It will however provide a clearer picture to investors regarding construction methodology and risk/return expectations and help us manage the portfolio allocations.

Figure 2: New the composite benchmark