InvestSMART Interest Income Portfolio
The InvestSMART Interest Income Portfolio is designed to form the Fixed Interest component of a diversified investor’s portfolio.
The benchmark for this portfolio is the Bloomberg AusBond Composite 0 Year Total Return (AUD) Index, though we seek to ensure returns greater than the RBA cash rate.
The Bloomberg AusBond Composite 0 Year Index is designed to measure the performance of the Australian bond market and includes investment grade fixed income securities issued by the Australian Treasury, Australian semi-government entities, supranational and sovereign entities and corporate entities.
The portfolio is constructed by investing in a range of ETFs and Managed Funds that hold government & corporate fixed and floating rate securities as well as cash. While we have maintained performance in excess of the RBA cash rate over the longer term, we have seen a level of underperformance when compared to our benchmark and this has been in part due to our cash weighting.
|
Performance to 31 December 2017 |
1 Month |
3 Months |
6 Months |
1 Year |
2 Years |
SI (p.a) |
|
InvestSMART Interest Income |
-0.19% |
0.68% |
0.86% |
2.48% |
2.10% |
2.15% |
|
RBA Cash Rate |
0.12% |
0.38% |
0.75% |
1.51% |
1.63% |
1.61% |
|
Excess to RBA Cash Rate |
-0.31% |
0.30% |
0.11% |
0.97% |
0.48% |
0.55% |
|
Bloomberg AusBond Composite 0 Y TR AUD |
-0.52% |
1.44% |
1.37% |
3.66% |
3.29% |
3.23% |
|
Excess to Benchmark |
0.33% |
-0.77% |
-0.51% |
-1.17% |
-1.18% |
-1.08% |
Figure 1: InvestSMART Interest Income Portfolio Performance after fees to 31 December 2017
As such, we are reducing our allocation to the BetaShares Australian High Interest Cash ETF (AAA) and reinvesting it across the portfolio. This will better align our asset allocation with the peer group and will work toward reducing the margin between portfolio returns and benchmark.
Figure 2: Asset Allocation Pre and Post Portfolio Adjustments
Frequently Asked Questions about this Article…
The InvestSMART Interest Income Portfolio is designed to be the Fixed Interest component of a diversified investor's portfolio, aiming to achieve returns greater than the RBA cash rate.
The benchmark for the InvestSMART Interest Income Portfolio is the Bloomberg AusBond Composite 0 Year Total Return (AUD) Index, which measures the performance of the Australian bond market.
The portfolio has maintained performance in excess of the RBA cash rate over the longer term, although there has been some underperformance compared to the benchmark due to cash weighting.
The portfolio invests in a range of ETFs and Managed Funds that hold government and corporate fixed and floating rate securities, as well as cash.
The portfolio is reducing its allocation to the BetaShares Australian High Interest Cash ETF to better align its asset allocation with the peer group and reduce the margin between portfolio returns and the benchmark.
As of December 31, 2017, the InvestSMART Interest Income Portfolio achieved a 2.48% return over the past year, outperforming the RBA cash rate but underperforming the Bloomberg AusBond Composite 0 Year Index.
The Bloomberg AusBond Composite 0 Year Index is designed to measure the performance of the Australian bond market, including investment-grade fixed income securities issued by various entities.
The portfolio aims to improve its performance by adjusting its asset allocation, specifically by reducing cash holdings and reinvesting across the portfolio to align more closely with the benchmark.
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