InvestSMART Interest Income Portfolio

We've made some changes to the InvestSMART Interest Income Portfolio

By ·
11 Jan 2018 · 2 min read

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

 


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