InvestSMART Portfolio Update - July 2017

The long-term benefits of portfolio diversification remain a core tenant to the InvestSMART investment philosophy and it is on this basis that we are building portfolios that allow our clients to achieve this.

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7 Aug 2017 · 5 min read

During the month, we added new securities to our Interest Income and International Equities portfolios as we strive to better achieve our objectives of long term wealth creation through diversification, at an affordable cost.

We also launched a new Income focused strategy in the InvestSMART Hybrid Income Portfolio which was developed for investors seeking regular income with a lower risk profile than ordinary shares, but higher return than cash.

The long-term benefits of portfolio diversification remain a core tenant to the InvestSMART investment philosophy and it is on this basis that we are building portfolios that allow our clients to achieve this.

Based on empirical research, over the long term it has been shown that the following asset allocations are best suited to deliver risk adjusted returns in line with a given Investment Horizon.

 

Goal

Horizon

Cash

Fixed Interest

Property

International Equity

Aust Equities

High Growth

10 Years

7.10%

14.40%

10.50%

45.90%

22.10%

Growth

7-10 Years

8.80%

19.20%

14.10%

28.50%

29.40%

Balanced

5 - 7 Years

12.10%

34.00%

10.50%

21.40%

22.10%

Conservative

 0-5 Years

15.30%

48.70%

7.00%

14.30%

14.70%

Table 1: Target Asset Allocations

Through our online Portfolio Manager and associated Health Check, you can easily review how your portfolio compares and determine the gaps, or potential risks in your asset allocation.

Given our SMA product offering, you can either select a particular portfolio to fill a gap in your current asset allocation, or if you like, simply invest in one of our Diversified Options.

 

Strategy

IS Portfolio

Cash

Fixed Interest

Property

International Equity

Aust Equities

Growth

Property

3.66%

 

96.34%

 

 

 

International Equity

2.03%

 

 

97.97%

 

Income

Interest Income

21.90%

78.10%

 

 

 

 

Hybrid Income

4.32%

95.70%

 

 

 

Diversified

Core Growth

8.84%

19.32%

14.00%

28.40%

29.44%

 

Diversified Income

6.44%

52.97%

8.51%

 

32.09%

Table 2: Current InvestSMART SMA Asset Allocations

 

Find out more about investing directly in InvestSMART Portfolios.

 

InvestSMART Interest Income Portfolio

The InvestSMART Interest Income Portfolio produced a return of 0.08% (after fees) during July.

The Macquarie Income Opportunities Fund was the biggest contributor to the return for the month.

During the month, the iShares Floating Rate Bond ETF (FLOT) was introduced to the portfolio. FLOT seeks to track the investment results of an index composed of U.S. dollar denominated, investment-grade floating rate bonds with maturities between one month and five years. 

Given the floating rate nature of the product, FLOT provides greater exposure to the view that it is more likely global interest rates will remain stable or rise as opposed to decline further from here.

The estimated yield on the portfolio is currently 2.32%.

Since inception, the portfolio has returned 2.23% per annum (after fees).

 

Performance to 31 July 2017

1 Month

3 Months

6 Months

1 Year

SI (p.a)

InvestSMART Interest Income

0.08%

0.49%

1.22%

0.44%

2.23%

Bloomberg AusBond Composite 0 Y TR AUD

0.25%

0.51%

1.88%

-0.24%

3.37%

Excess to Benchmark

-0.17%

-0.02%

-0.66%

0.68%

-1.14%

Table 3: InvestSMART Interest Income Performance - After Fees

 

InvestSMART Core Growth Portfolio

The InvestSMART Core Growth Portfolio produced a return of -0.39% (after fees) during July.

The Macquarie Income Opportunities Fund was the biggest contributor to the return for the month while the iShares S&P 500 (IVV) was the biggest detractor.

The estimated yield on the portfolio is currently 2.93%.

Since inception, the portfolio has returned 6.98% per annum (after fees).

 

Performance to 31 July 2017

1 Month

3 Months

6 Months

1 Year

2 Years

SI (p.a)

InvestSMART Core Growth

-0.39%

-1.42%

3.98%

5.65%

3.09%

6.98%

Morningstar Aus Msec Growth TR AUD

-0.44%

-1.50%

3.48%

4.58%

3.83%

7.60%

Excess to Benchmark

0.05%

0.08%

0.50%

1.06%

-0.74%

-0.62%

RBA Cash Rate 3%

0.37%

1.13%

2.27%

4.60%

4.82%

4.99%

Excess to Objective

-0.76%

-2.55%

1.71%

1.05%

-1.74%

2.00%

 Table 4: InvestSMART Core Growth Performance - After Fees

 

InvestSMART Diversified Income Portfolio

The InvestSMART Diversified Income Portfolio produced a return of 0.12% (after fees) during July.

The Macquarie Income Opportunities Fund was the biggest contributor to the return for the month.

The estimated yield on the portfolio is currently 3.29%.

Since inception, the portfolio has returned 4.15% per annum (after fees).

 

Performance to 31 July 2017

1 Month

3 Months

6 Months

1 Year

2 Years

SI (p.a)

InvestSMART Diversified Income

0.12%

-1.04%

2.13%

1.27%

3.11%

4.15%

Morningstar Aus Msec Moderate TR AUD

-0.04%

-0.38%

2.37%

2.00%

3.51%

4.54%

Excess to Benchmark

0.16%

-0.65%

-0.24%

-0.73%

-0.40%

-0.39%

RBA Cash Rate 1%

0.21%

0.63%

1.26%

2.53%

2.75%

2.86%

Excess to Objective

-0.09%

-1.66%

0.88%

-1.26%

0.36%

1.28%

Table 5: InvestSMART Diversified Income Performance - After Fees

 

InvestSMART Property Portfolio

The InvestSMART Property Portfolio produced a return of 0.05% (after fees) during July.

Vicinity Centres (VCX) was the biggest contributor to the return for the month while Westfield (WFD) was the biggest detractor.

The estimated yield on the portfolio is currently 3.34%.

Since inception, the portfolio has returned 4.48% per annum (after fees).

 

Performance to 31 July 2017

1 Month

3 Months

6 Months

1 Year

SI (p.a)

InvestSMART Property Portfolio

0.05%

-6.27%

0.04%

-12.52%

4.48%

S&P/ASX 200 A-REIT TR

-0.07%

-5.92%

1.16%

-11.14%

6.22%

Excess to Benchmark

0.12%

-0.35%

-1.13%

-1.38%

-1.74%

Table 6: InvestSMART Property Performance - After Fees

 

InvestSMART International Equities Portfolio

The InvestSMART International Equities Portfolio produced a return of -1.56% (after fees) during July.

The iShares S&P 500 (IVV) was the biggest contributor to the return for the month.

During the month, the iShares Asia 50 ETF (IAA) was added to the portfolio. IAA seeks to track the investment results of an index composed of 50 of the largest Asian equities.

The estimated yield on the portfolio is currently 1.96%.

Since inception, the portfolio has returned 9.91% per annum (after fees).

 

Performance to 31 July 2017

1 Month

3 Months

6 Months

1 Year

2 Years

SI (p.a)

InvestSMART International Equities

-1.56%

-1.40%

5.39%

9.55%

2.09%

9.91%

MSCI World Ex Australia NR AUD

-1.67%

-1.63%

5.24%

10.60%

3.08%

12.15%

Excess to Benchmark

0.11%

0.23%

0.15%

-1.04%

-0.99%

-2.24%

Table 7: InvestSMART International Equities Performance - After Fees

 

InvestSMART Hybrid Income Portfolio

The InvestSMART Hybrid Income Portfolio produced a return of -0.10% (after fees) during July. This was behind its objective of 0.40%, due largely to the initial transaction costs to establish the portfolio.

The main contributors to performance during the month were MBLHB, NABHA, and CBAPF while detractors were ANZPF, NABPB, and IAGPD.

During the month, we reduced exposure to CTXHA, NABPA, WBCPC and WBCPD while adding ANZPF and IAGPD, and increasing exposure to CBAPD, CGFPB and MQGPB.

Perpetual Securities NABHA and MBLHB have benefitted from the ongoing discussion surrounding a possible future buy-back or redemption given they lose ~ 10% qualification as AT1 Hybrids each year till they have nil qualification by the end of 2022. 

ANZ announced on the 27th of July that it is considering making an on-market buy-back offer (rather than redemption) for ANZPC in conjunction with the offer of a new hybrid capital instrument.  More detail will be given on 15 August on the new hybrid offer.

Our credit duration has increased from 5.2 to 5.6 years, and the number of securities held at 31 July was 23, with cash levels of 4.2%.

The expected yield to call of the portfolio is 5.10% (including franking), which is 0.60% above our objective of 3% above the RBA cash rate.

 

Performance to 31 July 2017

1 Month

SI (p.a)

InvestSMART Hybrid Income

0.10%

0.10%

RBA Cash Rate 3%

0.37%

0.37%

Excess to Benchmark

-0.27%

-0.27%

Table 8: InvestSMART Hybrid Income Performance - After Fees


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