InvestSMART Portfolios update, June 2017

Equities had a strong year to June 30, but a late rise in the Aussie dollar has dragged international exposures lower.

It has been a good 12 months for the Australian equity market, with the S&P/ASX 200 up a solid 9.3% for the year. With profit-taking and tax-loss selling on the agenda for some investors in June, the year finished quietly with the S&P/ASX 200 down 0.1% for the month.

The Australian dollar rose 3.2% in June, on the back of a weaker US dollar, and commodity price rises. With iron ore prices having fallen for much of the year, in June the price surged higher, due to strong demand from Chinese property and infrastructure sectors.

It was great for travellers and importers, but the rise in the Australian dollar lowered the value of US-based equity exposures, such as the iShares Core S&P 500 ETF (which is in the Core Growth and International portfolios).

Currency aside, the US stock market continued to tick upwards in June, with the S&P 500 index rising 0.5 per cent for the month. US banks were stronger, though tech stocks were sold off as investors reacted to concerns that prices in the sector were stretched. This latest increase in the US stock market caps off an excellent year for the S&P 500, which has risen 15.5 per cent over the last 12 months.

On the flip side, Australian REITs took a hit this month with hefty falls of around 4-5% across the sector. Investors were concerned about weak retail sales and online retail giant Amazon’s looming Australian arrival.  

Returns from Australian bonds continue to stay low, and the potential for rising interest rates continue to put pressure on bonds. As expected, the Reserve Bank kept Australian interest rates on hold, but in the US, the Federal Reserve increased interest rates by 0.25% in June, with one more rate rise expected this calendar year.

All things considered, let’s check in with InvestSMART’s portfolios and see how they’ve fared.

Diversified Income Portfolio

The InvestSMART Diversified Income Portfolio (see Table 1) fell 0.6% (after fees) during June.

With the S&P/ASX 200 remaining relatively flat, the main reason for the fall was a drop of 4.4% in the value of the Vanguard Australian Property Index ETF, and a 0.8% drop in the value of the iShares Core Composite Bond ETF.

This portfolio has no international shares, so there was no impact from the rise of the Australian dollar.

Since inception, the portfolio has returned 4.2% per annum (after fees).

Table 1: Performance - Diversified Income Portfolio
Portfolio to 30 June 2017  1 Mth  3 Mths 1 Year S.I. (p.a.) *
InvestSMART Diversified Income Portfolio -0.60% -0.53% 3.86% 4.24%
Morningstar Multisector Moderate Index -0.77% 0.71% 3.71% 4.72%
Excess to Benchmark 0.17% -1.24% 0.15% -0.48%
* Inception date is 29 Dec 2014. Performance is after investment fees and admin fees

 

Core Growth Portfolio

The InvestSMART Growth Portfolio (see Table 2) fell 1.3% (after fees) during June.

With the Australian dollar higher, this has led to an average 2.3% drop in the international ETFs in the portfolio.

The Betashares Australian High Interest Cash ETF returned a positive 0.2% for the month.

Since inception, the Core Growth Portfolio has returned 7.4% per annum (after fees). 

Table 2: Performance - Core Growth Portfolio
Portfolio to 30 June 2017  1 Mth  3 Mths  1 Year S.I. (p.a.) *
InvestSMART Core Growth Portfolio -1.25% 0.85% 10.07% 7.37%
Morningstar Multisector Growth Index -1.20% 0.66% 8.37% 8.02%
Excess to Benchmark -0.05% 0.19% 1.70% -0.66%
* Inception date is 24 Oct 2014. Performance is after investment fees and admin fees

 

International Equities Portfolio

The InvestSMART International Equities Portfolio (see Table 3) fell 2.5% (after fees) during June, but has still returned 15.5% for the 12 months.

A strong Australian dollar has seen falls in all the ETF’s in the International Portfolio, with the largest fall being the Vanguard FTSE Europe Shares ETF, which was down 3.3%. Despite the S&P 500 being up 0.5% for the month, the iShares S&P 500 ETF fell 2.1%.

Since inception, the portfolio has returned 10.9% per annum (after fees).

Table 3: Performance - International Equities Portfolio
Portfolio to 30 June 2017 1 Mth 3 Mths 1 Year  S.I. (p.a.) *
InvestSMART International Equities Portfolio -2.54% 4.31% 15.45% 10.90%
MSCI World ex Australia NR AUD Index -2.64% 3.62% 14.73% 13.27%
Excess to Benchmark 0.10% 0.69% 0.72% -2.37%
* Inception date is 24 Oct 2014. Performance is after investment fees and admin fees

 

Property Portfolio

The InvestSMART Property Portfolio (see Table 4) fell 5.1% (after fees) during June, with falls across the entire portfolio.

The portfolio’s biggest holdings, Scentre Group and Westfield Corporation, fell 4.9% and 5.3% respectively, with the Goodman Group retracing 5.9% after a strong performance this year.

Since inception, the InvestSMART Property Portfolio has returned 4.7% per annum (after fees).

Table 4: Performance - Property Portfolio
Portfolio to 30 June 2017 1 Mth  3 Mths  1 Year  S.I. (p.a.) *
InvestSMART Property Portfolio -5.05% -4.03% -8.08% 4.70%
S&P/ASX 200 A-REIT TR Index -4.82% -3.40% -6.26% 6.62%
Excess to Benchmark -0.24% -0.63% -1.82% -1.93%
* Inception date is 23 Dec 2015. Performance is after investment fees and admin fees

 

Interest Income Portfolio

The InvestSMART Interest Income Portfolio (which is a rename of the Fixed Income portfolio) fell 0.3% (after fees) during June, with the main detractor the iShares Core Composite Bond ETF, which fell 0.8%.

The portfolio is 20% invested in the BetaShares Australian High Interest Cash ETF, which returned 0.2% for the month.

Since inception, the InvestSMART Interest Income Portfolio has returned 2.3% per annum (after fees).

Table 5: Performance - Interest Income Portfolio
Portfolio to 30 June 2017  1 Mth   3 Mths 1 Year  S.I. (p.a.) *
InvestSMART Interest Income Portfolio -0.34% 0.74% 0.97% 2.29%
Bloomberg AusBond Composite 0 Yr Index -0.90% 1.01% 0.25% 3.39%
Excess to Benchmark 0.56% -0.27% 0.72% -1.10%
* Inception date is 23 Dec 2015. Performance is after investment fees and admin fees

You can find out more about investing directly in InvestSMART portfolios by clicking here.

Or to find out more about our investment portfolios, register for our four upcoming events in July. Click on each of the event names below for the time details and to register.

On July 11, we explain How to choose the right investment vehicle. On July 18, we talk about Getting the investment ball rolling. On July 19, learn about Adding further value to your portfolio. And, on July 25, we discuss how to Diversify your investment portfolio.

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