InvestSMART portfolios update, March 2017

Australian and international equity markets continued their buoyant run through March, resulting in gains for all InvestSMART portfolios.

After rising 1.6% in February, the S&P ASX 200 increased a further 2.7% in March with banking stocks leading the way.

Over in the US, despite a flat March, the S&P 500 had its best quarter since late 2015, increasing 5.5% on rising optimism from businesses and consumers. Technology was the best-performing sector, rising 12%, with Google, Facebook and Amazon all hitting record highs.

World markets (ex-US) also posted strong gains with the MSCI World ex-USA index rising 6.9% during the quarter.

Gains on overseas investments, however, was offset by a strong rise in the Australian dollar, which increased 6.2% (from 72 US cents to 76.5 US cents) during the quarter. As the portfolios are unhedged, this took some of the edge off the performance of our international exposures.

The returns from our Australian Bond ETFs showed subdued increases, with the market factoring in the potential for interest rate rises over the next couple of years.

Despite the relative optimism in the markets in March, the mood has turned to caution as a result of increased geopolitical tensions in Syria and North Korea.

Lowering Fees

We're delighted to announce that we have reduced the fees on our InvestSMART Income, Growth, International Equities, Property and Fixed Income portfolios by 0.2%. The reduction took effect from 1 April, but it's no April Fool.

It may not sound like much, but small differences add up to a lot when compounded over time. Over 20 years, for example, a saving of 0.2% a year will leave you with about 4% more in your retirement pot.

With the increased use of low-cost ETFs tracking major markets, we have also managed to lower the average management costs of the underlying ETFs in all our portfolios. This will see marginally better returns in these portfolios, while still investing in the best companies in the world.

As an example, two of our main international ETFs, the iShares Core S&P 500 ETF and the Vanguard All-World ex-US shares index ETF have fees of just 0.04% and 0.11% respectively.

Performance of Portfolios

The InvestSMART Income Portfolio (see Table 1) produced a return of 1.4% in March, which was 0.6% above its benchmark.

The main contributor to the result was the strong rise of 3.4% in the iShares S&P/ASX 200 ETF, reflecting the strength of the Australian market through March. The other contributor of note was the Vanguard Australian Property Securities ETF, which was up 0.9%, with all other holdings in the portfolio producing positive but small contributions.

The InvestSMART Growth Portfolio (see Table 2) produced a return of 1.9% in March.

The key contributor to the result was again the iShares S&P/ASX 200 ETF, which rose 3.4%. The non-US international ETFs also provided a valuable contribution, with the Vanguard FTSE Europe Shares ETF increasing by 3.6% and the Vanguard All-World ex-US Shares Index ETF up 2.6%.

As the US stock market was steady in March, the iShares Core S&P 500 ETF stayed flat.

The other holdings in the portfolio, which includes Bond ETFs, Australian listed property security ETFs and cash all produced smaller contributions.

The InvestSMART International Equities Portfolio (see Table 3) produced a return of 1.1% for March.

The key contributors were the Vanguard All-World ex-US Shares Index ETF, which increased 2.6% and the Vanguard FTSE Europe Shares ETF, which rose 3.6%.

With the US stock market and Australian currency steady through March, the iShares Core S&P 500 ETF also stayed relatively flat.

The InvestSMART Property Portfolio (see Table 4) produced a return of 0.5% for March, which was slightly below its benchmark.

The main contributors to the result were the GTP Group, which increased 4.5%, and the Dexus Property Group, which was up 3.5%.

The main detractors were Scentre Group (the fund's biggest holding), which fell 1.6%, and Vicinity Centres, which was down 2.1%.

The InvestSMART Fixed Income Portfolio (see Table 5) produced a return of 0.3% for March, which was moderately below its benchmark.

The main contributors were Macquarie Income Opportunities, which rose 0.4%, and the iShares Core Composite Bond ETF, which was up 0.3%.

The InvestSMART Fixed Income Portfolio is also 20% invested in the Betashares Australian High Interest Cash ETF, which provides attractive and regular income distributions.

Changes to Portfolios

We believe the rebalancing of the InvestSMART portfolios will deliver long-term benefits for investors.

With the reduction of fees, we believe that over the long term the portfolios will track closer to the respective indices, and will continue to provide investors with low-fee broad-based exposure to quality assets in Australia and internationally.

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