InvestSMART

The COVID Weighting Game. Have investment allocations changed?

We take a look at managed portfolios and if COVID-19 has changed their asset weightings.
By · 22 May 2020
By ·
22 May 2020
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Key takeaways

  • Peer fund managers have reduced exposure to domestic equities, infrastructure and property, and increased exposure to cash on a balanced portfolio.
  • For Growth portfolios, peer fund managers have decreased exposure to domestic equities, and infrastructure and property, but have increased cash and international equities.
  • The fallout of COVID-19 on property and infrastructure may be long-lasting as companies realise the benefits of remote working and make moves to reduce costs.

A properly diversified portfolio, with investments in various asset classes according to your risk profile, is at the heart of what InvestSMART offers.

But with the emergence of COVID-19, we’ve seen several asset classes affected and unable to offer their traditional purpose. From shares deferring dividend payments to property assets at risk of being heavily discounted, we ask, is it time to change the idea of how assets weigh inside a portfolio?

This week's From the Bunker webinar questioned if there had been a shift in portfolio weightings across asset allocations. Remember that diversified portfolios will spread investments across different asset classes such as equities (domestic and international), fixed interest, cash, infrastructure and property. The allocation of investment funds to defensive or growth assets determines the risk profile ranging from conservative to high growth.

As mentioned in the webinar, InvestSMART has a range of diversified portfolios with the added benefit of capped fees. You can see these capped fee portfolios here.

What we've seen since the start of the COVID-19 crisis is that portfolio managers in peer funds have reduced exposure to domestic equities, infrastructure and property, and increased exposure to cash on balanced portfolios. For growth portfolios, peer fund managers have decreased exposure to domestic equities, and infrastructure and property, but have increased cash holdings along with international equities.

As Evan Lucas points out, the decrease in exposure to Australian equities and property has been due to its recent underperformance (compared to international equities) and the prospect that COVID-19 will have a long-lasting effect on companies requiring office space. We've covered these topics in detail in our previous webinars which you can watch recordings of here.

Remember to make use of a portfolio tracker like the InvestSMART Portfolio Manager. This free tool will track your investments and see where you may be over or underweight compared to a particular risk profile.

You can watch this week's recording below.

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Frequently Asked Questions about this Article…

Since the onset of COVID-19, peer fund managers have reduced exposure to domestic equities, infrastructure, and property, while increasing exposure to cash in balanced portfolios. This shift reflects the changing dynamics and uncertainties in these asset classes.

For growth portfolios, there has been a decrease in exposure to domestic equities, infrastructure, and property, with an increase in cash holdings and international equities. This adjustment aims to mitigate risks and capitalize on international market opportunities.

Domestic equities and property have seen reduced exposure due to their recent underperformance compared to international equities and the potential long-lasting impact of COVID-19 on companies' need for office space.

A diversified portfolio is crucial during uncertain times as it spreads investments across various asset classes, reducing risk and enhancing potential returns. This approach helps investors navigate market volatility and changing economic conditions.

Investors can use tools like the InvestSMART Portfolio Manager to track their investments. This free tool helps identify if a portfolio is over or underweight compared to a specific risk profile, ensuring alignment with investment goals.

Cash has become a more significant component in investment strategies as it provides liquidity and flexibility. Increasing cash holdings allows investors to quickly adapt to market changes and seize new opportunities as they arise.

Capped fee portfolios, like those offered by InvestSMART, provide cost certainty and can enhance investment returns by minimizing fees. This approach ensures that more of your money is working for you, rather than being eroded by high management costs.

COVID-19 may have long-lasting effects on property and infrastructure investments as companies increasingly adopt remote working, potentially reducing the demand for office space. This shift could lead to a reevaluation of these asset classes in investment portfolios.