The COVID Weighting Game. Have investment allocations changed?
- 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.