Elston Blend Model Market Update

Transcription

1 Blend Model Market Update September 2018 Snapshot of the month The S&P/ASX 100 Accumulation Index declined -1.3% while the MSCI World ex Australia NR Index (A$) ended +0. higher. The A$ appreciated +0. against the USD and was flat on a trade-weighted basis. All model portfolios outperformed their respective benchmarks. Model portfolio changes were limited to the Australian equity component which saw the sale of Janus Henderson and the purchase of Pendal Group Limited. The Bloomberg AusBond Composite 0-5Yr Index was flat for the month. Developed markets continued the run of outperformance versus their emerging counterparts. The domestic market underperformed its global peers. Performance Overview as at September Year 3 Years 5 Years Inception Value of $1m from Inception Australian Equities 16.87% 16.33% $2,685, % 11.4 $2,077,660 Aggressive % $2,608, % $2,095,655 Balanced 13.99% % % % 10.77% 12.9 $2,498,950 $1,994,987 $2,268, % % $1,853,056 The Composite Portfolio Returns shown are before administration fees and performance based fees and are inclusive of franking credits. The performance represented is historical and is not necessarily indicative of future performance. Inception date is 31 December $1,000,000 invested in the Balanced Portfolio $1,000,000 invested in the Dec 2011 Jun 2012 Dec 2012 Jun 2013 Dec 2013 Jun 2014 Dec 2014 Jun 2015 Dec 2015 Jun 2016 Dec 2016 Jun 2017 Dec 2017 Jun 2018 $2,300,000 $2,200,000 $2,100,000 $2,000,000 $1,900,000 $1,800,000 $1,700,000 $1,600,000 $1,500,000 $1,400,000 $1,300,000 $1,200,000 $1,100,000 $1,000,000 The calculated performance figures are provided to give an indicative performance benchmark for consolidated model portfolios. The data has been adjusted so as to exclude material in-specie and off model investments. The portfolio returns reflected above are the weighted average returns for all client accounts to the relevant Portfolio. The weighting is based on the account balances, such that large client accounts can have a disproportionate impact on the monthly return, especially if there are only a few accounts allocated to a particular Portfolio. Due to the customisation available from individually managed accounts (IMA's), the performances of individual accounts allocated to the same Portfolio can vary significantly month-to-month due to inter-alia allocations to investments other than those recommended by. While the performance numbers reflected have not been specifically audited, the internal controls around preparing client statements have been subject to independent review. The client statements form the basis for the preparation of the monthly performance numbers PAGE 1

2 Blend Model Portfolios The Blend Model is suitable for investors seeking a balance between income and capital growth. In addition to the core active Australian Equities offering, offers a comprehensive range of tax-efficient Multi-Sector investment strategies. Ranging from conservative to high growth, the Multi-Sector Model Portfolios allow investors to access a suite of diversified portfolio solutions which invest across a range of asset classes including domestic & international equities, fixed income, listed property, and cash. By applying s Investment Philosophy and Process to a broader range of asset classes, seeks to add value through top-down Strategic Asset Allocation, Tactical Asset Allocation and bottom-up stock and fund selection. Performance Commentary The Australian equity and fixed income components contributed to model portfolios outperforming their respective benchmarks. The Australian equity component (-0.1%) outperformed its benchmark (-1.3%) with both stock selection and sector positioning contributing to outperformance. At a sector level, the primary positive contributors were the underweight to Health Care and overweight to Energy. The primary positive contributors from stock selection came from holdings within Health Care and Consumer Staples. The top three contributors to performance were from positions in Ansell, Coca-Cola Amatil & Rio Tinto, while the largest detractors were from positions in James Hardie, Caltex and Seek. The largest overweight positions on average last month relative to the benchmark were Caltex (+4.), Origin Energy (+4.) & AMP (+3.3%), while the largest underweights were due to not owning Westpac (- 6.), CSL (-6.) & National Australia Bank (-5.). The international equity component underperformed its benchmark due to the regional allocations relative to the benchmark i.e. underweight the US and overweight Asia ex-japan. The former was amongst the best performing major markets while the latter suffered on the back of escalating trade tensions. While outperforming its benchmark, the actively managed Macquarie Asia New Stars No.1 Fund (-3.) still ended the month lower while the Vanguard FTSE Europe Shares ETF was flat for the month. The ishares S&P 500 ETF (+0.) performed broadly in-line with the benchmark. In the fixed income component, both the Macquarie Income Opportunities Fund (+0.1%) and Janus Henderson Tactical Income Fund (+0.1%) outperformed the benchmark. For the former, performance was mainly due to the overweight positioning to US investment grade credit as sentiment towards credit markets improved significantly during the month, while the latter benefitted from domestic high grade credit spreads remaining broadly stable and being defensively positioned for higher yields. Australian Equities & Listed Property Despite strong gains in commodity markets, the domestic market underperformed its global peers finishing the month down (-1.3%) with the tag of worst performing major developed market. September saw 8 of the 11 GICS sectors down with Health Care (-8.) and Consumer Discretionary (-4.) the primary detractors. Negative returns from market darlings CSL (-10.) and Cochlear Limited (-6.) along with the announced government inquiry into Aged Care weighed on the sector. The Materials sector (+4.) benefited from a rise in both coking coal (+9.) and Iron ore (+4.) prices. The Energy sector (+4.3%) rallied as Brent rose (+7.), hitting a 4-year high on expectations of tightening supply ahead of US sanctions against Iran. The best performing sectors domestically were Energy, Materials & Telcos while Health Care, Consumer Discretionary & Utilities all underperformed. On a total return basis, the best performers in the S&P/ASX 100 were Northern Star Resources (+20.), Whitehaven Coal (+12.1%) & South32 (+12.1%). The worst performers were CSR (-12.), a2 Milk Company (-12.1%) & CSL (-10.). International Equities Developed markets continued the run of outperformance versus their emerging counterparts, driven by the S&P 500 (+0.) which hit another record high and the Nikkei 225 (+5.) that traded at levels not seen since the early 1990 s. Globally, Energy (+3.), Communications (+2.) and Health Care (2.1%) were the top performers whereas REITs (-2.3%) ended the month down, impacted by the US Fed hiking the Fed Funds rate by 25bp. The MSCI Emerging Markets Index (-1.1%) saw mixed performances across its constituents with rising oil and commodity prices lifting exporter countries, while trade issues and a firmer USD continued to weigh on behemoths India and China. Across Europe equity markets were mixed with the CAC 40 rising (+1.), the FTSE 100 (+1.1%) higher while the German DAX (-0.9%) finished September in the red. Fixed Income September was a relatively poor month for developed market bonds as yields rose in most advanced economies on the back of positive economic data. Better than expected domestic GDP and employment data saw investors bring forward the timing of expected rate hikes slightly, while yields rose between 7 15 bps. In the US 10- year rates again pushed though the psychological 3% barrier to finish the month up +20bps at 3.0, while the US 2-year bond yield rose 19.2bp to 2.8. Credit markets were well supported with lower grade / higher yielding corporate debt benefitting from improved sentiment which saw spreads trading tighter. PAGE 2

3 Strategic & Tactical Allocations Conservative Moderate Balanced Aggressive Australian Equities Strategic Asset Allocation % 97% Defensive % 3% Australian Equities 19% 31% 47% 5 63% 91% 23% 33% 49% 5 63% 89% International Equities % 17% 2 2 Listed Property 9% 9% 9% 3% 3% 3% 3% 3% Fixed Interest % 19% 7% Cash % 3% 3% 1 11% 11% 9% 7% 7% Tactical Asset Allocation QAA/Tactical Allocation Overview In the diversified models that include an allocation to fixed income, we remain overweight both Australian and international equities as we continue to see decent value on a relative basis. Despite steadily rising interest rates, in late-cycle environments, stocks tend to perform well until monetary policy becomes genuinely restrictive which in our view is some way off. Accordingly, the shorter-term outlook for global and Australian growth remains relatively sound. Prior to last quarter, we had been slowly moving to a more neutral position as equity markets moved higher. This was implemented via the periodic rebalancing of holdings across portfolios. Post our latest quarterly asset allocation meeting the decision has been made to maintain the existing overweight allocations. After a volatile few months, the growth outlook for 2018 remains robust albeit with the pace of growth moderating. Rising protectionism could undermine this and negatively impact sentiment, but the outcome is largely unknown and at this point remains small. Policy rates are set to tighten steadily but remain accommodative as inflation remains below target for much of the developed market ex the US. Overall, global growth still looks healthy and corporate earnings robust, though locally, company earnings growth estimates remain comparatively lacklustre. Increasing political risks could weigh on sentiment, and tightening financial conditions mean greater uncertainty in the macro outlook. PAGE 3

4 Model Portfolio - Reweighting & Changes Sold Security Code Name Current Weight Prior Weight Change 25/09/2018 JHG Janus Henderson Bought Security Code Name Current Weight Prior Weight Change 25/09/2018 PDL Pendal Group Australian Equity Portfolio - Sector Exposure - Risk & Return Australian Equity Sector Exposure Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Real Estate Telecommunication Services Utilities Blend Australian Equities % 16.3% % % Aggressive Portfolio - Risk & Return Blend Aggressive 14.7% % % 1 7% 9% 11% PAGE 4

5 Portfolio - Risk & Return 2 Blend % 7% 9% 1 11% Balanced Portfolio - Risk & Return 1 1 3% 7% 9% Blend Balanced 12.3% 12.9% % 9.9% % Moderate Portfolio - Risk & Return Blend Moderate 9.7% 9.9% 9.1% % % % 7% Disclaimer This material has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this material is General Advice and does not take into account any person s individual investment objectives, financial situation or needs. Before making an investment decision based on this advice you should consider whether it is appropriate to your particular circumstances, alternatively seek professional advice. Where the General Advice relates to the acquisition or possible acquisition of a financial product, you should obtain a Product Disclosure Statement ( PDS ) relating to the product and consider the PDS before making any decision about whether to acquire the product. You will find further details of the service we provide and any cost to you within the Financial Services Guide. Any references to past investment performance are not an indication of future investment returns. Prepared by EP Financial Services Pty Ltd () ABN AFSL Although every effort has been made to verify the accuracy of the information contained in this material,, its officers, representatives, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this material or any loss or damage suffered by any person directly or indirectly through relying on this information. Further Information 1300 ELSTON info@elston.com.au PAGE 5