FY returns
The alternatives universe (hedge funds, private equity etc) doing a good job of showing the diversification benefits from an allocation. In a month in which most assets are down, you can see the Alts benchmark proxy lifting.
The small ordinaries, locally, have been crunched. The index is full of companies that, whilst growing, on average lack the scale and market power necessary to pass on cost inflation, and are also full of mid-tier lower quality mining companies, in a month in which industrial metals have (mostly) fallen.
Style and strategy (e.g. value, growth, quality) not so important in a month dominant by purely macro premia (rather than factor premia).
Zooming out, the past month has been a difficult one for any multi-asset portfolio, although an EM allocation (slightly surprisingly) performed well. We increased our EM exposure over the past quarter, a move that will have worked well, albeit our overall allocation is small, and only modestly above the benchmark.
Central banks are in an inflation fighting mode, that means they want to get the price of everything lower, and as the below suggests, they are succeeding. Copper, iron ore, oil, rates, all lower.
Risk and return graphs over the long run. Not for any great point about asset allocation, but rather because I enjoy seeing the plot. It’s also a good highlight of why we tend to view a commodities allocation as a tactical, but not generally strategic, allocation, beyond that which we have in our direct equity portfolios (e.g. a BHP or RIO, for index purposes) or that which is embedded in the underlying managers.
By equity market region, China continues to rerate, post a vastly more business friendly equity market friendly stance adopted by the state (reducing some of the pressure on Didi, Alibaba, Tencent, Meituan in areas of new games, IPO’s, dual listings).
By ASX sector, materials and financials underperformed. This has benefitted our portfolio positioning greatly, given these contain our largest industry group tilts (we are overweight the insurers, which performed well, and underweight everything else in the sector, likewise with materials we are overweight packaging, but underweight metals and mining).
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.