Strategy Objective: The Rivkin Low Volatility Strategy aims to provide steady, stable returns, which have a low correlation to the broader equity market. The Strategy involves allocating equal weighting to four different asset classes, via ASX listed ETFs.
30 June 2020 Equivalent Unit Price – A$1.2687
Welcome investors to the monthly update for the Rivkin Low Volatility (LV) Strategy for June 2020. The LV strategy posted a small fall for the month of June, with the Equivalent Unit Price declining 0.60%. This takes the net return for the first half of the 2020 calendar year to 4.68%, while the net return over the past 12 months is 9.14%. Over the equivalent six and 12-month periods, the ASX200 Accumulation Index declined by 10.42% and 7.68% respectively.
| PORTFOLIOS | LOW VOLATILITY |
|---|---|
| Latest Month | -0.60% |
| QTD | 1.07% |
| Calendar YTD | 4.68% |
| Financial YTD | 9.14% |
| 12m | 9.14% |
| Inception | 26.87% |
Monthly Commentary
An increase in Covid-19 cases in Victoria has seen the greater Melbourne area enter a new 6-week lockdown period this week, which goes to highlight how the economic recovery is far from over. We can only imagine how disruptive this will be for business within the area. Nevertheless, equity prices have largely remained buoyant, with both local and US share markets closing higher for the month of June, while the Nasdaq100 has even managed to fully recover from the February to March decline. This goes to highlight the disconnect that can occur between equity prices and the underlying economy, at least over the short term.
Despite both gold and US equity prices rallying throughout the month of June, the stronger Australian dollar (relative to the USD) has more than offset these moves for Australian investors. For June, the AUD rallied 3.54% to finish the month at US$0.6903. This has negated the gains in US equities and gold, as both the ETFs we hold for these asset classes are unhedged. Again, we don’t view this strength as a structural shift and continue to view the AUD/USD as very cyclical, partly evidenced by the fact that the currency has traded both above and below current levels around US$0.70 on multiple occasions over the past 20 years. As such, we do not view having half the portfolio unhedged as an issue.
GOLD, which is the ASX listed ETF which tracks the AUD gold price, gained 0.04% for June, while IVV (S&P500) declined by 2.35%. AAA, which represents our allocation to cash, was slightly higher (+0.08%) as one would expect, while VAF (bonds) gained 0.30%.
The RBA has reaffirmed their intention to keep interest rates low for the foreseeable future, keeping the cash rate at 0.25% at their Tuesday meeting. The RBA Governor Phillip Lowe noted that the Bank’s revised economic contraction for the Australian economy is not as bad as initially feared, with GDP expected to fall by 6% over the year, with unemployment peaking at 10%.
If you have any questions regarding the above or your investments with Rivkin in general, please call us on 02 8302 3605.
Monthly Returns
Performance
NAV Price Chart
Portfolio Composition
Asset Class Weighting
Strategy Description and Information
The low volatility strategy invests in listed ASX securities (ETFs) that represent multiple asset classes: cash, US equities, bonds and gold. We target asset classes that have a low or negative correlation to each other, with the benefit being a history of lower volatility and higher risk-adjusted returns than equities alone. While the expected return of this strategy will be lower than the long-term average of equity returns, the superior return per unit of volatility makes this an excellent tool to offset some of your more volatile investments. Both the gold and US equity ETF are unhedged, meaning that approximately half the portfolio has exposure to a short AUD/USD position. Given the nature of the AUD as a growth currency to decline during periods of equity market declines, this exposure is advantageous to cushioning the portfolio during periods of equity market weakness.
Important Disclaimer
The Rivkin Low Volatility Strategy is available to wholesale investors only. Past performance is not a reliable indicator of future performance. The value of your investment may rise and fall, and you may not receive the amount originally invested.
Contact
Thomas Silitonga – Director, Rivkin Asset Management
thomas.silitonga@rivkin.com.au – +612 8302 3605
