Mainstream Separately Managed Accounts allow clients to follow Rivkin’s proven investment strategies without having to trade themselves. Our four portfolio options have been designed to suit various different investor goals.
Monthly Update August 2022
Welcome to the monthly performance report for the Mainstream SMAs for August 2022. It was a mixed bag for equities in August, with the ASX200 Accumulation Index ending the month higher, up 1.2%, while in the US, the major indices gave up initial gains, to finish the month lower. The tech heavy Nasdaq100 closed 5.2% lower, while the broader S&P500 ended the month at 3,955, down 4.2%. The energy sector remains the most buoyant, being the best performing sector from both the ASX200 and S&P500, up 7.4% and 2.2% respectively. Interestingly, this was despite falls in the underlying energy prices throughout August, with Crude Oil retreating below US$90 a barrel by month end.
The problems in the energy industry are clearly not going away any time soon however… just this week, Russia have halted all exports of gas through the Nord Stream 1 pipeline, a key natural gas supply route for Europe. Added to this, electricity prices have soared in the UK, while in the key US state of California, the government is warning of blackouts due to electricity shortages. Given energy prices flow through to virtually all aspects of the economy, taming inflation in such an environment will be difficult.
Nevertheless, in terms of economic data during the month, U.S. inflation showed further signs of peaking with both core and headline prices lower than forecast for the month, driven by falling commodity and energy prices as well as the effects of rates increased by the Federal Reserve. Meanwhile, employment data continued to show robust demand with 528k jobs added in July and a further increase of 315k in August, with year-on-year wage growth remaining around 5%.
Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole Symposium was a key focus for investors with many calling for a “dovish pivot” ahead of the speech following recent weakening in forward looking indicators and economic data. However, Powell’s remarks were instead viewed as hawkish noting “Restoring price stability will likely require maintaining a restrictive policy stance for some time…. the historical record cautions strongly against prematurely loosening policy”. These comments were taken as a very clear pushback against the idea of a dovish pivot in 2023 and further rate increases in the coming months although money market futures are still pricing in a terminal rate of 3.8% in early 2023 followed by a moderate easing of policy. The current Federal Reserve Rate stands at 2.5%. Yields on the US 10-year bond rallied from 2.65% to 3.19% over the course of the month yet remain below the peak of 3.49% from the middle of June.
More locally, and August was earnings season, with ASX listed companies releasing their 2022 full year financial results. All in all, the results were rather positive with most companies weathering the difficult environment. With margins holding up, one warning sign is that inflation has become entrenched as companies have successfully passed on their rising costs to customers.
To the performance of the portfolios, Rivkin offers four options on the Mainstream Self-Managed Account (SMA) platform: ASX Growth, ASX Income, US Growth, and Low Volatility. The two ASX equity portfolios performed well in August, with ASX Growth gaining 6.06% for the month net of fees, while ASX Income increased by 2.69%, net of fees. In the US, and US Growth declined 1.06%, net of fees, which while a negative month, was less than that of the broader indices. Finally, the Low Volatility portfolio declined by 0.71%, net of fees.
For the ASX Growth portfolio, it was pleasing to see the strong gains in August, following a good month in July. The performance was well spread across holdings in the portfolio, from both the Momentum and Quality components. Whitehaven Coal (WHC, +28.2%) was the top performer, followed by Altium (ALU) and Wisetech Global, both of which rallied a little over 17%. While AGL Energy (AGL) and APA Group (APA) were the only two to disappoint, down by 8.4% and 4.8%. The holdings within this portfolio have been quite stable of late, with only 1 stock changed mid-month, with Allkem (AKE) coming back into the portfolio, at the expense of Endeavour Group (EDV).
Regarding ASX Income, the Blue-Chips component of the portfolio, which is approximately 50% of the total portfolio, was mixed in August, with the likes of Medibank Private (MPL, +8.8%) and South32 (S32, +8.9%) performing well, while several of the Real Estate stocks, being Dexus (DXS) and Stockland (SGP) sold off, declining by 8.3% and 6.0% respectively. August was a big month for the Events portion of the portfolio, with two new investments in iSelect (ISU) and PTB Group (PTB). Additionally, we saw increased offers for MACA (MLD) as well as a massive increase for ResApp (RAP). In RAP’s case, we have decided to exit the stock at a profit of around 70% with our view that the risk/reward is no longer attractive. Finally, we enjoyed some strong monthly returns in companies such as Big River Gold (BRV) and PayGroup (PYG) as they progressed towards completion of their binding schemes. The environment remains conducive to corporate activity, and we are excited about the recent performance continuing.
The US Growth portfolio continues to hold a somewhat ‘defensive’ stance at present, with only half of the capital allocated to US Momentum invested in Momentum stocks. This is because the S&P500 remains below its 200-day moving average, which we use as an indicator of the long-term trend for US equities. The other half of the usual US Momentum allocation is invested within defensive ETFs, which track Gold (GLD), the US Dollar Index (UUP), and 1–3-year treasury bonds (SHY). The bulk of the US Quality stocks were lower throughout August, with only Lowe’s Companies (LOW) bucking the trend, up 1.4%, while the US Dollar Index ETF gained 2.9%.
Finally, regarding the Low Volatility portfolio, the portfolio was adversely impacted by weakness spread across the equities, bonds, and gold allocations. The three equity ETFs currently held, being IVV, IOO, and VTS, returned between 0.0% and -1.4% for the month, while corporate credit (CRED) and Aust. Government Bonds (VAF) fell 2.1% and 2.6% respectively. Gold, which accounts for approximately one quarter of the portfolio was down 0.7% in August. As a reminder, the Low Volatility portfolio also participates in ASX Event trades, meaning that the bulk of the comments from above regarding ASX Events is relevant to this portfolio also.
Looking forward, and although equity prices have fallen throughout August, volatility remains quite low, and the decline appears to be merely a correction of the prior strong rally off the June lows. And with general market sentiment remaining overly bearish, we believe the probability is for a continued recovery into the end of the year.
All performance data presented in this document relates only to the start date of the SMA portfolios, being June 2019 for ASX Income and Low Volatility and July 2021 for ASX Growth and US Growth. The performance below refers to the model portfolios, net of both management and performance fees, which will not match exactly everyone’s account while providing an accurate representation. Please use the investor portal or call us to check your account-specific performance.
*Past performance is not indicative of future performance. The inception date for ASX Growth and US Growth is 1 July 2021. Low Volatility and ASX income inception date is 12 June 2019
The above table shows the returns of each portfolio, being ASX Growth, US Growth, ASX Income, and Low Volatility, over various time periods after brokerage, management, and performance fees. Individual account performance may vary from the results above due to a number of factors including, but not limited to, rounding, small variations in stock weightings, and account start date. Please log in to your Mainstream Account to have the most accurate picture of your account’s performance.
Please note that we don’t have historical data for the ASX and US Growth portfolios, as were included in the SMA offering from 1 July 2021 whereas ASX Income and Low Volatility remain unchanged.
For those interested in the historical performance of the individual strategies, please click here
| 2019 | 2020 | 2021 | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept | Oct | Nov | Dec | |
| ASX Growth | 10.17% | -12.90% | -2.99% | 7.13% | -4.91% | -6.09% | -7.71% | 8.90% | 6.06% | ||||||
| US Growth | 9.88% | -2.72% | -3.23% | -0.70% | -2.68% | 0.42% | -2.02% | 5.46% | -1.06% | ||||||
| ASX Income | -1.51% | 0.16% | 18.10% | -1.74% | 1.46% | 3.31% | -1.07% | -1.61% | -4.70% | 1.67% | 2.69% | ||||
| Low Volatility | 5.87% | 6.47% | 4.95% | -1.48% | -0.45% | -0.35% | -0.16% | -2.36% | -1.25% | 1.57% | -0.17% |
*Past performance is not indicative of future performance. The inception date for ASX Growth and US Growth is 1 July 2021. Low Volatility and ASX income inception date is 12 June 2019.
Note: All returns in this document are net of fees, 1.5% management fee (1% for capital Stable); and 10% performance fee where applicable with high watermark ( 5% for capital stable) for the complete list of the fees please refer to the PDS issued by The Trust Company (RE Services) Limited a part of the Perpetual Group.
*$70,000 for US Growth
**5.0% for Low Volatility
#1.0% for Low Volatility
The PDS can be obtained by calling 02 8302 3600 or visiting our website at www.rivkin.com.au.
This information has been prepared and issued by Rivkin Securities Pty Ltd (ABN: 87123290602, AFSL: 332 802).
Important Notice: Please consider your own financial situation before investing in our products. Rivkin does not provide personal financial advice and does not take anyone’s personal financial situation into account when structuring its model portfolios.
Past performance and/or backtesting is not a guarantee of future performance. Investing and trading carry financial risk, when judging performance please consider the different types of investments and levels of risk associated.
The Trust Company (RE Services) Limited (ABN 45 003 278 831, AFSL 235150) is the responsible entity and the issuer of units in the Mainstream Separately Managed account. It is general information only and is not intended to provide you with financial advice, and has been prepared without taking into account your objectives, financial situation or needs. You should consider the product disclosure statement, available on www.rivkin.com.au, prior to making any investment decisions. If you require financial advice that takes into account your personal objectives, financial situation or needs, you should consult your licensed or authorised financial adviser. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.
All opinions and estimates constitute judgments of Rivkin and are subject to change without notice. These statements should therefore not be relied upon as an accurate representation or prediction as to any future matters. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital. Past performance is not indicative of future performance.
Total returns shown for the Mainstream Separately Managed Account have been calculated using exit prices after taking into account all of Perpetual’s ongoing fees and assuming reinvestment of distributions.
