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 March 2022

Following an increase in volatility to begin 2022, equity markets, both in Australia and the US have rebounded strongly in March. The Australian share market has outperformed the US of late, with the ASX200 Accumulation Index gaining 6.4% for the month, resulting in new all-time highs for this index. The gains for US stocks were more modest for the month, being +3.6% for the S&P500 and +4.2% for the Nasdaq100, and given the prior falls were also deeper, both of these main US indices remain below their respective peaks from late 2021. In both markets, gains in March were broad-based across most sectors, which is always a good sign of a healthy rally.

We entered the month of March with investor sentiment being considerably bearish, understandably, as the Russian/Ukraine conflict was only around a week old at that point, with many unknowns. However, as we stated, equity markets are forward-looking in nature, meaning that bottoms often coincide with bearish news and vice versa. The challenge this poses is that if investors wait for the news to improve, equity prices will likely have already rallied. And while we do not proclaim to know how or when this conflict will end, equity markets are potentially sniffing out an improvement to the current situation. There have been glimmers of hope offered through rounds of peace talks, which is encouraging for all involved.

Inflation remains a major concern globally, with the current sanctions on Russia only adding to already problematic supply issues of major commodities, brought about by economic shutdowns during 2020 and 2021. The obvious markets to be impacted have been the likes of oil, natural gas, and wheat, however, there are likely to be follow-on repercussions to other commodities as well, with both Russia and Ukraine major global supplies of fertiliser. Bond yields have continued to rally strongly across the curve, with the yield on the US 10-year note reaching 2.5%.

On the monetary policy front, the Federal Reserve raised interest rates by +0.25% in March as widely anticipated. The Fed meeting also coincided with updated economic projections and “dot plots” which forecast interest rates over the coming years. Rate projections by the Federal Reserve committee were raised in line with market pricing which shows an expectation of a further nine rate increases by the end of 2022, bringing the Federal Funds rate to 2.40% as it seeks to tame inflation which has risen by 6.4% over the past year. A shift to tighter monetary policy has been seen globally with the Bank of England raising rates for the third time, while the Reserve Bank of Australia has signalled it expects to raise rates in June/July after the Federal election has taken place. Recent data has shown major economies continue to grow with stronger labour markets and rising real GDP while PMI and producer price reports continue to point to growing inflation pressures. Looking ahead to April, corporate earnings will be in focus, particularly in the U.S. where earnings are expected to rise 6.3% from a year earlier.

To the performance of the portfolios, Rivkin offers four options on the Mainstream Self-Managed Account (SMA) platform, being ASX Growth, US Growth, ASX Income, and Low Volatility. Regarding the Australian-focused portfolios, ASX Growth gained 7.13%, while ASX Income increased 3.31%, both net of fees. With ASX Growth, both the momentum and quality components of the portfolio performed well, with momentum stocks having a good month, such as IGO (IGO, +29.2%) and Pilbara Minerals (PLS, +18.1%). While IDP Education (IEL, +20.8%) and Wisetech Global (WTC, +17.3%) were the top gainers from quality. Regarding ASX Income, although the return for March was less, this portfolio closed at a new all-time high in value, which demonstrates that it has held up very well during the market volatility of January and February. The portfolio was aided by strong gains across many of the large-cap financials, such as Commonwealth Bank (CBA, +13.2%) and National Australia Bank (NAB, 11.8%), while BHP Group (BHP) also rallied by over 10%.

Across our ‘ASX events’, as market volatility subsided throughout March, we started to see the spreads for some of our arbitrage opportunities reduce. In the case of Crown (CWN), we have now received FIRB approval, and the timetable to be paid is ahead of our early expectations, and we are now expecting to be paid in May if everything goes to plan. We also received competition regulatory approval for Z Energy (ZEL), with our investment now likely to come to a conclusion in May as well.

The US Growth portfolio ended March -0.70% lower net of fees, with gains across the stocks being offset by a stronger Australian dollar, which rallied 3.0% against the US dollar. With any US share portfolio that is unhedged to currency movements, like the US Growth portfolio is, the return in Australian dollar terms is a function of both the movement in the underlying US stock prices and the movement in the AUD/USD currency pair. When the AUD appreciates against the USD, this will reduce the Australian dollar valuation of the portfolio and vice versa. Given that the AUD/USD tends to be cyclical, these effects will wash out over the long run, however, if we define the ‘long run’ as 5 years, this may not always marry up with one’s investment horizon. Over shorter time periods, say 6 to 12 months, the AUD can indeed trend against the USD, both up and down.

The US Growth portfolio on the Mainstream SMA is not hedged, meaning currency fluctuations will impact the timing of performance. And while hedging this currency risk is not something that we offer as part of this portfolio, it is something that investors could consider implementing on their own if they were indeed concerned about a persistently strong Australian dollar. Please contact us directly if you would like more information on currency hedging and what is involved.

Finally, the Low Volatility portfolio declined by -0.35%, net of fees, taking the return for Q1 2022 to -2.26%. While this portfolio has been declining in 2022, the magnitude is well in line with how it has performed historically. In March, stronger equity prices were offset by a weaker AUD Gold price, with GOLD declining by -3.5%, while investment-grade corporate bonds (CRED) also sold off, declining by -4.5% for the month.

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

*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 and target market determination can be obtained by calling 02 8302 3600 or visiting our website.

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) (part of Perpetual Group ABN 45 003 278 831 AFSL No 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.

PERPETUAL BEING THE ISSUER AND RESPONSIBLE ENTITY UNDER The Trust Company (RE Services) Limited (Perpetual, Responsible Entity, RE, we, us or our), part of the Perpetual Group ABN 45 003 278 831 AFSL No 235150