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 July 2021
In the month of July, equity markets have continued their recent upward paths, both in Australia and the US. Locally, the S&P/ASX200 has followed on from gains of 2.1% in June, to close 1.1% higher in July, at a new-all time high of 7,392.62. Performance across the market was quite widespread, with materials stocks, such as BHP Group, doing particularly well, in addition to many industrials, while the information technology sector was the biggest laggard, down 6.9%. While in the US, the S&P500 rallied 2.3%, and the Nasdaq100 gained 2.8%, with both markets also closing at new all-time highs. The performance was broad based in the US, except for the energy sector, which shed 8.44%, off the back of a softening crude oil price.
Bond yields declined along the yield curve, typically a signal that the market is concerned about the growth outlook, which has been evident in recent economic data expanding at a slower pace. In the background, the debate around inflation continues, with central banks and many economists of the view that price increases are likely to prove transitory as supply constraints ease in the face of increased demand as part of economies reopening. However, there are some economists predicting price gains will prove stickier, and with labour markets still some way off pre-pandemic levels, there are concerns that we may enter a period of stagflation, where inflation is high, economic growth slows and unemployment remains high.
Except for the European Central Bank, many central banks are now shifting towards reducing accommodative policy, notably in Australia where the Reserve Bank is pushing ahead with a planned taper of asset purchases from September. This is despite economist predictions to delay tapering due to the ongoing lockdown in Sydney, and in the U.S. where the Federal Reserve has signalled the likely announcement of a taper of asset purchases in September. While monetary support may be withdrawn, it will be at a gradual rate, only in line with economic growth and improving labour markets and is still expected to remain accommodative by historical standards. This coupled with ongoing fiscal support globally is seen as providing support for risk assets.
Starting with the portfolios focused on ASX listed equities, being ASX Income and ASX Growth, the ASX Income portfolio returned 0.96% for July, net of fees, while the ASX Growth portfolio declined -0.20% for the month, net of fees. The ASX Growth Portfolio was impacted by several ‘quality’ stocks that sold off, including Hub24 (HUB: -15.6%) and Seek (SEK: -11.7%), while Mineral Resources (MIN) was the top performer, gaining 17.3% for the month. Interestingly, this was despite weakness in the price of iron ore, which declined over 15% for the month to close at US$178 a tonne. ASX Income benefitted from the strong performance of the large, diversified miners, with BHP Group (BHP) and Rio Tinto (RIO) gaining 10.1% and 5.4% respectively. It was a quiet month for the Event strategy component of the portfolio, as several new positions were bought, being Empired (EPD) and Rhipe (RHP), while we had a few arbitrages conclude. We remain fully invested in the strategy and there has been no shortage of opportunities, and the hope with several of them is that we see competing bidders emerge.
For those investors wanting US share exposure, the US Growth portfolio, which holds US stocks only, returned 2.56% (net of fees) for the month. The standout performer from this portfolio was Moderna (MRNA), a momentum stock, which gained 50.5% for the month. Moderna is a name that many may well be familiar with, being the developer of the Moderna Covid-19 vaccine. July highlights an important component of the relative momentum strategies, that being that it is often the big outperformance from a smaller number of holdings that makes all the difference to the overall portfolio return, as opposed to the gains being spread evenly across all holdings. Being unhedged, the portfolio was also aided by a weaker Australian dollar, which declined 2.1% for the month to close at 73.43 US cents.
Finally, the Low Volatility portfolio had a good month, gaining 2.35%, net of fees, thanks to a stronger AUD gold price (+5.6%), as well as gains across our equity ETF holdings. Bond prices also rallied (corresponding with failing yields), with the Australian government bond ETF, VAF, gaining 1.9%, while CRED, being investment grade corporate bonds, rallied 2.4%. Encouragingly, after a slower than average first six months of the year, this portfolio has moved to new highs.
Looking ahead, August will be a busy month for news, as ASX companies release their 2021 full year financial results, which will allow investors to gauge business performance. Importantly, it is not only the results themselves, but the ‘markets’ expectations that are important. By this, we mean where the numbers land relative to what investors are expecting is what will determine movements in a company’s share price.
The performance below refers to the model portfolios, net of 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 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.
As Investors should be aware, we have recently made changes to our SMA portfolios, to simplify our offering. As of this month, we are reporting on the four portfolios now available, being ASX Income, Low Volatility, ASX Growth, and US Growth. 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 20201, whereas ASX Income and Low Volatility remained unchanged.
For those interested in the historical performance of the individual strategies, please click here
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
Please click here or request the PDS to understand the full risks and cost of the product before making a decision to invest in it.
This information has been prepared and issued by Rivkin Securities Pty Ltd (ABN: 87123290602, AFSL: 332 802). It is general information only and not intended to provide you with financial advice, and has been prepared without taking into account your objectives, financial situation, or needs. If you require financial advice that takes into account your personal objectives, financial situation, or needs, you should consult your licensed or authorized financial advisor.
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
