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.
28 February 2021 Equivalent Unit Price – A$1.2644
Welcome investors to the monthly update for the Rivkin Low Volatility (LV) Strategy for February 2021. The Low Volatility strategy declined 2.96% throughout the month of February, with the Equivalent Unit Price (EUP) ending the month at 1.2644.
| PORTFOLIOS | LOW VOLATILITY |
|---|---|
| Latest Month | -2.96% |
| QTD | -2.74% |
| Calendar YTD | -2.74% |
| Financial YTD | -0.34% |
| 12m | 0.17% |
| Inception | 26.44% |
Monthly Commentary
For the LV portfolio, the current drawdown, which is the percentage decline from the high-water mark, is currently at 5.75%. This is well within our historical modelling, which showed a maximum drawdown over the past 20 years of approximately 10%.
In terms of performance relative to the past three years, February was somewhat of an anomaly, with the monthly return of -2.96% the largest decline witnessed. As investors are hopefully aware, the premise of the Low Volatility strategy is that we maintained equal weightings across four different asset classes, being equities, gold, bonds, and cash, which have historically shown negative to low positive correlation, meaning their ups and downs occur at different times. This relationship broke down somewhat in February, with only cash (AAA) showing a positive return for the month. We do not foresee a persistence breakdown in this relationship going forward.
The Australian dollar Gold ETF (GOLD) was the largest detractor, declining 6.41%, followed by both investment grade corporate bonds (CRED) and Government Bond (VAF) which fell by 3.52% and 3.47% respectively. Regarding our allocation to equities, the S&P500 (IVV) dipped slightly by 0.36%, while the iShares Asia 50 (IAA) and Nasdaq100 (NDQ) fell 2.52% and 4.26% respectively. As a reminder, our exposure to both equities and gold (which totals approximately 50% of the total portfolio) is unhedged to the AUD/USD exchange rate, meaning there is also a currency effect on this portion of the portfolio.
The biggest theme for the month was the surge in longer-term interest rates, both in the US and Australia, which led to a fall in both bond prices and growth-related equities. Inflation expectations have been rising, and really the asset class that should be rallying in such an environment is gold, which up until this point has remained within a downtrend. Nevertheless, should inflation become a larger issue, we would imagine that investors would return to gold over the coming months.
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
