Strategy Objective: The Rivkin Australian Defensive Income Strategy aims to produce positive average annual returns while seeking to maintain a level of volatility lower than that of the S&P/ASX 200 Accumulation Index over the same investment period. The strategy focuses on income over capital growth and invests in high dividend paying blue chip stocks, hybrid securities, and takeover arbitrage.
31 January 2021 Equivalent Unit Price – A$0.9866
Welcome investors to the monthly update for the Rivkin Australian Defensive Income Strategy (RADIS) for January 2021. For the month of January, the RADIS ended largely unchanged, with the Equivalent Unit Price ending the month at 0.9866, for a loss of 0.11%.
| PORTFOLIOS | RADIS |
|---|---|
| Latest Month | -0.11% |
| QTD | -0.11% |
| Calendar YTD | -0.11% |
| Financial YTD | 7.24% |
| 12m | 2.32% |
| Inception | -1.34% |
Monthly Commentary
Broadly speaking, equity markets have begun 2021 reasonably subdued, with the ASX200 Accumulation Index gaining 0.31% in January, while in the US, the S&P500 declined 1.01% over the course of the month. Prices drifted higher for much of January before a small but sharp sell-off occurred into month-end. Encouragingly, after the first week of February, this sell-off has been reversed, with both major equity indices recovering to new highs. In Australia, much of the weakness related to commodity-related stocks, with the ASX200 Energy and Materials Indices being the worst performers, declining 8.9% and 5.9% respectively. There were no significant gains across the other sectors, with the utilities (+1.3%) and consumer staples (+1.1%) indices the top performers.
Government policy, both locally and in the US continues to provide a positive tailwind for equities, and asset prices more broadly. In the February RBA meeting, Governor Philip Lowe stated that the current RBA cash rate of 0.1% was likely to remain unchanged for up to 4 years. More so, the RBA has committed to buying another $100 billion in bonds to get interest rates low further along the curve. Interestingly, despite the RBA extending its quantitative easing (QE) program, the yield on the Australian 10-year bond has ticked up to its highest level since March last year. Nevertheless, with interest rates likely to remain at low levels for the foreseeable future, asset markets should continue to perform strongly. Signs are already beginning to emerge across property prices in Sydney and Melbourne, and we expect equity markets will also benefit over the months to come. In the US, government stimulus is coming more from the fiscal side, with the Biden administration pushing to get their Covid-19 Stimulus package, currently in the order of around US$1.9 trillion, through the House. This is planned to include direct payments to Americans of US$1400, in addition to funding to states and cities.
In terms of the current composition of the portfolio, we currently hold a relatively high amount of cash at 21.5%, which is because there are not many ‘event style’ opportunities that meet our criteria at present. We allow space in the portfolio for six opportunities at any one time, of which we are only holding two, being Coca-Cola Amatil (CCL) and Vitalharvest (VTL). Regarding the Blue Chips strategy, which as a reminder holds the top 10 dividend-paying stocks from the ASX50, there was no change to this portfolio at the end of the month. This strategy holds a relatively large weighting to commodity-related stocks at present, across the energy and materials sectors. Many of the Blue-Chip stocks are due to pay dividends over the coming month, with February being very busy on this front, meaning we are expecting some cash to flow into the portfolios over the coming weeks. Please see the tables below for full details regarding our sector exposure, and top 10 holdings.
Looking ahead, February has begun in a rather bullish fashion, with prices quickly recouping the late January decline. And with positive monetary and fiscal tailwinds, not to mention, the continued economic recovery, we believe equity markets remain an attractive option for investors with a three-to-five-year time horizon.
If you have any questions regarding the above or your investments with Rivkin in general, please call us on 02 8302 3605.
Performance
NAV Price Chart
Monthly Returns
Portfolio Composition
Sector Breakdown
Top 10 Stock Holdings
| STOCK | TICKER | STRATEGY | WEIGHT |
| iShares S&P500 ETF | IVV | Low Volatility | 7.16% |
| Vanguard Aust. Fixed Interest ETF | VAF | Low Volatility | 6.93% |
| GOLD ETF | GOLD | Low Volatility | 6.28% |
| Fortescue Metals Group | FMG | Blue Chips | 6.02% |
| BHP | BHP | Blue Chips | 5.49% |
| Rio Tinto | RIO | Blue Chips | 5.25% |
| Woodside Petroleum | WPL | Blue Chips | 5.13% |
| Telstra | TLS | Blue Chips | 5.07% |
| Medibank Private | MPL | Blue Chips | 4.97% |
| Vitalharvest Freehold | VTH | Events | 4.91% |
Strategy Weighting
Strategy Description & Information
The Rivkin Australian Defensive Income Strategy invests predominantly in listed Australian securities whose characteristics satisfy one or more of the strategies that occupy the portfolio. These strategies include: Blue Chips, being high dividend paying stocks from the ASX50, Hybrids Securities, which as the name suggests are a hybrid between a debt and equity instrument, and Events, which include opportunities such as takeover arbitrage.
Important Disclaimer
The Rivkin Australian Defensive Income 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
