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.

31 December 2020 Equivalent Unit Price – A$1.3000

Welcome investors to the monthly update for the Rivkin Low Volatility (LV) Strategy for December 2020. Following a negative month in November, the value of the LV portfolio recovered somewhat in December, with the Equivalent Unit Price (EUP) ending the month at 1.3000, for a monthly gain of 0.75%.

Monthly Commentary

For the 2020 calendar year, the LV portfolio returned 7.25% net of fees. This is an encouraging result considering the performance of broader equity markets earlier in the year, with the ASX200 Accumulation Index returning 1.40% over the same time period. More importantly however, was the lower volatility, which is the hallmark of this portfolio. While the ASX200 Acc. Index fell over 35% between February and March, the maximum drawdown for the LV Portfolio over the corresponding period was kept to approximately 6%.

In terms of the current composition of the portfolio, we have recently made a change to the equity component of the strategy, which collectively accounts for 25% of the overall portfolio. As we discussed late last year, we split this 25% exposure across three equity market ETFS. The first, being the S&P500 (IVV) which is held as a permanent position. For the other two ETFS, we rank a basket of 10 potential ETFS and hold the top two based on prior price momentum. Just this week, we have sold out of the Nasdaq100 (NDQ), which has been replaced with IEM, which tracks the MSCI Emerging Markets Index. The third position remains unchanged in IAA, being the iShares Asia 50. The upside of using a rotational strategy across different broad equity ETFs, is that our exposure will shift to areas of the market that are demonstrating relative outperformance. To put this in context, the recent change sees us remove exposure to technology focused US companies, and move towards companies listed predominantly in Asia, India, and Brazil. Being ETFs, our equity market exposure remains well diversified and broad based.

For the month of December, it was the Gold and iShares Asia 50 ETF which were the main performers, both increasing by 2.6%, while the Nasdaq100 was also higher by 0.9%. While the S&P500 as well as bonds were lower. Hampering performance at present is the strong Australian dollar, relative to the US Dollar, which is approaching 80 US cents. Because our gold and US equity exposure is unhedged, a stronger AUD detracts from performance. It is important to remember however that the AUD is a very cyclical currency, meaning the time will come when it again weakens against the USD, which will provide a tailwind for the LV portfolio.

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