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 July 2020 Equivalent Unit Price – A$1.2931

Welcome investors to the monthly update for the Rivkin Low Volatility (LV) Strategy for July 2020. Following back to back minor declines throughout May and June, the LV Strategy had a strong month in July, with the Equivalent Unit Price gaining 1.92% to finish the month at 1.2931. Encouragingly, and as can be seen from the chart of the equity line below, this represents a new all-time high in valuation for the portfolio. For the 2020 calendar year-to-date, the LV strategy has returned 6.68%, which not only is a positive return, but well above ASX equity markets which are yet to fully recover from the Covid-19 induced selloff earlier in the year. Year-to-date, the ASX200 Accumulation Index is down 9.97%.

Monthly Commentary

The biggest news as it relates to the LV strategy in July has been the surge in the AUD price of gold, which closed the month at a price of $2,764.72 an ounce. Prices have continued higher in August as well, to be now trading above $2830 an ounce. The GOLD ETF which we hold to gain exposure to the AUD gold price gained 5.94% in July, which was a considerable contributor to the overall return of the strategy for July. Gold prices tend to do very well in an environment of very low to negative real interest rates (nominal interest rates – inflation), which is exactly what we are seeing at present.

Regarding the other asset classes held, Bond prices were slightly higher, with VAF (bond ETF) gaining 0.43% for the month, while IVV, which tracks the S&P500 gained 1.67%. The return on US equities was dampened somewhat by the stronger Australian dollar which rallied 3.49% for the month. Again, we wish to reiterate that we do not believe the recent AUD strength will prove to be a persistent theme in the months ahead. Finally, AAA, which is the high cash ETF gained 0.06% for the month.

With the Covid-19 pandemic clearly not going away anytime soon, there remains risks to the speed and strength of the economic recovery, with this outcome heavily influenced by Central Bank and government willingness to maintain support and stimulus. Holding a mix of different asset classes across equities, gold, bonds, and cash, remains an attractive option for conservative investors at such a time.

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