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 2020
July was a considerably quieter month for Australian equities, with the ASX200 confined to a relatively tight trading range centred around the 6000 levels. The reduction in volatility is quite welcome, however, considering what 2020 has been like to date. By month’s end, the ASX200 Accumulation Index gained 0.50%. It has been a slightly different and more bullish story in the US where, following a pause in June, the major stock indices have continued their upward trajectory, with the S&P500 and Nasdaq100 Total Return Indices gaining 5.64% and 7.41% respectively in July. It is often thought that the Australian and US equity markets are higher correlated, and while this is true in terms of the day to day ups and downs, over the longer-term, significant performance differences can and do occur. The recovery off the March lows is an excellent example of this, with US equities, notably the Nasdaq listed technology stocks, far outperforming local equities.
Rivkin offers four different portfolio options for SMA investors; two of these, the ‘Smart Growth’ and ‘Defensive Income’ are focused on ASX investments. For July, Smart Growth returned 3.63%, while Defensive Income returned 1.34%, both net of fees. Encouragingly, both portfolios performed strongly in what was otherwise a flat market, as measured by the performance of the cap-weighted ASX200. An essential difference between Rivkin’s portfolios and the broader stock indices is that we do not weight our stocks based on their relative market capitalisation. This means that as compared to the index, we hold a more prominent position in small-cap stocks and smaller positions in the larger cap stocks.
As a reminder, 50% of the Smart Growth portfolio is allocated to the ASX Momentum strategy, and 50% to the ASX Value strategy. It was again the ASX Momentum portfolio which contributed the bulk of the gains for the month, gaining 7.57%. In comparison, the ASX Value strategy declined 0.31% for the month, an excellent example of why diversification across different strategies is important. From the ASX Momentum strategy, Fortescue Metals (FMG), Northern Star Resources (NST), and Afterpay (APT) were the top-performing stocks for July. FMG rallied over 25% throughout the month off the back of higher iron ore prices, which ended the month just shy of US$110 a tonne, while NST rallied 15.7% in July, buoyed by higher gold prices. The Australian dollar gold price rallied over 7% for the month, closing at a new all-time high of $2764.72 an ounce. Not only did the stronger Aussie dollar price boost several gold stocks in our portfolios, but it also benefitted Capital Stable, which has a 25% allocation to the AUD spot gold price. More on Capital Stable below.
The Defensive Income portfolio is comprised of mostly the ASX Income Strategy, which gained 1.76% for July, with a smaller allocation to ASX Value. It was not a great month for the larger ASX Blue Chip stocks, with many of the financials and property stocks retreating, while the bulk of the gains were limited to the major miners, such as BHP (+2.59) RIO (+4.12%), and FMG (25.70%).
To the US, and our two US equity strategies both had encouraging months in July, with US Momentum gaining 6.32%, while US Value gained 3.45%. It is important to note that this is despite the headwind caused from a stronger Australian dollar which gained 3.5% over the month. As our US portfolios are unhedged, a stronger AUD/USD exchange rate detracts from our returns (as measured and reported in AUDs), meaning that the performance of the stocks in these portfolios is greater than what the portfolio returns suggest. Across the two US strategies, Tesla (TSLA, +32.55), DocuSign (DOCU, +25.9%), and Qualcomm (QCOM, +15.8%) were the top-performing stocks.
Finally, the Capital Stable portfolio continues to do its thing, gaining 1.79% for July, thanks to both stronger AUD gold and US equity prices. For the 2020 calendar year-to-date, Capital Stable has returned +5.94%, which compares favourably to the ASX200 Accumulation Index, which remains at a loss of 9.97%.
Looking to the weeks and months ahead, we discussed in the June update the possibility of a period of sideways trading to develop, which is often the case after a strong rally. This has occurred, with both the ASX200 and S&P500 consolidating for several weeks. Such a pause in a trend is often a healthy development, making the trend more sustainable over the longer term. And although the Covid-19 pandemic continues to grow, in terms of the number of infected people, equity markets are currently pushing ahead regardless. We have had many comments from clients that equity markets are entering a bubble, with the current rally being unsustainable. Part of the benefit of using a systematic investment strategy, is that our portfolios will stay invested while the trend remains up, and revert partly to cash when the trend reverses, which removes the need to have to guess when or if a bull market is at risk of ending.
All performance data presented in this document relates only to the start date of the SMA portfolios on June 12, 2019. The performance below refers to the model portfolios, net of fees, which, while providing an accurate representation, will not match exactly everyone’s account. Please use the investor portal or call us to check your account-specific performance.
*Past performance is not indicative of future performance
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 accounts performance.
The table below presents performance on a monthly basis for each of the portfolio options. Again, results in this table are after brokerage and fees.
Returns for June represent performance from the launch date of 12 June 2019 to the end of month.
*Past performance is not indicative of future performance
Rivkin also offers its original investment strategies on the SMA platform. The table below shows the returns of these strategies.
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.
**5.0% for Capital Stable
*1.0% for Capital Stable
This product PDS is issued by The Trust Company (RE Services) Limited a part of the Perpetual Group, ABN 45 003 278 831,AFSL No 235150.
Please search our website or request the PDS to understand full risks and costs of the product before taking decision to invest in it.
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.
To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. 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.
