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 May 2020
Following strong gains in April, equity markets both in Australia and the US continued to rally throughout the month of May. Context is key however, as the rally follows an extremely sharp and deep selloff which occurred between February and March, due to the Covid-19 outbreak. From peak to trough, the ASX200 and S&P500 declined some 37% and 34% respectively over a 4-5 week period, which is one of the most dramatic declines in market history. However, it is encouraging to see that with economies now looking to reopen, equity prices are rebounding strongly.
Australian GDP figures for the March quarter were released on Wednesday, which showed that the Australian economy contracted 0.3% for the quarter, and with the June quarter set to be considerably worse, Australia is now officially in a recession. The thing to always remember however is that while economic data is backwards looking, equity prices are forward looking, meaning all the bad news being released is already priced in. More so, equities prices will rally well before the economic news turns around, which is exactly what we are seeing at present.
As a reminder, Rivkin offers four different portfolio options for SMA investors, via seven underlying strategies. Two of these ‘Smart Growth’ and ‘Defensive Income’ are focused on ASX investments. For the month of May, Smart growth returned 3.15%, while Defensive Income returned 3.55%, both net of fees. As a reminder, 50% of the Smart Growth portfolio is allocated to the ASX Momentum strategy, and 50% to the ASX Value strategy, the latter of which did the heavy lifting in May, gaining 7.07%. ASX Momentum on the other hand was down slightly at -0.78%, with this strategy holding a significant cash weighting for much of the month. The way that ASX Momentum works, is that as the available universe of upending stocks decreases, the portfolio will build cash, potentially even going to 100% cash in extreme circumstances. This ability to build cash is a double-edged sword, in that it will provide substantial risk mitigation in the event of a sustained bear market but can lead to periods of underperformance on sharp declines and reversals. ASX Value on the other hand remains 100% invested through all market cycles.
The Global Growth strategy declined -0.94% throughout the month of May. Global Growth has 60% allocated to US equities, split evenly between the US Momentum and US Value strategies, both of which are unhedged to the AUD/USD currency. Even though the US Momentum strategy was 100% in cash for the month of May, the account value in AUD terms still declined by -2.49%, due to a rally in the AUD/USD currency. Although the currency moved against us this month, we do not believe that the AUD will remain persistently strong against the USD over the long run, meaning remaining unhedged is not an issue. In fact, because the AUD/USD currency tends to decline when equity markets decline and rally when equity markets rally, being unhedged decreases the overall volatility of the Global Growth portfolio.
Finally, the Capital Stable portfolio had a largely uneventful month, with the portfolio declining by -0.09% in May. In terms of what transpired over the course of the month, the rally in equity markets was a positive, with the strategy allocating approximately 25% to an ASX listed ETF which tracks the S&P500. The stronger AUD did counteract a portion of this, and resulted in a lower AUD gold price, while both cash and bonds were up slightly.
Looking to the weeks and months ahead, while the strong rebound over the past 2 months has been a positive development, we would not be surprised to see a minor pullback in the near-term. While we would be happy to see prices rally straight back to new all-time highs, a steadier rise, punctuated by periods of sideways consolidation is likely more realistic. Nevertheless, with Covid-19 being extremely well contained within Australia, we expect the economic recovery will be quicker than what many were expecting some 2-3 months ago.
All performance data presented in this document relates only to the start date of the SMA portfolios on June 12. The performance below relates to the model portfolios, so 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.
