Strategy Objective: The Rivkin Australian Equity Managed Account 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.
31 January 2020 Equivalent Unit Price – A$1.1485
Welcome investors to the monthly update for the Rivkin Australian Equity Managed Account (RAEMA) for January 2020. The RAEMA has started the year on a positive note, with the Equivalent Unit Price (EUP) ending the month of January at 1.1485, for a gain of 5.33%. This return was above that of the ASX200 Accumulation Index which gained 4.98%, which is encouraging considering the strategy is only 80% invested in ASX equities, with the remaining 20% invested in a defensive low volatility strategy. It is important to remember that the low volatility component will aid the portfolio more during times of market volatility than in a bull market, like we are currently seeing. The RAEMA has returned 20.99% over the past 12 months.
Monthly Commentary
Throughout 2019, the Australian share market rallied very strongly over the first six months, only to then trade sideways between late July and December. However, prices have since broken out of this sideways consolidation range in January 2020, to reach a new all-time closing high of 7132.73, confirming that the longer-term uptrends remain intact. More so, a strong January tends to be a decent indicator of how the market will perform for the year ahead. Over the past 20 years, if the ASX200 has had a positive January, the ASX200 Accumulation Index has returned 10.96% on average, compared to a return of 7.55% if January has been negative.
More recently, there has been a slight emergence of market volatility, driven by the Coronavirus outbreak in China. However, the market declines have not been anything out of the ordinary and have tended to be isolated to those sectors and stocks with direct exposure to china, such as tourism, airlines, and materials. Looking three to six months ahead, we do not believe this poses a sustained risk to Australian equity prices. If anything, often with the benefit of hindsight, market declines as a result of situations such as this represent good buying opportunities.
Digging deeper into the performance of the portfolio over the month of January, both the ASX100 and ASX200 Momentum strategies were the standouts, whereas the Quality strategy, while positive, was less of a contributor this month. The performance of the ASX200 Momentum strategy was largely the result of two stocks, in Silver Lake Resources (SLR) and EML Payments (EML), which gained 21.3% and 15.9% respectively, while with the ASX100 strategy, it was more the case of consistency across the board, with Afterpay (APT), James Hardie (JHX), Resmed (RMD), and Magellan Financial Group (MFG) all returning between 14% and 18%. The quality strategy was weighed down with exposure to Webjet (WEB) and Bluescope Steel (BSL) which declined by 9.8% and 5.4% over the month.
In terms of the current portfolio composition, we remain fully invested with a small cash position of 7.3%. The technology sector has edge up in terms of weighting from 19.3% at the end of November to account for 28.1% of our equity allocation by the end of January 2020. This is followed by materials (23.2%) and financials (21.6%) as the strategies’ highest sector weights. Important to note that despite the decent weighting to financials, we have no exposure to any of the large retail banks at present. At month end, the portfolio was invested across 28 individual stocks. Full details of the portfolios top 10 holdings and sector weights can be found below.
A note in relation to portfolio administration, in an effort to smooth the payments of performance fees, these will now be calculated on a monthly basis as opposed to quarterly. Performance fees are only paid on performance above the high water mark, meaning this change will not increase the total fees paid, but will result in smaller amounts on a more regular basis as opposed to larger amounts less often, which is the case with quarterly billing.
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
Strategy Weighting
Strategy Description & Information
The RAEMA Strategy invests predominantly in listed Australian companies whose characteristics satisfy one or more of the strategies that occupy the portfolio. These strategies include: Momentum 100 & 200, being two discreet segments (ASX 100 & ASX 200 ex the ASX 100) of securities that are enjoying positive price trends; Quality, being companies with robust earnings profiles that are priced favourably versus their peers; Income, being securities that provide a high yield relative to the broader market; and Low Volatility, which cushions market shocks.
Important Disclaimer
The Rivkin Australian Equity Managed Account 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
