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 March 2020 Equivalent Unit Price – A$1.2102
Welcome investors to the monthly update for the Rivkin Low Volatility (LV) Strategy for March 2020. The LV strategy pulled back slightly throughout the month of March, with the equivalent unit price declining 0.55% to end the month at 1.2102. The LV strategy has returned +3.57% during the first three months of 2020, and +13.32% over the past 12 months.
Monthly Commentary
Volatility across global financial markets has increased markedly in 2020, particularly over the past month, as the world grapples with the growing spread of the Coronavirus, and the economic ramifications of the subsequent ‘social distancing’ measures that have been introduced in an effort to curtail the spread of the virus. The ASX200 as an example fell over 20% throughout the month of March, while in the US, the S&P500 declined 12.51%.
The LV strategy continues to maintain a 25% weighting to US equities via a holding in an ASX listed exchange traded fund (ETF). Not surprisingly, this portion of the portfolio resulted in a negative impact of the overall performance of the strategy, however the losses where somewhat negated by the weakness in the Australian dollar (-5.72%) over the corresponding period. To demonstrate how the unhedged nature of our exposure to US equities can be beneficial, while the S&P500 Index fell 12.51%, the S&P500 ETF which we hold only declined by 5.18%, as the declining AUD/USD rate shielded the falls.
Despite equities falling, the Australian dollar gold price rallied, gaining 3.70% over the course of the month, while bonds were up 0.16% and cash up 0.15%. Given that many Central banks have slashed interest rates towards zero once again, the cash component is unlikely to be a big contributor to overall performance at this time. Nevertheless, with real interest rates (nominal rates minus inflation) now negative, gold is likely to remain attractive to many.
All in all, the methodology of holding a mix of different asset classes across equities, bonds, commodities, and cash resulted in a much smoother ride for investors than straight equities over recent times.
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
