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.
29 February 2020 Equivalent Unit Price – A$1.2169
Welcome investors to the monthly update for the Rivkin Low Volatility (LV) Strategy for February 2020. Following a strong return of 4.04% in January, the LV strategy consolidated in February, with the Equivalent Unit Price (EUP) gaining 0.09% to close at 1.2169. The trailing 12-month performance of the strategy is 14.46%. Considering the sharp declines across both domestic and global equity markets over the course of the month, we view the 0.09% return as quite a positive.
Monthly Commentary
The LV strategy was not immune to the sharp declines witnessed across global equities in February, because as a reminder, the strategy maintains a 25% weight to US equities. Although this component of the strategy fell over 8%, these losses were offset by the other three asset classes we hold, being cash, bonds, and gold. It was really the AUD gold price that did the heavy lifting, gaining 7.8%, followed by bonds which gained 0.8%. Again, the month of February 2020 goes along way to demonstrating the positives of a multi-asset strategy, particularly when the assets held are not correlated.
The narrative surrounding the sharp selloff in equities is the increasing pace of the spread of the Coronavirus, particularly in new countries such as South Korea, Italy, and Iran. While this may well lead to pressure for equities in the weeks ahead, global Central Banks have already been quick to respond, with the RBA cutting their benchmark rate by 25 basis points at their March meeting on Tuesday this week (RBA rate now at 0.50%), while the US Federal Reserve, after holding an emergency mid-month meeting, cut the Fed Funds rate by 50 basis points, to 1.25% (upper bound). While the flow on effect of this looser monetary policy is yet to flow through to equity markets, bond prices have surged as a result, as has gold. Any additional loosening of monetary conditions will continue to boost both of these asset prices.
As stated above the LV strategy has returned 14.46% over the past 12 months after all fees. This remains well above the long-term average of 6-7%, meaning investors should prepare for a period of reduced returns at some point in the future.
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
