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 January 2021 Equivalent Unit Price – A$1.3029

Welcome investors to the monthly update for the Rivkin Low Volatility (LV) Strategy for January 2021. The Low Volatility strategy edged higher in January, with the Equivalent Unit Price (EUP) ending the month at 1.3029, for a monthly gain of 0.23%. Since inception of Low Volatility back in September 2017, the portfolio has returned an annualised 8.99%, which is comparable to the ASX200 over the same period (9.07%), however, this has been achieved with considerably less volatility and drawdown.

Monthly Commentary

It appears that in Australia interest rates will remain low for the foreseeable future. In this month’s RBA meeting, Governor Philip Lowe stated that the current RBA cash rate will likely remain at its current level of 0.1% for at least the next four years. What this means for investors, is that the ability to earn an income from cash or fixed interest only will be close to impossible. The effect of ultra-low interest rates is that it forces people to move out along the risk curve to generate a return, with equity markets being one of the largest beneficiaries of this change. The problem being that equity markets come with significant risk, in that every so often a bear market comes along which results in a significant decrease in values. To balance risk and return, the LV portfolio maintains an approximate 25% to equities, with the remainder 75% split over more defensive assets, including cash, corporate and government bonds, and gold.

For the month of January, it was the equity component of the portfolio, which generated the bulk of the positive performance. More specifically, the two equity ETFs that were selected based on their relative momentum being iShares Asia 50 (IAA) and iShares MSCI Emerging Markets (IEM) were the top performers, at 8.8% and 3.9% respectively, while the S&P500 position (IVV) which has a permanent position in the portfolio, gained 1.0%. Government Bonds (VAF) were down slightly at -0.4%, while the Australian dollar gold price (GOLD) was the worst performer, slipping 2.1% for the month. As of the beginning of February, we have made one change to the composition of the portfolio, replacing IEM with the Nasdaq100 ETF (NDQ), which is now ranked higher on our relative momentum score.

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