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 February 2022

Following sharp falls to begin 2022, equity markets began the month of February with decent rallies before market volatility resumed into month-end. In Australia, the market recovery off the January lows was rather strong, to the point that even after a steep selloff during the final week, the ASX200 finished the month up, gaining 1.1% for the month. The ASX200 Accumulation Index, which includes dividends, gained 2.1%, reflecting the large amount of stock dividends that were paid out by Australian companies during February. To the US and gains early in the month were more than reversed into month-end, with the S&P500 and Nasdaq100 declining -3.1% and -4.6% respectively in February.

The most significant ‘event’ of the month regards the Russian invasion of Ukraine, and foremost, the social and personal impact this is having on the Ukrainian people. And while we do not claim to be experts in foreign policy, it does appear that Putin has underestimated both the resolve of the Ukrainian people’s desire to mount a defence, and the harshness and speed of Western government sanctions. The first is likely to result in the conflict lasting longer than Putin initially expected, while the ramifications of the second are likely to lead to a major loss in domestic support.

The initial impact on financial markets has been most acutely felt on Russian assets and stock prices which have dropped greatly, and on key commodity prices, such as oil, natural gas, and wheat, which have rallied. Thinking further afield, additional supply constraints in commodity markets will only add to the current high inflationary environment seen in Europe and the US, while currency and bond market volatility is likely to see Central Banks walk back their initial plans on monetary tightening. The effect of this policy shift on developed market equities, such as the US and Australia, could well be positive over a 3–6-month time horizon, once the initial fears of war subside, and the realisation that governments remain quick to revert to an accommodative monetary setting. However, the gains are likely to be quite sector-specific, with commodity and energy stocks the likely beneficiaries of higher commodity prices, while we can see consumer staples being preferred over consumer discretionary stocks should inflation remain high.

To the performance of the portfolios, Rivkin offers four options on the Mainstream Self-Managed Account (SMA) platform, being ASX Growth, US Growth, ASX Income, and Low Volatility. Regarding the Australian-focused portfolios, ASX Growth declined 2.99% for the month, net of fees, while ASX Income gained by 1.46%, net of fees. Regarding ASX Growth, volatility was enhanced during February with many companies reporting their half-yearly results. From our holdings, Cochlear (COH, +15.8%), and Lynas (LYC, +14.3%) were the top-performing stocks. Nevertheless, these were not enough to offset losses elsewhere, with Pilbara Minerals (PLS) and IDP Education experiencing the largest falls at 15.3% and 10.3% respectively.

With ASX Income, regarding the ‘ASX Event’ component of the strategy, the uncertainty brought about from broader market volatility did start to creep into some of our holdings. This response is not without precedent and it’s reasonable for investors to require higher returns to risk capital in periods of volatility, however as long as we remain comfortable with the likelihood of these deals completing, the situation remains unchanged for us. Throughout February, we saw the spreads blow out on Ausnet Services (AST), Icar Asia (ICQ), and Sydney Airport (SYD) and ultimately, we saw all deals complete as planned. Widening spreads for Crown Resorts (CWN) and Link Administration Holdings (LNK) are now occurring in March, but our view remains that the odds of these deals completing remain high and we continue to expect to make excellent annualised returns. Blue Chips as a portfolio held up reasonably well, with only Wesfarmers (WES) the major detractor, declining -8.58%.

The US Growth portfolio was also lower, declining by -3.23% net of fees, with a large portion of this being a result of a stronger Australian dollar, which gained 2.8% for the month. Removing the currency affect, and the stocks outperformed the broader indices, particularly Quality stocks, with American Express (AXP) and Abbvie (ABBV) notable performers, gaining 8.1% and 17.9% respectively. On the detractors’ side, two health care stocks were the largest decliners, being Gilead Sciences (GILD, -12.1%) and Pfizer (PFE, -10.9%).

Finally, the Low Volatility portfolio declined by -0.45%, net of fees. The three equity-based ETFs that we held for the month, being IOO, IVV, and VTS all fell by over 5%, with the weakness exacerbated by a stronger Aussie dollar. Bond prices were also weaker, with CRED declining by -2.7%, while GOLD was higher, gaining 4.4% for the month.

Looking forward to March, and regarding equity markets, market sentiment indeed feels quite bearish at present, which can often be a sign that markets are closer to a bottom. It is always important to remember that stock markets are very forward-looking, meaning that they will often bottom when news is bearish and top out when everything looks rosy again. Nevertheless, how and when the conflict in Ukraine is resolved will likely play a major part over the coming weeks.

All performance data presented in this document relates only to the start date of the SMA portfolios, being June 2019 for ASX Income and Low Volatility and July 2021 for ASX Growth and US Growth. The performance below refers to the model portfolios, net of both management and performance fees, which will not match exactly everyone’s account while providing an accurate representation.

Please use the investor portal or call us to check your account-specific performance.

*Past performance is not indicative of future performance. The inception date for ASX Growth and US Growth is 1 July 2021. Low Volatility and ASX income inception date is 12 June 2019

The above table shows the returns of each portfolio, being ASX Growth, US Growth, ASX Income, and Low Volatility, 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 account’s performance.

Please note that we don’t have historical data for the ASX and US Growth portfolios, as were included in the SMA offering from 1 July 2021 whereas ASX Income and Low Volatility remain unchanged.

For those interested in the historical performance of the individual strategies, please click here

*Past performance is not indicative of future performance. The inception date for ASX Growth and US Growth is 1 July 2021. Low Volatility and ASX income inception date is 12 June 2019.

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.

*$70,000 for US Growth

**5.0% for Low Volatility

****1.0% for Low Volatility

The PDS and target market determination can be obtained by calling 02 8302 3600 or visiting our website.

This information has been prepared and issued by Rivkin Securities Pty Ltd (ABN: 87123290602, AFSL: 332 802).

Important Notice: Please consider your own financial situation before investing in our products. Rivkin does not provide personal financial advice and does not take anyone’s personal financial situation into account when structuring its model portfolios.

Past performance and/or backtesting is not a guarantee of future performance. Investing and trading carry financial risk, when judging performance please consider the different types of investments and levels of risk associated.

The Trust Company (RE Services) Limited (ABN 45 003 278 831, AFSL 235150) (part of Perpetual Group ABN 45 003 278 831 AFSL No 235150) is the responsible entity and the issuer of units in the Mainstream Separately Managed account. It is general information only and is not intended to provide you with financial advice, and has been prepared without taking into account your objectives, financial situation or needs. You should consider the product disclosure statement, available on www.rivkin.com.au, prior to making any investment decisions. If you require financial advice that takes into account your personal objectives, financial situation or needs, you should consult your licensed or authorised financial adviser. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.

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. 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.

PERPETUAL BEING THE ISSUER AND RESPONSIBLE ENTITY UNDER The Trust Company (RE Services) Limited (Perpetual, Responsible Entity, RE, we, us or our), part of the Perpetual Group ABN 45 003 278 831 AFSL No 235150