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 September 2021

Following a strong streak of gains throughout 2021, equity markets, both locally and in the US, took a breather throughout the month of September. Given the large rallies over the past six to nine months, a pause in the trend doesn’t come as a huge surprise. In terms of monthly figures, the ASX200 Accumulation Index declined 1.9% in September, while the S&P500 in the US was 4.8% lower. For a second month in a row, materials stocks were the weakest performers, declining 12.1% in Australia, and 7.4% in the US at the sector level. Energy stocks were the only parts of the market to demonstrate meaningful gains, thanks to strong price movements in many of the underlying commodities, with both crude oil and natural gas prices rallying to multi-month highs.

The correction in equities can be attributed to several macroeconomic risks at the forefront of investors’ minds. At the start of the month, the potential collapse of one of the world’s largest and most heavily indebted property developers, Evergrande, prompted concerns of a “Lehman moment” in China, which could spread globally. Although throughout the month these concerns have largely subsided, and the impact is largely viewed as being limited to within China only.

In the U.S. the debt-ceiling debate is ongoing, with 18^th of October deadline fast approaching, although it appears as though a temporary reprieve will be passed to push the deadline back until December, giving the Democrats enough time to raise the debt limit through the budget reconciliation process without Republican support. Additionally, yields have resumed their upward march in September as the Federal Reserve prepares to taper its emergency stimulus measures, with major central banks echoing a similar tone.

Expectations of a cold winter in the northern hemisphere and low inventories in the wake of the pandemic, have seen energy prices soar, particularly in Europe. This has added additional inflationary pressures, prompting comparisons to the 1970s stagflation environment, where low demand and high unemployment was accompanied by high levels of inflation. This remains a key risk for investors, with central banks having limited tools to deal with inflation which is driven by supply side factors.

To the portfolios, and Rivkin offers four options on the Mainstream Self-Managed Account (SMA) platform, being ASX Growth, US Growth, ASX Income, and Low Volatility. Both Growth portfolios employ a systematic approach to stock selection, utilising both ‘momentum’ and ‘quality’ factors, and aims to identify high growth companies, whereby returns are predominantly generated from capital gains. By their nature, the two growth portfolios tend to select higher beta stocks, meaning they result in a portfolio that often has higher volatility than the broader market. While the ASX Income portfolio focuses on dividend paying Blue Chips stocks, and corporate events, such as takeover arbitrages, thus tends to be less volatile, compared to both the ASX Growth portfolio, and the ASX200. The final portfolio, Low Volatility, is the least volatile of all, partly because it invests across multiple asset classes in addition to equities, such as bonds, cash, and gold.

Looking at the performance for the month of September, all four portfolios were lower for the month; ASX Growth declined 3.37%, US Growth declined 2.94%, while the ASX Income and Low Volatility portfolios were down by 1.27% and 1.81% respectively, with all figures stated being net of fees. With ASX Growth, Mineral Resources (MIN, -18.4%) and Pro Medicus (PME, -13.4%) were the biggest drags on the portfolio, while IDP Education (IEL) bucked the trend, gaining 18.4% for the month. The ASX Income portfolio held up quite well thanks to several small gains across the ‘Events’ strategy and was mainly impacted by heavy falls from the diversified miners BHP Group (BHP, -12.2%), and Rio Tinto (RIO, -10.6%).  Finally, the Low Volatility portfolio was impacted broadly across its holdings, with equities, bonds, and gold all lower for the month. While it is a little surprising to see all asset classes move lower together, we do not believe this reflects a breakdown in the longer-term correlations. Using monthly returns, over the past 5 years, the correlation between US equities (IVV) and the Australian dollar gold price (GOLD) has been -0.18, meaning they tend to move inversely to one another. Put another way, while both have long-term uptrends, when one ETF is up for the month, the other is typically down. While the correlation between IVV and bonds (VAF) over the same timeframe has been 0.09, which represents a very low positive correlation. It is this low positive to negative correlation between these major assets classes which aids greatly in providing an overall low volatility return profile.

Looking to the months ahead, the pullbacks across equity markets to date have been rather orderly and appear to be merely just a corrective pause, meaning we do not believe there is cause for concern at this point. More so, we do perceive that any of the above-mentioned macro risks are overly major and systemic at this point, which would be needed to justify the view that equity markets were poised for significant falls.

All performance data presented in this document relates only to the start date of the SMA portfolios on June 12, 2019. The performance below refers to the model portfolios, net of 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 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.

As Investors should be aware, we have recently made changes to our SMA portfolios, to simplify our offering. As of this month, we are reporting on the four portfolios now available, being ASX Income, Low Volatility, ASX Growth, and US Growth. 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 20201, whereas ASX Income and Low Volatility remained 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). It is general information only and not intended to provide you with financial advice, and has been prepared without taking into account your objectives, financial situation, or needs. If you require financial advice that takes into account your personal objectives, financial situation, or needs, you should consult your licensed or authorized financial advisor.

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