Prime SMA Performance Summary – March 2018

Portfolio Objective

To achieve capital growth with moderate tax-effective income via franked dividends through investment in listed Australian securities.

The Model Portfolio is managed by selecting primarily those securities with moderate growth potential but robust cash-generating capacity. These securities are expected to deliver an above-market average income yield, together with a relatively moderate level of capital growth. The portfolio benchmark is the S&P/ASX200 Accumulation Index.

Portfolio Commentary & Positioning

Global equity markets fell further in March – a continuation of the prior month’s weakness.

US, European and Asian markets lost 2-3% as rising trade tensions between the US and China spooked markets.

A sell-off in the tech space following Facebook Incs data-leak scandal further added to market weakness.

The US Federal Reserve hiked rates to 1.75% and pointed towards 3 more interest rate rises this year given the strength in the US economy and rising inflation, which rose to 2.4% year-on-year in March – it’s highest reading in a year.

US bond yields fell to 2.74% as investors took risk off equity market tables, seeking the perceived safety of bond markets.

Locally, the ASX200 Accumulation Index underperformed the wider market falling 3.7%

Iron ore lost 19% to trade at a four month low of $65/tonne as stockpiles once again increased. Meanwhile oil rallied 7% as geopolitical tensions and an ongoing cutback in oil production continues to bolster prices.

The AUD fell 1% to trade under 77c and was weaker against a basket of currencies with the falling iron ore price a major factor.

Unsurprisingly, materials was one of the worst sectors losing -5.6% and despite the bounce in oil, energy stocks only marginally outperformed, still falling -2.8%. Telco and bank sectors were equally weak, down ~6%. Increased funding costs for the banks and the ongoing royal commission as well as TLS going ex-dividend were all catalysts. Defensive sectors such as utilities and REITs outperformed.

APN Outdoor (APO) added 7.9% and continues to benefit from a strong balance sheet and growing revenues. HSO +2.4% and AMC +1.9% benefitted from some M&A speculation and a falling AUD.

Detractors from performance were Regis Healthcare (REG) -12.5% and Qube (QUB) -12%. Rising staff costs and falls in occupancy hurt REG. QUB was weak following potential legal action over its MCS acquisition, which has since been dropped.

The Growth and Defensive SMAs outperformed during March. We added to positions in IFL and BTT and bought new positions in APT and VOC. We trimmed weights in longer-dated capital notes ANZPD and CBAPD as a result of the proposed Labor tax on imputation credits. The Diversified Income SMA underperformed as many of its underlying holdings went ex-dividend but like the International SMA was otherwise unchanged.

RISK PROFILE PERFORMANCE FIGURES
AS AT 31 MARCH 2018
PRE-FRANKING CREDITS
 1 Mth3 Mths6 Mths1 Yr2 Year (PA)*3 Year (PA)*
High Growth-1.19%-1.07%5.68%8.46%10.14%5.81%
Growth-0.76%-0.72%4.84%7.51%8.98%5.38%
Balanced-0.54%-0.54%4.23%6.85%8.24%5.66%
Moderate-0.12%0.22%3.19%5.69%6.88%4.44%
Conservative0.27%0.25%1.85%4.27%5.25%3.77%
*Annualised return. Portfolio inception date 03/07/2012
SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
AS AT 31 FEBRUARY
PRE-FRANKING CREDITS
 1 Mth3 Mths6 Mths1 Y2 Year (PA)*3 Year (PA)*5 Year (PA)*
Prime Australian Equity Growth SMA-2.61%-2.94%5.72%4.26%8.19%2.17%9.00%
Prime Australian Defensive Income SMA
* Annualised return. Portfolio inception date 03/07/2012
0.28%0.24%1.90%4.40%5.43%3.87%4.89%
Prime Diversified Income SMA-2.65%-2.82%2.40%
Prime International Growth SMA-1.10%-0.73%6.26%14.49%13.51%
*Annualised return. Portfolio inception date 18/02/2016

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Disclaimer: This information has been prepared by Primestock Securities Limited ABN 67 089 676 068, AFSL 239180 (“Prime”). Prime accepts no obligation to correct or update the information or opinions in it. This information does not take into account your objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate to your situation. It is recommended that you obtain financial, legal and taxation advice before making any financial investment decision. Prime is bound by the Australian Privacy Principles for the handling of personal information.

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