Prime SMA Performance Summary – October 2019

October was another positive month for global equity markets as represented by the MSCI World Index adding +2.5%.

Optimism surrounding US-China trade negotiations bolstered equity markets with the announcement of the ‘first phase’ of a trade deal.

Providing further support and investor confidence was the reduced risk of a no-deal Brexit.

US equities advanced 2% following another 0.25% rate cut from the Federal Reserve in spite of slowing jobs growth. The unemployment rate ticked higher from 3.5% to 3.6% largely as expected.

Interesting to note was McDonalds missing profit estimates for the first time in 2 years having remodelled 14,000 US restaurants and partnering with Uber Eats. Shares fell -8%.

Asian share markets performed best with Japan +5% and Hong Kong +3% as a result of the improved US-China deal.

The ASX200 Accumulation Index underperformed falling -0.4% as the RBA followed the Federal Reserve 0.25% lower.

Australian bond yields widened further with 10-year Government bonds yielding 1.14% at month end.

Oil was broadly flat during October. Iron ore fell -10% to trade $83/tonne as demand falls along with construction during the winter months in northern China.

Contributors were IOOF (IFL) and Regis Healthcare (REG) which added +15% and +11% respectively. IFL rallied after announcing a $125m reduction in the purchase price of the ANZ Wealth business.

Afterpay (APT) was the major detractor falling -20% after broker UBS initiated coverage on the stock with a sell rating. Given APTs recent strength we view this correction as a buying opportunity.

The Growth SMA added to Boral (BLD), as did the Diversified Income SMA which also sold the remainder of its Westpac (WBC) holding ahead of its FY19 results. The Defensive Income and International Growth SMA went unchanged. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

Portfolio Performance Figures

Risk Profile Portfolio Performance Figures as at 31 October 2019

Prime SMA – Model Portfolio Performance Figures as at 31 October 2019

About the Portfolio

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

Model Portfolio
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.

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