Prime SMA Performance Summary – February 2020

Global equities sold off heavily in February as represented by the MSCI World Index which fell by over -8%.

Coronavirus fears and the increasing number of reported cases outside of China led to all major equity markets trading lower.

The impact of the virus on global growth and corporate earnings will be severe as travel bans, production and social distancing look set to cause major demand and supply side shocks.

US equities fell -8.4% and volatility as measured by the VIX reached higher levels than during the GFC.

China fell -3.2% with production halted by factory closures and supply stopped as cargo ships were docked at seaports unable to leave.

Locally, the ASX200 Accumulation Index fell -7.7% as half year reporting season came to a close.

Australian bond yields tightened with 10-year Government bonds falling to new records lows of 0.81%

Oil extended January’s declines falling -10% as concerns over global growth increased. Iron ore fell -12% on similar worries and China’s effective shutdown.

The major contributor to performance was Challenger (CGF) which rose +1.5% after reporting 1H revenues of $1.2bn and an increase of 10% in assets under management. We remain confident CGF will be a major beneficiary from the requirement for superannuation funds to offer comprehensive income products for retirement (CIPRs) in coming years.

Detractors were IOOF (IFL) and Downer (DOW) which fell -28% and -23% respectively. IFL reported 1H NPAT of $115m and was sold off due to concerns relating to provisions made against ‘no advice’ whilst DOWs cashflows were weak and net debt was significantly higher than analyst forecasts.

We were active across the SMAs in February. The Growth SMA established a new position in software developer Altium and added to NUF, BLD, IFL, DOW and TLS whilst reducing its exposure to APT and CGF. The Diversified Income SMA added to BLD, DOW and TLS and the Defensive Income SMA reduced its exposure to MXT at $2.03. The International 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 29 February 2020

Prime SMA – Model Portfolio Performance Figures as at 29 February 2020

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