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

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

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