Prime SMA Performance Summary – January 2019

Prime SMA Performance Summary – January 2019


 Prime SMA Performance Summary – January 2019

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 recovered much of the previous month’s selloff with the MSCI World Index rallying 7.8% in January.

Fears over slowing growth and trade wars abated somewhat in January with global risk sentiment rebounding from a poor final quarter in 2018.

The US equity market added 7.9% on the back of strong earnings and a more dovish Federal Reserve. Better than expected earnings numbers from Facebook and General Electric led to the stocks rising +27% and +34% respectively.

The USD was weaker against a basket of currencies with the AUD buying 72.7c at the end of January.

US bond yields continued their fall in line with the Federal Reserve’s more cautious tone. US 10 year Treasury yields currently yield 2.62%

Asian equity markets followed global equity markets higher in January. Negotiations between China and the US indicated a possible resolution to the ongoing trade dispute.

The Australian equity market was stronger with the ASX200 Accumulation Index rising 3.9%.

Large caps added 2.5% while mid-caps and small caps fared better climbing 4.5% and 5.5% respectively.

Commodities were strong – Iron ore rose 18% to trade $84/tonne, a near 2-year high. Oil reversed a 3-month fall as OPEC cut production by nearly 800,000 barrels per day to stem the oversupply in the oil market. Brent rose to $61/barrel (+13%) and WTI to $54/barrel (+18%.)

Contributors to performance in January were Afterpay (APT) +28% and Magellan (MFG) +21%. APT announced underlying sales in 1H FY19 of $2.2b, up from $918m in the previous corresponding period. We await official 1H earnings numbers in February with confidence. MFG was likewise strong announcing 1H performance fees of $42m, up from $9.6m in the previous period. Meanwhile OSH and WPL both rode the oil price tailwind adding 9%.

The worst performer was Challenger (CGF) which fell 24%. CGF downgraded earnings citing market volatility, softer performance in the Life absolute return portfolio and falling performance fees. Whilst the downgrade indicates growth of 0-3%, well below the previous guidance range of 8-12%, we remain bullish on CGF. The Retirement Income Framework (RIF) is to be introduced in July 2019 and we view CGF as a major beneficiary of this.

Across the SMAs we increased our exposure to CGF in the growth SMA and added CGF to the Diversified Income SMA. The Defensive SMA reduced some of its existing holding in MXT and the International SMA reduced a portion of MGG. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

  1 Month 3 Months 6 Months 1 Year 2 Year (PA)* 3 Year (PA)* 5 Year (PA)*
High Growth 2.98% -0.30% -3.71% 0.88% 7.92% 7.73% 8.65%
Growth 2.29% 0.21% -2.17% 1.63% 7.14% 7.07% 7.80%
Balanced 1.87% 0.53% -1.22% 1.99% 6.55% 6.62% 7.16%
Moderate 1.08% 1.06% 0.43% 2.59% 5.50% 5.76% 6.02%
Conservative 0.46% 1.71% 2.10% 3.38% 4.04% 4.66% 4.42%
*Annualised return. Portfolio inception date 03/07/2012


  1 Month 3 Months 6 Months 1 Year 2 Year (PA)* 3 Year (PA)* 5 Year (PA)*
Prime Australian Equity Growth SMA 4.54% -0.83% -7.97% -0.79% 5.86% 6.85% 7.74%
Prime Australian Defensive Income SMA
* Annualised return. Portfolio inception date 03/07/2012
0.48% 1.78% 2.18% 3.49% 4.17% 4.82% 4.55%
Prime Diversified Income SMA 3.08% 0.77% -3.18% -2.61%
Prime International Growth SMA 3.32% -0.66% -3.00% 0.46% 10.42%
*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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By | 2019-02-21T17:45:22+11:00 February 21st, 2019|Active Management Performance, Uncategorized|0 Comments

About the Author:

As the Chief Investment Officer (CIO) for Prime Financial Group, I work closely with the national advisory team, high net worth individuals, family groups and Prime’s broader accounting network to provide considered and pro-active investment advice.