Prime SMA Performance Summary – June 2018
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
There was wide dispersion across equity markets in June as the financial year came to a close.
The US was modestly higher (+0.5%) while European equity markets were softer (EuroStoxx50 -0.3%) as ongoing political instability in Italy caused weakness in both equity and bond markets.
Emerging markets fell for the fifth consecutive month (-4.5%) with significant underperformance in China and a strengthening USD the main factors.
Asian equity markets were sold off heavily with China (-8%) and Hong Kong (-5%) the main targets. The introduction of tariffs on Chinese goods by the Trump Administration was the major catalyst, but it also impacted the performance of shares in other major export-oriented economies such as Korea which also fell -4%.
Locally, the ASX200 Accumulation Index outperformed rising +3.3% driven by the energy (+7.8%) and bank (+4.1%) sectors. Telcos were once again a drag on portfolios (-5.8%) with the sector now down 25% in 2018.
Oil bounced strongly – Brent Crude +1.8% and WTI +10.5% following the US State Department’s request for all allies to suspend Iranian oil imports, which if adhered to would see a material reduction in global oil supply.
The AUD/USD was 2% weaker as concerns over the impact a US-China trade war may have on Australia saw the currency fall to 74c.
Best performers in June were Afterpay (APT) which bounced 20% following its recent foray into the US market which by all reports is gaining solid traction. APT remains a stock favourite of ours. Pleasingly Oil Search (OSH) and Woodside (WPL) rose 8% and 9% respectively on account of the oil price strength.
Detractors from performance were Regis Healthcare (REG) which fell -12% following a broker downgrade. Recently IPO’d L1 Capital (LSF) disappointingly lost 7% after having recorded its worst monthly performance figures since the funds inception. We retain confidence in the manager that this will be recouped over the coming months. Telstra (TLS) fell a further 6% as plans to establish a standalone infrastructure business and strengthen its balance sheet couldn’t offset cuts to FY19 EBITDA guidance.
The Growth SMA underperformed in June while the Diversified Income, Defensive Income and International SMAs all outperformed. Performance across all risk profiles continues to beat the benchmark on a 5-year view. We were very active across the portfolios in June. In the growth SMA we purchased a new position in Magellan (MFG) and added to Vocus (VOC) and Qube (QUB) while trimming Afterpay (APT), Macquarie (MQG), Woodside (WPL) and Oil Search (OSH) after recent share price strength. We replicated the MFG trade in the Diversified Income SMA, cut AGL Energy (AGL), trimmed WPL and MQG and added 1.5% to TLS. The Defensive Income and International SMAs remained unchanged.
|RISK PROFILE PERFORMANCE FIGURES
AS AT 30 JUNE 2018
|1 Mth||3 Mths||6 Mths||1 Yr||2 Year (PA)*||3 Year (PA)*|
|*Annualised return. Portfolio inception date 03/07/2012|
|SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
AS AT 30 JUNE 2018
|1 Mth||3 Mths||6 Mths||1 Y||2 Year (PA)*||3 Year (PA)*||5 Year (PA)*|
|Prime Australian Equity Growth SMA||1.20%||5.91%||3.07%||11.50%||11.70%||6.79%||10.59%|
|Prime Australian Defensive Income SMA
* Annualised return. Portfolio inception date 03/07/2012
|Prime Diversified Income SMA||1.75%||1.71%||-0.94%||4.97%||–||–||–|
|Prime International Growth SMA||1.61%||3.70%||3.27%||13.23%||14.32%||–||–|
|*Annualised return. Portfolio inception date 18/02/2016|
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