Prime SMA Performance Summary – September 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
Global equity markets climbed higher in September with the MSCI World Index rallying 0.5%.
US equity markets were modestly higher but in keeping with the global index rising 0.4%. Strength in the US economy and robust job growth were reflected in September’s US consumer confidence numbers which surged to an 18-year high.
The Federal Reserve hiked rates 0.25% as anticipated and forecast another rate rise for December. Economic momentum was further reflected in US 10 year treasury notes which increased to 3.05%
China responded to the US announcing tariffs on $60bn worth of US goods and continued its recent run of equity market volatility rising 3.5% for the month, however remains 20% weaker for the calendar year.
The Australian share market was weaker with the ASX200 Accumulation Index falling 1.26%
Oil continued to climb higher rising 6% as US sanctions on Iran and disruptions to global crude supplies provided a strong level of support.
Stocks in the energy space performed best rising +4% on account of the strength in oil. Meanwhile health care stocks fell 8% following the announcement of a Royal Commission into aged care.
Major contributors were Vocus (VOC) which rose 15%. VOC stands to benefit from the proposed merger between TPG and Hutchison as the industry becomes less competitive. Woodside (WPL) added 4.6% and rode the rally in the oil price, whilst Telstra (TLS) added 2.9% despite a minor cut to FY19 guidance.
Detractors were Regis (REG) which fell 17% alongside other aged care providers Japara and Estia. The Royal Commission will take some time to play out but we continue to think REG is undervalued at these levels and offers up a 7% dividend yield. BWX Limited (BWX) fell 16% following Bain Capital’s withdrawal of its takeover offer. We added to BWX on this weakness believing the growth opportunities locally and offshore remain favourable.
The Growth SMA and International SMA were both in line with their respective benchmarks, the Defensive SMA outperformed slightly whilst the Diversified Income SMA was weaker. On a risk-profile basis we continue to track ahead of benchmarks on a 5-year view. We made a host of changes in the Growth SMA buying a new position in Challenger (CGF), adding to IFL, BWX and AMC and taking profit in VOC. In the Diversified Income SMA we sold our remaining position in APA and would consider re-entering should FIRB oppose CK Infrastructure’s takeover. We also increased our holdings in IFL and REG.
|RISK PROFILE PERFORMANCE FIGURES
AS AT 30 SEPTEMBER 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 SEPTEMBER 2018
|1 Mth||3 Mths||6 Mths||1 Y||2 Year (PA)*||3 Year (PA)*||5 Year (PA)*|
|Prime Australian Equity Growth SMA||-1.26%||6.32%||12.60%||19.30%||12.05%||11.36%||10.10%|
|Prime Australian Defensive Income SMA
* Annualised return. Portfolio inception date 03/07/2012
|Prime Diversified Income SMA||-1.31%||2.43%||4.18%||6.80%||–||–||–|
|Prime International Growth SMA||0.44%||4.72%||8.59%||15.85%||15.22%||–||–|
|*Annualised return. Portfolio inception date 18/02/2016|
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