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 continued to climb higher as momentum drove the MSCI World Index up 3.5% in April.
The volatility that plagued equity markets in the December quarter appears to have abated somewhat despite no progress or resolution to the ongoing US/China trade war.
Although global bond yields rallied somewhat throughout the first half of April, they remain comfortably low. US 10 year Treasury yields rose to 2.50%.
The US was the notable outperformer in April rising 4% to all-time highs as stronger than anticipated economic growth gave investors further cause to buy the market.
The Australian equity market also rallied with the ASX200 Accumulation Index adding 2.4% in April.
Oil continues to bounce higher as the US demanded buyers of Iranian oil cease purchases by May or face sanctions. Both Brent and WTI rallied nearly 6% to $71 and $63/barrel respectively.
Iron ore continues to approach the $100/tonne level as supply side shocks from both Brazil and Australia were met with solid demand from China. Iron ore trades $96.50/tonne.
Contributors to performance in April were Afterpay (APT) + 22%, Amcor (AMC) + 4%, ANZ and WBC + 4.5% and 6%. APT trades well with both user and merchant subscription numbers in the US tracking nicely and the upcoming rollout of its UK business exciting the market. AMC announced a 16.8c dividend as it moves towards finalising its acquisition of Bemis whilst the banks were well bid ahead of their upcoming ex-dividend dates in the second week of May.
Detractors from performance were BWX (BWX) and Pendal (PDL) which fell -4.8% and -1.3%. BWX was weaker despite there being no news released in April. We await an update from management detailing whether a turnaround in its key Sukin branded products is occurring. In the case of PDL, April fund flows disappointed with a notable outflow in PDLs higher margin JO Hambro unit. Despite the headwinds facing Pendal, dividend income remains steady and PDL stock trades at a significant discount to its peers. We continue to hold the stock with a keen interest on the next set of FUM flows.
We were less active than normal in April with a Federal Election looming. However, we reduced our position size in NUF and established a new position in Boral (BLD) in the Growth SMA. The Diversified Income SMA exited its position in the Rare Infrastructure fund and used the proceeds to participate in the new Metrics IPO – the Income Opportunities Trust (MOT.) The Defensive SMA likewise participated in the MOT IPO whilst the International SMA sold down its MGG holding. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.
RISK PROFILE PERFORMANCE FIGURES
As at 30 April 2019
SMA—MODEL PORTFOLIO PERFORMANCE FIGURES
As at 30 April 2019
What is a Separately Managed Account (SMA)?
What’s the benefit of a Separately Managed Account (SMA) to a Managed Fund?
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