Six Park Update January 2020

Discussion in 'Shares & Funds' started by Redwing, 21st Feb, 2020.

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  1. Redwing

    Redwing Well-Known Member

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    Asset class performance

    While all asset classes posted positive returns in January 2020, global property and International Shares (un-hedged) were the standout performers, gaining +6.3% and +5.3% for the month respectively.

    Global property surged +6.3% in January. Most of this advance was currency-related, with the AUD falling -4.2% over the month against the USD (and hence boosting the value of overseas assets in local currency terms). US real estate stocks were the strongest underlying performers, boosted by a better-than-expected start to the local reporting season.

    International equities returned +5.4% for the month, although without the benefit of the falling AUD, underlying gains were only +1.7%. US shares rallied to record highs in the first two weeks of the week (buoyed by easing US-China trade tensions and solid economic data releases) before giving back most of those gains by month-end on mounting fears surrounding the coronavirus. European and Japanese stocks ended the month slightly down, with escalating Middle East tensions (with assassination of an Iranian General leading to an Iranian missile response) and concerns over the coronavirus weighing on investor confidence.

    Australian shares posted their best start to a new year since 2012, gaining +4.9%. While coronavirus concerns took some of the shine off the local bourse in the final weeks of January, all sectors ended the month in positive territory. Healthcare and technology stocks led the way, with gains in excess of +11% for the month.

    Infrastructure rose +4.5% in January. Utilities were among the strongest performers, benefiting from their perception as safe haven assets. Port and transport operators also registered strong gains on the back of the signing of the US and China’s first phase trade agreement midway through the month.

    Fixed income added +2.2% for the month. The sector benefited from rising investor caution and the RBA reaffirming its accommodating monetary policy stance.

    Emerging markets ended January up +0.2%, with the tailwind from a falling AUD helping to mask underlying price declines. Chinese shares ended the month down, although losses were largely contained due to the market closures over the Chinese New Year (which spanned from 24th January to month-end). Broader concerns over the impact of the coronavirus on Chinese (and global) growth saw sharp declines in commodity prices, and this weighed heavily on sentiment towards agricultural economies including Brazil, Mexico and South Africa.

    Our cash yield ETF posted another marginal gain of 0.1%. This subdued return reflects the prevailing low-interest rate environment. Despite these low returns, this sector continues to be an important asset class in our portfolio given its high level of capital security and low risk correlation with our other ETFs.

    https://www.sixpark.com.au/news/2020/performance-january-2020
     
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  2. Redwing

    Redwing Well-Known Member

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    I thought I'd check in on Six Park again

    [​IMG]

    Asset class performance
    Almost all asset classes, apart from our cash yield ETF, tumbled in March. Australian equities and global property fared worst of all, falling -18.9% and -20.8% respectively.

    Our cash yield ETF added 0.1% in February. This asset class continued to provide capital stability across our lower risk portfolios albeit with subdued returns given the prevailing low-interest rate environment.

    Fixed income fell -0.6% for the month. Although bonds typically provide a hedge against share market declines, such was the extent of this month’s equity market rout that even traditionally safe-haven assets (such as the government bonds held by our chosen ETF) dropped in price. Much of this decline was likely driven by a cascade of selling by fund managers who were forced to sell assets (including bonds) to cover stock losses, meet investor redemption requests and bolster cash levels. Despite this decline, our fixed income ETF has still returned +6.2% over the past 12 months.

    International equities fell -7.3% in March (and -13.0% on a hedged basis without the benefit of the ‑5.4% fall in the AUD) as the combination of (i) the rapid coronavirus outbreak (which forced countries into lockdowns) and (ii) a collapse in oil prices (ignited by a supply dispute between Saudi Arabia and Russia) sent stock markets tumbling. Central banks and governments reacted swiftly with an array of stimulative measures to help companies and consumers bridge the fallout. While this helped trigger “relief rallies” towards the end of March, all major markets ended the month sharply down. In the US, the S&P500 was down -12.5% for the month (its worst result since October 2008) while European and Japanese markets experienced declines of similar magnitudes.

    Emerging markets fell -12.5% over the month. Coronavirus worries, falling oil prices along with a strengthening USD (which raises debt servicing costs in local currency terms) were all contributing factors. Brazilian and South African markets were among the worst affected. China share markets were also down but outperformed other markets as the number of local virus cases declined and economic activity began to resume.

    Infrastructure stocks fell -15.8% in March although we saw large disparities in performance across different segments of the asset class. Transport related stocks (particularly airports and toll roads) fared worst (down 25-40%) and were a significant drag on performance as investors priced in significant short-term declines in passenger movements and patronage). Utilities and communication stocks held up better, with the latter actually rising roughly 4% for the month.

    Australian shares under performed their global counterparts for a second consecutive month, falling -18.9%. Only one of the country’s 22 sub-industry sectors posted gains (household & personal products). Leading the declines were the energy, real estate, and consumer segments (all down by more than 34% for the month!)

    Global property was the worst performing sector in March, falling -20.8%, even with the benefit of a -5.4% fall in the AUD. The sector continued to face sharp sell-offs on concerns about the impact that business closures would have on rental incomes and vacancies.

    https://www.sixpark.com.au/news/2020/performance-march-2020
     
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  3. Nodrog

    Nodrog Well-Known Member

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    Note DJRE is “unhedged” also (compare to VGS), hence that’s quite a nasty fall.

    As time goes on I’ve becoming increasingly adverse to so call “separate asset classes” such as Listed Property / Infrastructure. They’re nothing more than “sectors” which come with the associated risks which result from taking a bet on a particular part of the overall market.
     
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  4. sfdoddsy

    sfdoddsy Well-Known Member

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    I have a very similar portfolio to the Six Park ones, albeit using Vanguard, and have had very similar results. On the face of it the diversification into 'sectors' such as infrastructure, property, emerging markets and (in my case) small caps hasn't done a great deal in terms of spreading risk.

    I would have been better off with the less flashy diversification of the Vanguard funds.
     
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  5. Redwing

    Redwing Well-Known Member

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    Australian shares (STW) outperformed global equities for only the second time this year, gaining +5.3% on the back of higher commodity prices and optimism around the easing of lockdowns across the country. Almost all industry sectors posted gains, led by the consumer durables sector (+27%) and software services (+14.5%). Pharmaceuticals (-10.4%) and food/staples (-0.7%) were the weakest performers, both giving back some of their earlier gains from April.

    Hedged international equities (VGAD) advanced +2.9% on a hedged basis in May while unhedged returns (VGS) were slightly lower (+1.4%) as a result of the drag from the AUD’s +1.4% appreciation against the US dollar. European, US and Japanese markets all registered strong gains as the rate of Covid-19 infections continued to moderate and lockdown measures began to be eased. Hong Kong was the main laggard, declining ‑2.5% on fallout from China’s proposed new national security legislation for the territory.

    Infrastructure (IFRA) added +2.4% for the month, boosted by gains across the transport sub-sector, which benefited from expectations of an easing in travel restrictions.

    Returns across fixed income and cash yield were positive but muted. A modest decline in government bond yields saw our chosen bond ETF (IAF) marginally outperform cash (AAA).

    Global property (DJRE) fell -1.1% in May. Real estate stocks in the US and Europe chalked up gains for the month (amid a general improvement in investor sentiment) but were offset by falls in Asian markets (spooked by China’s security announcement regarding Hong Kong) and headwinds from the AUD’s 1.4% appreciation over the month.

    Emerging markets (VGE) fell -3.2% over the month, dragged down by losses across Chinese and Taiwan markets (which represent a combined 52% of our chosen ETF). Both markets declined on concerns of worsening US-China trade relations following the passing of a US Senate bill that would see some Chinese companies barred from being listed on US stock exchanges.
     
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