fitzpatricks mda risk targeted portfolios...fitzpatricks mda risk targeted portfolios monthly report...

FITZPATRICKS MDA RISK TARGETED PORTFOLIOS

Monthly Report, November 2017

www.fitz.com.au 1Monthly Report | Fitzpatricks MDA

AS AT 30 NOVEMBER 2017 Performance VolatilitySharpe Ratio

Inception

1 Month

3 Months

6 Months

1 Year

2 Years p.a.

3 Years p.a.

5 Years p.a.

Since Inception

Since Inception

Since Inception Date

Risk Targeted Moderately Conservative Portfolio

0.9% 3.1% 3.1% 5.9% 2.4% 4.5% 6.2% 7.3% 3.1% 1.0 30/09/02

Risk Targeted Balanced Portfolio 1.6% 5.0% 4.5% 9.5% 3.5% 6.6% 9.1% 9.2% 4.5% 1.2 30/09/02

Risk Targeted Growth Portfolio 1.9% 6.2% 5.3% 11.6% 4.2% 7.6% 10.2% 10.6% 5.5% 1.2 30/09/02

Risk Targeted High Growth Portfolio 2.0% 6.4% 5.4% 12.0% 4.4% 7.8% 10.5% 11.7% 6.3% 1.2 30/09/02

RBA Cash Rate 0.1% 0.4% 0.7% 1.5% 1.6% 1.8% 2.1% 4.1% 0.5% 0.0 30/09/02

50-50 Australian Equity and Cash 0.9% 3.0% 3.7% 7.9% 7.0% 5.4% 6.4% 6.9% 6.3% 0.4 30/09/02

Australian Equities 1.6% 5.7% 6.6% 14.6% 12.3% 8.7% 10.6% 9.4% 12.7% 0.4 30/09/02

Australian Small Cap Equities 3.9% 11.6% 17.3% 20.5% 16.9% 13.4% 7.4% 7.5% 17.2% 0.2 30/09/02

Australian Listed Property Trusts 5.3% 8.3% 4.8% 13.5% 11.9% 12.9% 14.0% 6.2% 16.4% 0.1 30/09/02

International Equities ($A) 3.2% 11.4% 7.5% 20.6% 10.3% 12.6% 19.4% 6.8% 11.4% 0.2 30/09/02

International Equities (Local) 1.6% 6.6% 8.3% 20.6% 11.8% 9.0% 13.6% 8.7% 13.1% 0.4 30/09/02

Australian Fixed Interest 0.9% 1.7% 1.0% 4.0% 3.7% 3.8% 4.3% 5.8% 2.8% 0.6 30/09/02

Gold 0.3% -3.5% 0.5% 8.7% 9.4% 3.0% -5.8% 9.5% 17.9% 0.3 30/09/02

Morningstar Multisector Conservative

0.7% 1.7% 1.9% 4.7% 3.7% 3.4% 4.3% 4.9% 2.2% 0.4 30/09/02

Morningstar Multisector Moderate

0.8% 2.5% 2.4% 6.5% 4.5% 4.1% 5.5% 5.3% 3.5% 0.4 30/09/02

Morningstar Multisector Balanced

1.2% 3.7% 3.7% 9.2% 6.4% 5.8% 7.7% 6.2% 5.6% 0.4 30/09/02

Morningstar Multisector Growth

1.5% 5.1% 5.0% 12.0% 7.8% 6.9% 9.2% 6.7% 7.4% 0.4 30/09/02

Morningstar Multisector Aggressive

1.9% 6.8% 6.6% 15.5% 10.0% 9.0% 11.8% 7.4% 9.5% 0.3 30/09/02

PERFORMANCE

Source: Fitzpatricks, Iress. Performance from 30 September 2002 to 30 November 2017. Performance of Fitzpatricks portfolios is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Inception was 30 September 2002. Performance is based on Fitzpatricks model accounts and will differ between the four risk profiles – individual client portfolio performance may be different from the results above. Market indices represent performance of; The RBA Cash rate, 50% split between The RBA Cash rate and S&P ASX 200 Accumulation Index, S&P ASX 200 Accumulation Index, S&P ASX Small Ordinaries Accumulation Index, S&P ASX 300 Listed Property Accumulation Index, MSCI World ex-Australia net $A and Local Currency, Bloomberg AusBond Composite Bond Index and the US Spot Gold price. Past performance is not a reliable indicator of future performance.

MARKET COMMENTARYGlobal equity markets broadly rose in November, the US market leading as it extended its impressive bull run into November. The S&P 500 recorded a solid 3.1% (USD) for the month and the Australian market was also stronger, the S&P/ASX 200 returning 1.6%. Europe was lower with the MSCI European Index down (-2.1%), so too were Emerging Markets, the MSCI Emerging Markets Index (USD) (-0.8%) lower. In contrast to recent stability, credit markets were volatile, particularly for High Yield credit. Bond yields were slightly higher, with the notable exception being Australia, and curves were generally flatter. The Australian dollar fell a further 1.3% against the US dollar, and volatility rose a little although continues to trend well below its typical levels. As the US S&P 500 continued to rally in November, more impressive was the fact that the S&P 500 Total Return Index (i.e. assumes dividend reinvestment) has not had a negative month since October 2016, the month prior to the US election. The Australian market in contrast has had 4 negative months over the same period, albeit 2 of those were very minor declines. Consumer Staples


FITZPATRICKS MDA RISK TARGETED PORTFOLIOS MONTHLY REPORT

and Consumer Discretionary were two of the leading sectors in the US for the month (both up in excess of 5%), however, the Information Technology sector lagged in November, although the sector is still up by a very solid 41% over twelve months, against 22.9% for the overall US market.Property and Resources led the Australian market, the S&P/ASX 300 Property Trusts Accumulation Index up by 5.3% and S&P/ASX 200 Resources Accumulation stronger by 3.1%. Financials were flat for the month, partly reflecting some weakness in the Banks. Banks were weaker leading into (and following) the announcement of the Royal Commission, but also reflected what impact a yield curve flattening may have on their earnings going forward. European equities were weak in general, down (-2.1%) for the month, although Germany outperformed (despite the breakdown of Angela Merkel’s attempts to build a coalition to form government). Emerging Markets were mixed, with the main focus on China as risks around China’s economic background lingered.

Credit markets saw a period of significant volatility in November, particularly in the High Yield segment of the market (i.e. the component rated below investment grade). The US High Yield market started the month on a very weak footing, and saw consistent selling until the middle of the month, at which point the High Yield Exchange Traded Fund was approximately 2.5% lower. However, we observed that selling was not indiscriminate and that much of the weakness came from two large internet service companies and telecommunications giant Sprint (which was sold on the back of a failed merger). The Investment Grade markets were significantly calmer, and the Australian market returned a positive 13.5 basis points (bps) in excess of government bonds. US Investment Grade corporate bonds provided a return in line with equivalent tenor government bonds (i.e. no excess return), and Euro Investment Grade saw a positive 5bps of excess return. The main focus in bond markets was not so much the direction of yields, but the change in the shape of the yield curve.



MARKET COMMENTARY (CONT.)Curves flattened aggressively in Australia and the US, and flattened slightly in Europe. The move in the US Treasury market was driven almost solely by the front end with 10yr treasuries remaining unchanged for the month. Front end yields rose (3yr yields were up 17bps) as the market became increasingly convinced that the Federal Reserve was on track to deliver close to its expected path of hikes as economic data remained firm, and the shorter term momentum in inflation turned slightly higher. The nomination of Jerome Powell to replace Janet Yellen as Chairman of the US Federal Reserve in February was seen as a continuation of the path that Janet Yellen has laid out in her almost 4 years as Chairman. Although some economic data in Australia continued to improve, there was considerable weakness in two areas being retail sales and wages growth. This ongoing weakness in both areas and a speech by RBA governor Philip Lowe highlighted that whilst the next move in rates would likely be higher it was likely to be further off than previously expected. This saw yields move lower over the month with 10 year bond yields falling a significant 17bps to close at 2.5%. The shift in momentum in the housing market over the past 2 to 3 months gives further support to a lack of pressure for the RBA to consider hiking rates at present, despite a clear preference (and some international pressure) to move away from record low policy rates. The flattening of curves remains in focus for investors across major markets (rates, credit and equities) as this has historically provided a lead on the economy potentially moving into recession. We do not believe recession is imminent and most macro-economic models place a very low probability on this, however, markets are watching this risk closely.The Australian dollar continued its decline against the US dollar over November (falling 1.3% to 0.76), and also falling materially against the Euro (-3.3%) reflecting mainly the continued decline in Australian bond yields relative to other markets. The US dollar reversed its October rise, declining 1.6% higher against a basket of its trading partners. The Japanese Yen and Euro were significant risers against the US dollar, the Japanese Yen in particular being driven by positioning adjustments given the significant short positions in the currency.

PORTFOLIO COMMENTARYThe Risk Targeted Portfolios continued to perform solidly in November as underlying asset exposures continued to contribute meaningfully to performance during the month. The Australian equity market continued to track positively against the backdrop of a supportive global growth environment. Solid news flow from the Annual General Meeting season continued to drive optimism about corporate profitability which supported the domestic equity environment. Allocations to the Atrium Equity Opportunities Fund delivered exceptional returns that significantly outperformed the broader index, posting a pleasing return of 3.1%. The result was driven by a range of core Fund positions with individual stock selection across a diversified range of industries boosting returns. Notable positive contributions from a range of holdings including remote communications service company Speedcast International (SDA), building materials company James Hardie Industries (JHX) and education services company Navitas (NVT) were the strongest contributors. Mid and smaller cap companies continued to outperform their larger counterparts in November which benefitted our managers. The SGH ICE Fund returned of 1.9% for the month, with returns coming across a diverse range of holdings including auto company Bapcor (BAP), financial services company Janus Hendersen (JHG), and online auto company Carsales.com Ltd (CAR). The Bennelong ex-20 Australian Equities Fund posted a relatively flat return for the month, consolidating a very strong performance in the month of October (5.9%). International equity markets (in local currency terms) posted mixed results for November with the US, Japan and Australia delivering modest to strong positive results, Emerging Markets being slightly negative and Europe being the sizable laggard.Bolstering results for a fourth consecutive month was the decision to hold our offshore equity holdings on a unhedged basis given a further fall in the Australian dollar across a range of currencies, most notably -1.3% against the US Dollar and -3.3% against the Euro. In our view, the Australian dollar remains overvalued (albeit less so than in previous months) and is a likely further source of positive returns for the International Equities Portfolios in future periods.


PORTFOLIO COMMENTARY (CONT.)Pleasingly, all of our international equity managers posted strong performance contributions for November. Our investment in the Magellan Global Equities Mandate delivered a strong 3.5%. This was bolstered by the continuance of the recent strong contributions from the Funds US technology, internet and payments investments. Fund positions reflect the manager’s preferred exposures with Apple Inc, Facebook, Alphabet (Google), Lowe’s Co and Visa the largest investments. The Antipodes allocations via the Global Fund – Long Only and Global Fund (L/S) delivered healthy returns of 3.0% and 2.6%, respectively. To date, our investment in the Antipodes Funds has provided a good source of returns and a complementary and differentiated Portfolio exposure to our other international managers. Alternatives continued to add positively to performance with Equity Market Neutral Managers the strongest contributors to the Portfolio. The Tasman Market Neutral Fund continued to benefit from its diversified long exposures to Asia (especially to the Chinese technology sector) as well as Australian small caps. Most notably, the Fund’s long position in graphite miner Syrah Resources enjoyed a 22% return for the month. The Zebedee Segregated Portfolio also gained thanks to its relative value trades in the Auto and Financial sectors despite weak European equity markets. However, Euro strength proved a headwind for the performance of our Systematic and Discretionary Macro Managers. In the case of P/E Global FX Alpha (AUD) it was the underperformance of the USD versus the Euro that drove a negative return for the month. Contrastingly it was the Euro


Source: Fitzpatricks, Iress. Asset allocation as at 30 November 2017.

Source: Fitzpatricks, Iress. Performance from 30 September 2002 to 30 November 2017. Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past performance is not a reliable indicator of future performance.

strength relative to the Japanese Yen that took the Alphadyne Segregated Portfolio slightly lower.Rates and Credit continued to add value as positive performance was broad based with the Lannock Sophisticated Investor No. 1 Unit Trust and Metrics Credit the strongest performers. The largest allocation remains the Kapstream Absolute Return Income Fund which returned 0.3%. Allocations to the Daintree Core Income Trust also recorded another positive month and is tracking in line with its objective in its initial months of operation. Encouragingly, our Diversified Portfolios continued to be

rewarded in November as markets revalue quality companies and our investment views continue to play out. Contribution to returns remain diverse, with exposures from all sectors adding to returns. The strong economic backdrop is supportive, however, valuations have risen steeply across a range of investment markets and the maturity of the growth cycle warrants a degree of caution. We believe the Portfolios remain well positioned and diversified, however, with volatility remaining at all-time lows and the share market (in our view) being fair to fully valued, active diversification and risk management remains key in this current economic cycle.

PERFORMANCE CHART

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100%

RTA 5 RTA 7 RTA 9 RTA 11

Rates and CreditCashLiquid AlternativesCombined EquityEmerging MarketsInternational EquitiesAustralian Small CapsAustralian Equities

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

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02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Risk Targeted Moderately Conservative Portfolio

Risk Targeted Balanced Portfolio

Risk Targeted Growth Portfolio

Risk Targeted High Growth Portfolio

RBA Cash Rate



AS AT 30 NOVEMBER 2017 Manager Historical Performance

1 Month % 3 Months % 6 Months % 1 Year % 3 Years % p.a.

PRESERVERS

CASH

Cash 0.1% 0.4% 0.7% 1.5% 1.8%

RATES AND CREDIT

Atrium Enhanced Fixed Income Fund 0.2% 0.8% 1.5% 3.2% -

GROWTH

EQUITIES - AUSTRALIAN

Atrium Equity Opportunities Fund 3.1% 9.1% 7.9% 16.6% -

Bennelong ex-20 Australian Equity Fund -0.1% 6.6% 8.5% 16.8% 16.4%

SGH ICE Fund 1.9% 7.4% 9.7% 15.9% 11.0%

EQUITIES - INTERNATIONAL

Magellan Global Equities Mandate 3.5% 10.6% 6.5% 21.1% 13.6%

Antipodes Global Fund - Long Only 3.0% 10.4% 9.9% 25.7% -

Northcape Capital Global Emerging Markets Fund 2.2% 8.5% 6.9% 25.3% 11.6%

DIVERSIFIERS

LIQUID ALTERNATIVES AND PRIVATE MARKETS

Atrium Alternatives Fund 1.0% 3.8% 3.7% 4.5% -

Crown Atrium Segregated Portfolio (USD) 0.8% 2.2% 1.9% -0.8% -

Bennelong Long Short Equity Mandate -1.3% 7.3% 0.2% 12.0% 12.2%

Regal Tasman Market Neutral Fund 4.3% 14.4% 21.9% 16.4% 3.4%

P/E Global FX Alpha Fund -3.4% 4.1% -2.1% - -

GMO Global Systematic Macro Fund -0.8% 1.8% 2.2% 8.3% 5.3%

One River Systematic Trend -1.2% 0.7% - - -

Henderson Alphagen Long Short Agriculture Fund -0.1% -1.4% 0.4% 2.1% 2.6%

Henderson Alphagen Relative Value Agriculture Fund 0.0% -0.8% -0.4% 0.2% 3.5%

Core Commercial Property Assets

Barwon Healthcare Property Fund 1.2% 4.5% 9.0% 11.0% 10.7%

Primewest Diversified Income Trust 0.5% 1.7% 11.3% - -

APN Regional Property Fund 6.9% 10.6% 16.8% 20.0% 29.8%

Value Add Property Assets

Exchange Tower Trust 0.6% -0.1% 1.3% 29.3% -

Opportunistic Equity Assets

Woolloomooloo Investment Trust 0.8% 2.4% 2.5% 5.4% 8.8%

Albion Investment Trust 0.0% 0.0% -9.9% -9.9% -

Barwon Childcare Property Fund 2.6% 5.3% 10.0% 20.4% -

Private Debt

Dickson Trust 1.1% 3.7% 7.7% - -

Bankstown Trust II 1.5% 4.6% 9.7% - -

Caringbah Trust 1.8% 5.5% 8.3% - -

Greenwood Trust 2.6% 7.0% 6.2% - -

Throsby Trust 2.0% 6.0% - - -

Homebush Trust 1.7% 5.3% - - -

Essential Secured Notes 0.8% 2.5% 4.2% - -

Smarter Money Active Cash 0.2% 0.7% 1.4% 3.0% 3.1%

Liquidity 0.1% 0.4% 0.7% 1.5% 1.8%Source: Atrium and External Investment Manager / Administrator websites or reports. Performance to 30 November 2017. Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Holdings within the Atrium Alternatives Fund are given on a look through basis, individual clients will not hold these funds directly. Past performance is not a reliable indicator of future performance. The Magellan Global Equities Mandate is a separately managed portfolio managed by Magellan Asset Management Limited in a manner consistent with the Magellan Global Fund. The Bennelong Long Short Equity Mandate is a separately managed portfolio managed by Bennelong Long Short Equity Management Pty Ltd in a manner consistent with the Bennelong Long Short Equity Fund.

Important Information

The information in this document (Information) is provided by Fitzpatricks Private Wealth Pty Ltd (ABN 33 093 667 595, AFSL 247 429) (Fitzpatricks), and where relevant, its related bodies corporate. Unless otherwise stated, the Information is of a general nature only and does not take into account the objectives, financial situation or needs of any person. Before acting on the Information, investors should consider its appropriateness having regard to their own objectives, financial situation and needs and obtain professional advice. No liability is accepted for any loss or damage as a result of any reliance on the Information. Past performance is not a reliable indicator of future performance. Future performance and return of capital is not guaranteed.

Performance figures relate to the model portfolios offered by Fitzpatricks, with investment management implemented by underlying investment managers selected by Fitzpatricks. The details of each model portfolio may change and you should keep this fluidity in mind when considering figures. Actual performance will differ among clients depending on the timing of their investment, the ability of an investor to nominate stocks they do or do not wish to hold and the level of variation from the models. Performance is net of investment management fees, does not deduct portfolio administration fees and assumes reinvestment of all distributions. They do not take into account inflation or tax or adviser fees.

For more information please contact your Adviser or Fitzpatricks Private Wealth:

SYDNEYLevel 5, Challis House 4 Martin PlaceSydney NSW 2000 PHONE 02 9248 8000

GPO Box 1193 Sydney NSW 2001

BRISBANE37a Kennigo Street Spring Hill QLD 4000

PHONE 07 3105 6500

EMAIL [email protected]


fitzpatricks mda risk targeted portfolios...fitzpatricks mda risk targeted portfolios monthly report...

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