Conservative strategies still paying-off for mixed asset funds
Although some equity sectors have rebounded to have positive returns for the year, the aggressive/growth mixed asset strategies are yet to overtake the conservative ones.
According to FE Analytics, within the Australian Core Strategies universe, the Cautious sector returned 1.75% since the start of the year, followed by Moderate (2.52%), Flexible (-4.93%), Balanced (-5.14%), Growth (-7.46%) and Aggressive (-8.77%) sectors.
In the Cautious sector, only seven funds had positive returns, led by Macquarie Multi-Asset Opportunities with 5.72% and followed by Bendigo Defensive Index at 0.34%.
Macquarie allocated 39.73% towards global fixed interest, 34.63% towards Australian fixed interest, 4.95% to global equities and 4.42% in Australian equities.
In its monthly review, Macquarie said barring a vaccine, it expected the virus to affect the economy for considerable time and sectors unable to adapt were at risk.
“This process will be difficult and particularly challenging in some sectors where survival is not a certainty for many companies; for the broader economy, the hit on the service sector is unprecedented and the job losses severe,” it said.
“A key variable to be monitored in the coming months will be how many furloughed workers will return to the workforce.
“The process of job creation was slow following the 2008-09 crisis and the recovery was sub-par compared to history. Our fear is that the COVID-19 recovery will be even more subdued.”
In the Aggressive sector, Perpetual Wholesale Income Share was the worst performer losing 15.32% while Affluence LIC was the best performer only losing 1.78%.
AMP Capital Dynamic Markets, which was in the Flexible sector, had the worst return of all mixed asset sectors losing 17.57%.
Its asset weightings were 35.61% in global equities, 28.38% in global fixed interest, 20.68% in Australian fixed interest and 13.06% in Australian equities.
However, MFS Prudent Capital Trust which was in the same sector, was the best performer of all sectors returning 8.98%, with its weightings holding 41.32% in global equities and 28.72% in global fixed interest.
In its May review, AMP Capital Dynamic Markets portfolio manager Nader Naeimi, said the market recovery was not expected to be equally spread and would require active decisions on asset classes, countries and sectors.
“We retain conviction in our process and are currently allocating to cyclical value sectors, which have reversed sharply in recent weeks,” Naeimi said.
“Rather than trying to time markets in isolation, our focus remains on adapting the portfolio to the situation at hand, using the combination of our indicators and our qualitative assessment at the time.
“There are several signposts and metrics we are watching for in order to gauge the likely path of the various asset classes, specifically as it relates to COVID-19.”
Performance of the mixed asset sectors since the start of the year
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