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20170630 – Portfolio Activity EOFY

European Central Bank President Mario Draghi gave an important speech this week in which he referenced the continuing economic recovery in Europe. Market participants took a clear signal that the era of extraordinary monetary policy support would not continue indefinitely. This led to some significant moves in bonds and a sharp increase in the Euro exchange rate. Whilst these short-term moves have been quite pronounced, Draghi made clear that ”global uncertainties remain elevated,” and as a result the bank will exercise prudence in adjusting the policy stance whilst ”accompanying the recovery.”

Activity in equity markets has also been a little more turbulent than the recent past, however after rallying by nearly 2% mid-week, indications are that the ASX200 will give back some of that gain on Friday and close about flat for the week. With a longer term perspective, and as we close the financial year, the ASX200 index has provided a very solid total return of 15% over the last year. Importantly, the recently beleaguered Financials sector has in fact led the overall market higher over the same period, notching up a total return of nearly 22% since July 2016.


At our meeting this week the committee affirmed the current active asset allocation stance. Within the defensive Income Securities asset class we are implementing the recent decision to use a new investment grade corporate bond exchange traded fund (PLUS), with portfolios having recently received the proceeds from the redeemed ANZ investment (ANZHA). Westpac have also announced the redemption of their similar investment (WBCHA), and we will redeploy these funds in the same manner when they become available in late August.

Our long term view on Australian Equities is for higher forecast returns than the other equities exposures, which continues to support the strong overweight stance to this asset class. That said, we are pleased to see the contribution from the Europe, Japan and Asia Pacific ETFs over the last quarter, a period in which the Australian market was under some pressure and tracking sideways. This underlines the important role that diversification plays in long term portfolio management.


  • As mentioned above we have begun to implement the corporate bond ETF (PLUS) utilising the proceeds of the ANZHA redemption for most accounts.
  • Several of the ETFs held in the portfolio will be paying distributions in the coming weeks. To capture some of these distributions we made purchases in the property ETF (MVA), the financials ETF (OZF) and the S&PASX50 ETF (SFY) prior to their ex-dividend dates. This was for newer accounts being moved towards their targets.
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