2020 is rapidly coming to a close and our team will be signing off until early January from next Wednesday (23rd) at midday. We just wanted to give you a quick update from the investment committee on what has been a surprisingly good investment year.
Portfolio performance
While it has definitely been a volatile year, our clients in the AAN Growth Model would be pleased with a return of 13.68% for the last 12 months to 30 Nov 2020, and clients in the AAN Core Model would have seen a return of 11.45%. These numbers are well above industry benchmarks and most peers and not something we would have contemplated at the end of February when we saw markets collapse by 30-35%.
The outperformance has been achieved via a variety of factors. The committee has built portfolios that include best of breed managers across a diversity of investment styles. Our experience has taught us that different investment disciplines can create very different experiences and by including the strongest managers we can find in those disciplines and negotiating reduced fees we have the potential to outperform.
The other strong contribution is adhering to our internal disciplines and trusting the process rather than watching the scoreboard. By ignoring noise and focusing on real analysis we have made measured strategic moves that have added substantially to that annual performance. This has meant our portfolios were very well positioned for the strong period we have seen since July.
Changes to the portfolios
Whilst we are positive about the performance of the portfolios, the committee continues to review the structure and risk management within them. New mangers and disciplines regularly come to market and reducing cost while incrementally improving investment performance is a key deliverable for the group.
Over the course of the last six months the Investment Committee has had the opportunity to look at the asset allocation structure and how it has performed against a very uncertain financial backdrop. Obviously very well, but there are improvements that we can now make and they are being implemented in this quarter. Additionally while not unhappy with our Australian share and fixed interest managers, in some cases newer, better priced solutions have come to market. As a result, we have made a number of decisions within the models, including;
1. Moving to an equal weighting approach of Australian and International shares.
2. Replacing one Australian share manager due to relative underperformance.
3. Re-allocating a portion of the cash holdings in the AAN Core model to a new fixed income manager who has demonstrated their resilience in a very difficult time.
4. Replacing one of the Australian fixed interest ETF’s with a global alternative.
Should you log into your Praemium account now, you will see that some of these changes have already been transacted, with numerous buys and sells now visible. It was important to make these changes now, before volumes become lighter over the holiday season.
AAN Sustainable Growth Model
It is also with great pleasure that I share with you that we have recently launched the AAN Sustainable Growth Model for superannuation and wealth accounts. This model has been implemented to cater for investors seeking a portfolio of growth assets that aligns with their preference for sustainable investments with potential for making a positive contribution to society.
The Investment Committee has adopted a pragmatic approach to excluding sectors given the subjective nature of some exclusion criteria, and the diversity of investor views relating to ethical investments.
If you would like to know more about this model or the AAN Sustainable Investment policy, please let your team know.
All the best for you and your loved ones over the break, and we look forward to seeing you in 2021.
The RFS Advice Team
