Overview: The Income Booster portfolio had a net return of -0.10% for the month of February 2023.
This was on the back of consolidation in Asian equities post the China reopening as well as the ongoing high inflation rates in developed markets leading to further interest rate hikes. The portfolio has performed +3.34% and +4.54% over 3 and 6 months respectively net of fees ending February 2023.
The macro-outlook is playing in line with the Investment Committee’s expectations. Especially within Asia, growth has picked up significantly since China’s easing of COVID restrictions and reopening. This will lead to strong consumption outcomes for the region over the medium to long term.
Furthermore, the consumption capability of China vs US is in an interesting position. As seen in the chart below, the US who are currently in net debt, means that for them to continue to grow they will have to borrow more, which would be difficult in an environment where inflation and interest rates are rising. Conversely, China is in a position to be able to deploy their savings more easily in investments and consumption.
The portfolio is well positioned for the volatility that lies ahead. The Investment committee has decided to enhance the forecast yield of the portfolio by adding a new diversified listed income strategy at the expense of reducing weights to a conservative Australian bond manager as well as two high income strategies managed by the same fund manager. The committee believes this is prudent to reduce reliance on any single manager within the portfolio. It is also expected that as interest rates continue to rise, the portfolios cash yield will also increase. The forecasted cash yield of the portfolio post these changes is 6.35% p.a.
