Overview: The Balanced Beam portfolio fell 3.97% net of fees for the month of September.
The Balanced Beam portfolio fell 3.97% net of fees for the month of September. The global growth backdrop continues to deteriorate on the back of persistent high inflation and even higher expected interest rates. Furthermore, the Russia/Ukraine situation is also making things worse. Developed market equities despite its correction year to date remains unattractive given this environment. One explanation could be the level of liquidity afforded to the market via quantitative easing over the last decade in the Western world leading to increased participation in the equities market. Chinese equities specifically remains very attractive but is also overshadowed by weak economic growth driven by the governments ongoing commitment to dynamic COVID-zero policies. Diversification in portfolios are critical in times like this.
Given this backdrop, the investment committee has resolved the following:
· Decrease exposure to listed Australian Property (-8%) given increased interest rates will continue to put pressure on net income generated which would therefore put further pressure on prices.
· Decrease exposure to global listed infrastructure (-6%) given the same reason above.
· Increase cash (+10%) to prepare the portfolio with enough dry powder to participate in markets when appropriate.
· Increase Australian investment grade fixed income (+4%) given rates have increased and providing a yield >4%. Furthermore, capital losses have already been priced into fixed income markets thus far and the IC feels the risk of further capital losses have reduced materially since
the beginning of 2022.
One final change to be made due to a successful fee negotiation relates to an alternative hedge fund which is in the portfolio that will be switched from the higher to lower fee version (22% discount). We continue to advocate for our investors and will negotiate fees on your behalf.
