We look back on the performance of our leading portfolios throughout FY20
As we close the books on FY20, the team at Kauri would like to start by thanking all of our clients for another prosperous financial year working together.
Many of our clients have been with us for several years, while others have moved across to join us in recent times. In both cases, we value your loyalty and commitment in entrusting us to look after your investment funds.
That level of appreciation is perhaps more appropriate this year than any other, what with the remarkable level of volatility and fear that have presided over the market. We have witnessed one of the most unpredictable and challenging trading environments in history.
The team at Kauri is grateful for the trust that each of our clients have placed in us to navigate our leading investment portfolios through these difficult times. We also recognise that whilst our flagship Growth Portfolio significantly outperformed the market yet again in FY20, the near-term trading environment is still turbulent. Nonetheless, we feel confident that our team can uphold that momentum and we hope to deliver another positive year for clients. Growth Portfolio returns 27% in FY20
Our flagship Growth Portfolio returned approximately 27% in FY20. We outperformed each of the three leading US indices. Across the same timeframe the Dow Jones Industrial fell 3%, the S&P 500 returned 5.4% and the NASDAQ Composite rose 25.6%.
One of the most important decisions we made throughout the financial year was when we exited our holdings in late February right before the market meltdown. We avoided unnecessary risk exposure, rebought certain stocks at lower prices in April, and still managed to deliver positive returns while the market crashed thanks to our currency hedging strategy.
Our strong exposure to the USD in the early part of 2020 proved invaluable as investors flocked to the safe-haven currency when the pandemic first spread. More importantly, however, we made the correct decision to sell half of our USD cash at the greenback’s highest level since 2002, thus gaining exposure to the Australian dollar, which has subsequently appreciated by as much as 25%.
Meanwhile, big tech managed to account for a large portion of the portfolio’s gains, courtesy of the likes of Apple (APPL), Advanced Micro Devices (AMD), Adobe (ADBE), Microsoft (MSFT) and Google (GOOGL).
In recent months, as the transition to the digital economy accelerated, we identified that digital commerce and stay-at-home stocks would play a prominent role in helping individuals and businesses navigate lockdowns. As such, we invested in stocks like Visa (V), Atlassian (TEAM), Square (SQ), PayPal (PYPL), ServiceNow (NOW) and Alibaba (BABA), all of which contributed strongly towards the portfolio outperforming the market.
With technology still at the heart of current developments, we move into FY21 with a portfolio of companies that have proven their resilience and capabilities to withstand if not thrive amid dire economic conditions. An inaugural year for the Yield Portfolio
During the financial year we launched our second investment portfolio, the Australian Yield Portfolio.
Since its inception in October, the portfolio has decreased 16%. While a disappointing headline result, we do need to consider this figure in the broader context of the ASX.
First, the ASX 200 is also down ~16% since its peak in mid-to-late February, failing to pare its losses to the extent that US markets have. Meanwhile, a number of income-paying positions have been hit hard by COVID and the recession, particularly financial stocks such as the banks.
Market volatility also pushed us to divert some of the portfolio’s funds towards more stable assets like hybrids. In ‘normal’ market conditions we would have a slightly higher exposure to growth assets that we believe would help us positively differentiate our performance from the local benchmark index.
Interest rates, however, are likely to remain low for an extended period – potentially several years. As such, not only do we anticipate dividends to return as the economic rebound plays out, but we expect the appetite for high-yield assets to increase over time and remain favourable in lieu of few comparable investment alternatives.
Until recently, Australia has been among the more effective nations to control and mitigate the impact of COVID. Notwithstanding recent flare ups, we think this relative success positions local shares for a positive mid-term outlook. Introducing the Hub24 Future Choices Superannuation Portfolios
For those who haven’t heard the news, we’re managing two superannuation investment portfolios through Hub24, an award-winning investment and superannuation platform providing investors with more product choice.
We see the Hub24 Future Choices Superannuation Portfolios as investment vehicles for those who demand greater accountability in the performance of their super fund.
Rather than the standardised investment templates used by most industry super funds, we act as a dedicated investment manager to identify your specific retirement objectives. We tailor superannuation investments to your needs from a range of ASX 300 stocks, as well as ETFs and LICs that provide exposure to international equities.
In addition to our bespoke and personalised Hub24 investment portfolios, we also have a ‘Balanced’ investment option for those seeking sustainable returns. For clients willing to take on a slightly more aggressive risk profile, our ‘Growth’ option provides greater exposure to growth assets that over the long-run are expected to deliver increased returns.
The 3-year (CY17-19) performance of the Hub24 Future Choices Superannuation Portfolio has returned 10.6% p.a. versus 8.7% p.a. achieved by the industry median growth fund, and 9.72% p.a. among the top 10 industry super funds. Looking into FY21, some final words
One of the things that we proudly emphasise at Kauri is our personalised approach, which we believe provides strong communal foundations with our clients, and aids us in serving your best interests.
We recognise that there is potential scope to provide more services for our clients, whether it be additional research, new investment portfolios,