Advance International Shares Multi-Blend Fund is a reasonable multimanager offering for those seeking diversified exposure to global equity strategies.
In August, equities lost momentum and weakened (in local currency terms) after a strong rally over recent months. On a relative basis, US equities outperformed most major developed and emerging markets, while growth stocks generally outperformed value. Fixed income returns were broadly flat to slightly negative. The real asset sector saw the largest declines, with global REITs and infrastructure down markedly.
A combination of weaker forward-looking indicators, a modest uptick in inflation data, particularly in the US, and Fitch Ratings’ downgrade of its US credit rating at the start of August, impacted returns.
Composite purchasing manager indices (PMI) continue to soften across the globe with the US Composite PMI falling to a six-month low in August. A similar scenario for the Eurozone, China, UK and Australia, however, Japan bucked the trend with a marginally higher reading. Consumer confidence continues to weaken with increasing signs of consumer distress, such as rising credit card and auto-loan delinquencies. After a period of strength, global labour markets appear to be cooling off. US employment data saw a distinct weakening in August with a solid uptick in its unemployment rate (+0.3% to 3.8%).
Headline inflation dropped sharply in the Eurozone and UK, largely driven by base effects as the 2022 inflationary spike rolls off. Elsewhere, inflation ticked up slightly in the US as a bounce in energy prices fed into its CPI numbers, however, CPI data was broadly unchanged in Japan and China.
At the annual summit in Jackson Hole, Wyoming, central bankers expressed cautious optimism, while acknowledging inflationary expectations remain elevated. Federal Reserve Chairman, Jerome Powell, reiterated the Fed’s goal of bringing inflation down to its 2% target and is prepared to lift rates further if required. The Bank of England raised interest rates for the 14th consecutive month with its policy rate now sitting at 5.25%. On the flipside, the People’s Bank of China introduced a number of easing measures, cutting its key interest rate (1yr Loan Prime Rate) to a record low of 3.45%.
In terms of August returns, Hedged Developed Markets Overseas Shares declined -1.9% and Unhedged Emerging Markets Equities dropped -2.4%. Hedged Overseas Government Bonds delivered a narrow loss of -0.3% over the month as government bond yields experienced an uptick in most major regions. Using 10 year government bonds as a guide, US yields saw a jump of 16bps, both Japan and UK were up 6bps, however, there were slight declines for German and Australian 10 year yields.
Australian Shares returned -0.8% in August, outperforming hedged overseas counterparts. Key contributing sectors were Consumer Discretionary (5.8%) and Real Estate (2.2%), whereas Materials (-2.0%) and Consumer Staples (-3.1%) detracted.
What is Advance International Shr Multi-Blend W Advance International Shr Multi-Blend W is an Managed Funds investment product that is benchmarked against Developed -World Index and sits inside the Foreign Equity - Large Multi-Manager Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Advance International Shr Multi-Blend W has Assets Under Management of 37.55 M with a management fee of 0.95%, a performance fee of 0.00% and a buy/sell spread fee of 0.41%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the Advance International Shr Multi-Blend W has returned -0.68% in the last month. The previous three years have returned 7.48% annualised and 11.68% each year since inception, which is when the Advance International Shr Multi-Blend W first started.
How is risk measured in this investment product?
There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Advance International Shr Multi-Blend W first started, the Sharpe ratio is NA with an annualised volatility of 11.68%. The maximum drawdown of the investment product in the last 12 months is -3.33% and -49.93% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product?
Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Advance International Shr Multi-Blend W has a 12-month excess return when compared to the Foreign Equity - Large Multi-Manager Index of -1.51% and 0.22% since inception.
Does the investment product produce Alpha over its Peers?
Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Advance International Shr Multi-Blend W has produced Alpha over the Foreign Equity - Large Multi-Manager Index of NA% in the last 12 months and NA% since inception.
What are similar investment products?
For a full list of investment products in the Foreign Equity - Large Multi-Manager Index category, you can click here for the Peer Investment Report.
What level of diversification will Advance International Shr Multi-Blend W provide?
Advance International Shr Multi-Blend W has a correlation coefficient of 0.97 and a beta of 0.95 when compared to the Foreign Equity - Large Multi-Manager Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers?
For a full quantitative report on Advance International Shr Multi-Blend W and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Advance International Shr Multi-Blend W with the Developed -World Index?
For a full quantitative report on Advance International Shr Multi-Blend W compared to the Developed -World Index, you can click here.
Can I sort and compare the Advance International Shr Multi-Blend W to do my own analysis?
To sort and compare the Advance International Shr Multi-Blend W financial metrics, please refer to the table above.
Has the Advance International Shr Multi-Blend W been independently verified by SMSF Mate?
This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
How can I invest in Advance International Shr Multi-Blend W?
If you or your self managed super fund would like to invest in the Advance International Shr Multi-Blend W please contact 275 Kent Street Sydney, NSW 2000 Australia via phone 61-2-9259-3555 or via email -.
How do I get in contact with the Advance International Shr Multi-Blend W?
If you would like to get in contact with the Advance International Shr Multi-Blend W manager, please call 61-2-9259-3555.
Comments from SMSF Mates
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Performance Commentary - July 31, 2023 In July, global equity markets maintained current upward momentum with most regions delivering solid, positive returns. On the other hand, fixed income performance was mixed, although in this “risk on” phase of the cycle, riskier parts of the sector fared better.
A combination of further declines in headline inflation, resilient economic data, particularly from the US, and market expectations that the current interest rate hiking cycle is nearing an end, led to positive investor sentiment throughout the month.
The advanced Q2 2023 US GDP growth figure was reported late month, coming in at 2.4% and surprising market economist estimates of 1.8%. On the flipside, UK and Eurozone growth was close to flat. Benefitting from the base effects of emerging from its extensive 2022 Covid lockdown, China’s GDP growth rate was measured at an annualised 6.3%, though a little below 7.3% expectations. Forwardlooking composite purchasing manager indices (PMI) kept falling across the globe in July, with Japan the only region holding steady. PMIs for the services sector continue to outpace manufacturing though are easing towards 50, an important level that is considered the line between expansion and contraction.
Inflation data continued to decline, somewhat aided by the impact of last year’s energy price surge rolling off. US headline Consumer Price Index (CPI) fell to 3.0% p.a and is at the lowest level since early 2021. Similarly, CPI data across the UK, Eurozone and Australia, continues to show easing inflationary conditions, albeit at higher levels than the US. CPI has flatlined at near zero in China. Japan was the only major country that recorded a marginal increase in its inflation rate during Q2 2023. Central banks continued to err on the side of caution, increasing rates by 25bps in the US and Eurozone and 50bps in the UK, where inflation remains the highest among major developed economies.
Central banks continued to emphasise a data-driven approach to future rate adjustments. In the US, which is furthest ahead in the inflation cycle, markets are now pricing in a greater than 50% chance that the Fed’s policy rate has peaked and interest rate cuts maybe forthcoming in 2024.
Over July, Hedged Developed Markets Overseas Shares delivered a 2.8% return. US indices were broadly in line with international developed markets, however, Emerging Markets (unhedged) outperformed with a positive 4.9% return. Value modestly outperformed growth over the period, although when looking on a yearto-date basis, mega-cap tech stocks still dominate returns and has led to increased market concentration within that segment of global markets. In the US, with roughly half of S&P500 companies having reported their Q2 2023 earnings, FactSet currently projects a 7% quarter over quarter (QoQ) earnings decline, which would be the softest quarterly outcome since the height of Covid’s impact. That said, to date the majority of companies have reported better than expected earnings results.
Hedged Overseas Government Bonds returned -0.4% over the month, as bond yields across most regions increased in July. Yields on both key long bonds in the US (10-year and 30-year) rose by approximately 15bps over the month. Outside the US, Japan’s 10-year yield rose by around 19bps, which is noteworthy following the Bank of Japan’s announcement that it will further increase the upper tolerance range for the 10-year yield (now 1.0% vs 0.5% previously). The UK was the only major economy where the 10-year yield fell, albeit modestly.
Australian Shares returned 2.9%, marginally outperforming their overseas counterparts in July. Financials (4.9%) and Energy (8.4%) were the strongest sectors of the market, while Healthcare (-1.5%), and Materials (1.4%) detracted.
Performance Commentary - June 30, 2023 The broad MSCI World ex-Australia Accumulation Index returned 5.8% in hedged terms and 3.1% in unhedged terms over the month as the AUD appreciated against the USD and most major developed market currencies. The best performing sectors were Consumer Discretionary (7.4%) and Industrials (6.0%), while the weakest performing sectors were Utilities (-0.3%) and Consumer Staples (- 0.1%). In AUD terms, the MSCI Small Caps Total Return Index was up by 3.4%, while the MSCI Emerging Markets Accumulation Index was up by 0.9% over June.
Over the month, the S&P500 Composite Index (6.6%), the NASDAQ (6.6%) and the Dow Jones Industrial Average (4.7%) increased, all in USD terms. In local currency terms, for the major European share markets the DAX 30 (Germany) (3.1%), the CAC 40 (France) (4.5%) and the FTSE 100 (UK) (1.4%) were all ahead. In Asia, Hong Kong’s Hang Seng (4.5%), the Japanese TOPIX (7.5%) and the Indian S&P BSE 500 (4.1%) increased, while the Chinese SSE Composite (-0.1%) decreased, all in local currency terms.
Performance Commentary - May 31, 2023 The broad MSCI World ex Australia Accumulation Index returned -0.2% in hedged terms and 1.2% in unhedged terms over the month as the AUD depreciated against the USD and GBP. In AUD terms, the strongest performing sectors were IT (10.5%) and Communication Services (5.8%), while Energy (-8.4%) and Materials (-5.2%) were the weakest performers. In AUD terms, the MSCI Small Caps Total Return Index was down by 0.7%, while the MSCI Emerging Markets Accumulation Index was up by 0.4% over May.
Over the month, the S&P500 Composite Index (0.4%) and the NASDAQ (5.8%) increased, while the Dow Jones Industrial Average declined (-3.2%), all in USD terms. In local currency terms, for the major European share markets the DAX 30 (Germany) (-1.6%), the CAC 40 (France) (-3.9%) and the FTSE 100 (UK) (-4.9%) all decreased.
Performance Commentary - April 30, 2023 In April, risk asset returns in developed markets were mostly positive, while defensive assets also provided modest gains. Emerging market equities were lower than their developed market counterparts due to the weakness in Chinese stocks
News flow during April was fairly quiet until the last week of the month when banking concerns resurfaced, as First Republic Bank came under pressure and was ultimately acquired by J.P. Morgan. Equity market volatility ended the month at its lowest level since late-2021, despite a brief spike during the last week of the month. Major economies remained resilient, driven largely by service activity. US GDP for Q1 2023 rose at a 1.1% annualised rate, which was below expectations. Consumer confidence remained on the rise and labour markets remained tight, in spite of high profile layoffs in the US.
Headline inflation continued to decline in major economies, reaching 5.0% in the US, its lowest level since mid-2021. In the UK, inflation fell by less than expected and remained above 10.0%, the highest rate in major developed economies. The People’s Bank of China and Reserve Bank of Australia left key lending rates unchanged.
Over April, Hedged Developed Markets Overseas Shares returned 1.6%. Even though the US earnings season delivered a fair number of positive EPS surprises relative to expectations, the earnings decline over the first quarter is set to be the largest since the second quarter of 2020. Returns were positive for most sectors with Consumer Staples delivering the largest gains for the month. Value outperformed growth among large- and mid-cap stocks, while growth outperformed among small-caps. Emerging Market Shares (UH) underperformed unhedged Overseas Shares in April.
Weakness in China outweighed the better performance from India and Brazil.
Hedged Overseas Government Bonds returned 0.2% over the month as bond yields generally saw modest changes for most countries during the month. In the US, the 10-year bond yield fell by 4bps, while the 30-year yield was flat. In developed markets outside the US, 10-year yields rose by 6bps for Japan and 23bps for the UK. US inflation expectations, as measured by the 10-year inflation breakeven rate, fell from 2.3% to 2.2%. Australian Government Bonds were flat over the month.
Lending conditions remain somewhat stressed due to banking concerns but bond markets have remained fairly calm. Credit spreads generally declined during the month, with investment-grade spreads falling 2bps and high yield spreads declining 3bps.
Australian Shares returned 1.8%, underperforming their overseas counterparts in April. Real Estate (5.2%) and IT (4.5%) were the strongest sectors, meanwhile Materials (-2.6%) and Utilities (1.4%) were the largest detractors.
Performance Commentary - March 31, 2023 The Advance International Multi-Blend Fund returned 3.05 % in March, underperforming the MSCI World ex-Australia Index by 0.84%. Global equities were positive in March, despite uncertainty in the Banking sector as institutions including Silicon Valley Bank and Credit Suisse faced bank runs, necessitating intervention from prudential regulators to prevent contagion. Financials sold off on poor sentiment in the sector while Real Estate was weak as investors exited on expectations of increased funding costs and lower operating incomes in a tighter credit environment. Conversely, large cap technology names proved resilient as they exhibited quality characteristics stemming from their strong balance sheets and limited leverage.
Against this background, GuardCap was the top contributor to relative performance. GuardCap is a high conviction strategy aimed at building a portfolio that has double digit long-term growth in earnings and cash flows with a strong balance sheet. The manager’s quality characteristics proved defensive in a weak month for global equities, with a further tailwind from the fund’s zero-weight to the Financials and Real Estate sectors. Conversely, Wellington Global Opportunistic Value was the largest detractor from performance. The strategy invests in companies that have been sharply discounted by the market due to investor bias in dealing with uncertainty. Negative stock selection in Financials including an overweight to Insurers detracted from relative performance over the month.
From a country perspective, the funds overweight to Denmark was the top contributor to relative performance, while negative stock selection in the United States was the top detractor from relative performance. On a sector level, strong stock selection in Health Care was the top contributor to relative performance, whereas an underweight to Information Technology was the largest detractor. The fund’s overweight to MarketAxess Holdings. was the top driver of relative performance whereas the underweight to Apple was the largest detractor.
Performance Commentary - February 28, 2023 The Advance Australian Fixed Interest Multi Blend Fund outperformed its benchmark in February with our underlying managers delivering a positive relative result over the month.
Pendal delivered positive excess returns in February. The domestic duration component of the fund was a positive contributor. The physical portfolio outperformed the benchmark. The government sector positioning performed inline whilst the non-government portion of the portfolio performed well.
Financials, supra-nationals, infrastructure, and real estate sector positioning also added to performance.
Janus Henderson outperformed the benchmark over the month with value added through active management in both rates and credit. Overweight duration to swap rates over government bonds yields has been a positive contributor. Active allocations to Tier 2 debt was a strong driver of returns as these assets significantly outperformed.
Macquarie also delivered a positive excess in February, driven by sector rotation, security selection as well as duration and curve. The Portfolio’s overweight credit positioning contributed positively to performance as Australian credit spreads outperformed global peers.
A combination of a hawkish shift by central banks and stronger-than-expected data in the US resulted in higher rates across the curve. This dampened risk sentiment in February.
In the United States, the Federal Reserve raised the Fed Funds rate by a further 25 basis points to 4.75%. In their accompanying statement the Committee stated that ongoing increases will be appropriate and that whilst inflation has eased somewhat it remained elevated. In the ensuing press conference Fed Chair Jay Powell noted that financial conditions had tightened ‘very significantly’ in the past year and that they are talking about a couple more rate hikes.
Performance Commentary - January 31, 2023 The Advance International Equities Multi-Blend Fund returned 2.94% in January, marginally underperforming the MSCI World ex-Australia Index by 0.03%. Global equities rallied in January as disinflationary economic signals led to optimism that a peak in the Federal Reserve Target Rate was approaching. Benchmark performance was driven by large cap US technology names, which continued to rebound from lows reached in 2022.
Against this background, T. Rowe Price was the top contributor to relative performance. The strategy seeks out companies with prospects for accelerating returns on capital. Strong stock selection particularly in US Information Technology names was a key driver of outperformance. Conversely, Wellington Durable Enterprises was the largest detractor from relative performance. The fund aims to invest in stable businesses with the potential to deliver market returns at less risk than the market. Weaker than consensus earnings from high conviction Diversified Financials names detracted from relative performance over the month.
From a country perspective, strong stock selection in the US was the top contributor to relative performance, while weak stock selection in France and the fund’s overweight to Denmark were the top detractors. On a sector level, strong stock selection in Industrials was the top contributor to relative performance, whereas weaker stock selection in Consumer Discretionary was the largest detractor. The fund’s overweight to MarketAxess was the top driver of relative performance whereas the underweight to Tesla was the heaviest detractor.
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