The Fund aims to provide positive returns of 3% to 5% per annum above Australian inflation over the medium term (before fees). It also seeks to provide regular income.
The Fund delivered a negative return over the month, which was driven by both the Fund’s growth asset and defensive asset exposure.
Asset allocation changes
In September, we observed negative performances in hedged international equities and Australian equities, both declining by -3.8% and -2.9%, respectively. Volatility also surged during the month, compounding the challenges faced. The fixed interest sector, both domestically and offshore, delivered negative results, detracting -1.5% and -1.9%, respectively.
September was marked by heightened volatility in both growth and defensive assets. Notably, there were significant developments in future interest rate projections, yield curve profiles, and inflation.
During the month, a hawkish press conference from the US Federal Reserve (Fed) reinforced the ‘higher for longer’ narrative in the market. This shift reduced the likelihood of near-term rate cuts and led to substantially higher long-term borrowing costs. This, in turn, had a negative impact on asset values across various asset classes.
Regarding inflation, there is mounting evidence, especially in some major developed countries, suggesting that wage pressures and declining productivity pose significant challenges in achieving sustained inflation at the 2% target. Additionally, the issue of increasing rents is a notable inflationary concern in countries experiencing significant migration, such as Canada and Australia. While this is not our base case scenario, it’s crucial to acknowledge the increasing risks and their potential implications on neutral interest rates and asset price behaviours across different asset classes.
Throughout the month, our Fund maintained a defensive posture, closely monitoring developments in the fixed income market. In the near term, we anticipate a higher probability of increasing positive correlation between defensive and growth assets, an unusual phenomenon that does not warrant an immediate portfolio response, in our view.
In summary, as volatility has risen and asset values have improved recently, we are closer to a shift back into growth assets. We also note the continued weakness of the AUD, presenting an opportunity in the currency market.
What is Macquarie Multi-Asset Opportunities Fund Macquarie Multi-Asset Opportunities Fund is an Managed Funds investment product that is benchmarked against Multi-Asset Growth Investor Index and sits inside the Multi-Asset - Real Return 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 Macquarie Multi-Asset Opportunities Fund has Assets Under Management of 136.43 M with a management fee of 0.7%, a performance fee of 0.00% and a buy/sell spread fee of 0%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Macquarie Multi-Asset Opportunities Fund has returned 1.01% in the last month. The previous three years have returned 0.97% annualised and 3.71% each year since inception, which is when the Macquarie Multi-Asset Opportunities Fund 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 Macquarie Multi-Asset Opportunities Fund first started, the Sharpe ratio is NA with an annualised volatility of 3.71%. The maximum drawdown of the investment product in the last 12 months is -1.76% and -9.03% 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 Macquarie Multi-Asset Opportunities Fund has a 12-month excess return when compared to the Multi-Asset - Real Return Index of -1.43% and -0.73% 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. Macquarie Multi-Asset Opportunities Fund has produced Alpha over the Multi-Asset - Real Return 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 Multi-Asset - Real Return Index category, you can click here for the Peer Investment Report.
What level of diversification will Macquarie Multi-Asset Opportunities Fund provide? Macquarie Multi-Asset Opportunities Fund has a correlation coefficient of 0.73 and a beta of 0.91 when compared to the Multi-Asset - Real Return 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 Macquarie Multi-Asset Opportunities Fund and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Macquarie Multi-Asset Opportunities Fund with the Multi-Asset Growth Investor Index? For a full quantitative report on Macquarie Multi-Asset Opportunities Fund compared to the Multi-Asset Growth Investor Index, you can click here.
Can I sort and compare the Macquarie Multi-Asset Opportunities Fund to do my own analysis? To sort and compare the Macquarie Multi-Asset Opportunities Fund financial metrics, please refer to the table above.
Has the Macquarie Multi-Asset Opportunities Fund 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.
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Comments from SMSF Mates SMSF Mate does not receive commissions or kickbacks from the Macquarie Multi-Asset Opportunities Fund. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - August 31, 2023 The Fund delivered a positive return over the month, which was driven by the Fund’s defensive asset exposure.
Asset allocation changes
In August, hedged international equities detracted -1.9% while Australian equities fell by -0.8%. The fixed interest sector delivered a mixed result, contributing +0.7% domestically and detracting -0.3% offshore.
In August, we observed heightened volatility in both growth and defensive assets. Sentiments toward growth assets were negatively impacted by the potential default of one of China’s largest property developers, Country Garden. The significant deterioration in the financial health of prominent Chinese property developers, such as Evergrande Group and Country Garden, raised concerns about the Chinese housing sector’s stability. This subsequently led to apprehensions about severe youth unemployment, Chinese economic growth, and the banking system and triggered substantial drawdowns in the Chinese and Hong Kong stock markets.
The Chinese government responded with stimulus efforts including reducing borrowing costs, easing apartment purchase restrictions, and lowering stock trading stamp duties. These measures provided temporary support to market sentiment, but the improvement was shortlived. The extent of these stimulus measures appeared underwhelming compared to market expectations. In other regions, we continue to observe weakness in European economic activities, particularly in the manufacturing sector, as indicated by manufacturing PMI releases. Additionally, previously robust services PMI indicators for Germany, the Euro Zone, and the UK have contracted. In Europe, the “bad news is good news” philosophy seems to have taken hold, where deteriorating economic conditions are perceived positively due to expectations the “bad news” will result in less restrictive European Central Bank policies. On the domestic front, Australia experienced an uptick in unemployment rates and ongoing consumption weakness.
In August the Fund closed out a short AUD position as the AUD/USD rate fell by -3.5% hitting a low just above 0.64. The AUD depreciation was driven by weaker economic performance and interest rate differentials. Our Fund remained defensively positioned in light of heightened risks and potential spillover effects surrounding the China property market and tighter financial conditions.
Performance Commentary - July 31, 2023 The Fund delivered a positive return over the month, which was driven by both the Fund’s growth asset and defensive asset exposure.
In July, hedged International equities and Australian equities performed positively while volatility continued to decline, both contributed +2.9%. The fixed interest sector delivered a mixed result, contributed +0.5 domestically and detracted -0.5% offshore.
In July, there was a significant improvement in investor sentiment towards growth assets. A series of better than expected inflation data in the US reinforced the market’s belief in the ‘soft-landing’ scenario. A soft-landing scenario sees inflation and economic growth slowing, but not to an extent which drives a significant increase in the unemployment rate. In Australia, the Reserve Bank of Australia paused raising interest rates but signalled further tightening measures to come. Most market participants now anticipate this interest rate cycle will peak at 4.3%, 0.3% lower than last month. Finally, Bank of Japan kept its short-term interest rate target below zero, but shocked markets by adjusting a policy that effectively raised the cap on the 10-year government bond yield from 0.5% to 1.0%. Relative to growth asset, fixed income assets continued to experience significant volatility.
Throughout the month, our Fund maintained a defensive stance. Despite recent improvements in market sentiment and valuation, we continue to favour a defensive asset allocation stance in our portfolio due to the high level of interest rates and rich equity valuations.
Performance Commentary - June 30, 2023 The Fund delivered a negative return over the month, which was driven by defensive asset exposure.
In June, hedged International equities improved significantly as volatility continued to decline, contributing +5.6%. Australian equities underperformed relative to global shares with a +1.7% return. The fixed interest sector delivered a negative result, detracting -2.0% and – 0.4% for the Australian and International sectors respectively.
Market sentiment in growth assets continues to be driven by the positive outlook surrounding AI and tech shares, especially during the first half of the month. In fixed income, interest rates along the curve have generally increased as evidence suggests that inflation may be stickier than initially anticipated. In Australia, the Reserve Bank of Australia surprised the market with a +0.25% increase in the cash rate, bringing it to 4.1%, and signalling further tightening measures to come. Market participants now anticipate an additional 0.5% increase by September this year. This has resulted in substantial underperformance in Australian fixed interest compared to International fixed interest. Australian equities have also experienced notable underperformance and increased volatility.
Throughout the month, our fund maintained a significant defensive stance. Looking ahead, we anticipate a shift in market focus from “inflation” to “recession” over the medium term. This shift is driven by factors such as the high cash rate, tighter credit conditions resulting from the recent banking crisis in the US, and the global decline in office values. Despite recent improvements in market sentiment and valuations in growth assets, we continue to favour a significantly defensive asset allocation stance in our portfolio.
Performance Commentary - May 31, 2023 The Fund delivered a negative return over the month, which was driven by both the Fund’s growth asset and defensive asset exposure.
In May, hedged International equities fell slightly while volatility continued to decline, detracting -0.2%. Australian equities underperformed with a -2.5% return. The fixed interest sector delivered a negative result, detracting -1.2% and -0.8% for the Australian and International sector respectively. Volatility in equities remained surprisingly low in May, despite the uncertainty surrounding the potential US default that continued to dominate market headlines. As the likelihood of a US default decreased throughout the month, market attention shifted towards the AI sector. The substantial upward guidance of revenue from Nvidia sparked global optimism towards AI-related sectors. The month concluded on a positive note as the US labour market showed no signs of stress or deterioration. In the fixed income market, there is now an expectation of more rate hikes in both the US and Australia.
Throughout the month, our Fund maintained a defensive stance close to the maximum allowable level. Looking ahead, we believe that the market will shift its focus from “inflation” to “recession” over the medium term. This is driven by factors such as the high cash rate, tightening credit availabilities resulting from the recent banking crisis in the US, and the potential liquidity drain from US Treasury bill issuance due to an increase in the debt ceiling. Therefore, despite recent improvements in market sentiment and valuation, we continue to favour a significantly defensive asset allocation stance in our portfolio.
Performance Commentary - April 30, 2023 The Fund delivered a positive return over the month, which was driven by both the Fund’s growth asset and defensive asset exposure.
In April, hedged international and Australian equities performed well with a notable decreased in volatility, contributing +1.6% and +1.9% respectively. With regard to fixed interest, the sector also delivered a positive result, with both domestic and global contributing +0.2%. During the month, volatility across major equity market indices declined significantly. Equity markets were primarily focused on the US Q1 corporate earnings, which, at an aggregate level, showed blended earnings decline of -3.7%.
Despite the contraction in earnings, the results were significantly better than expected. Therefore, despite the negative headline earnings number, positive earnings surprises fuelled investor sentiment and propelled equity markets higher. Our Fund continued to maintain a defensive stance close to the maximum allowable level. During the month, we utilised the profits we gained from our delta hedging activities in March to acquire more equity downside protection with September 2023 maturity puts, as implied volatilities were trading at post covid lows.
In the near term, we anticipate a significant uptick in volatility as we approach the US ‘debt-ceiling’ deadline. Over the medium term, we continue to believe that the market will shift its focus from ‘inflation’ to ‘recession’. As a result, both the June and September option structures will enable us to take advantage of any potential increases in equity market volatility in the coming months.
Performance Commentary - March 31, 2023 The Fund delivered a positive return over the month, which was driven by both the Model Portfolio’s growth asset and defensive asset exposure.
In March, market performance was driven by lower-than-expected inflation prints as well as a crisis of confidence regarding segments of the banking sector. During the month hedged international and Australian equities delivered mixed results with volatility increased significantly, contributing +2.6% and detracting -0.2%. With regard to fixed interest, the sector delivered a positive result, contributing +3.2% domestically and +2.5% offshore.
Our Fund maintained a highly defensive stance. Given the market conditions, we continue to anticipate the possibility of increased volatility and plan to maintain this position for the time being. However, if growth assets show significant improvement in valuation or global monetary policy becomes less aggressive, we will re-evaluate and adjust our focus to capture upside opportunities within growth assets.
During the month, we bought Australian equities taking profit on put option protection we acquired in January. We also noted a substantial decrease in volatility, particularly in Australia and Europe, in late March. We see this as an opportunity to utilise some of the profit we gained from our delta-hedging activities to acquire more put-option protection with expiry extended to September.
Performance Commentary - February 28, 2023 The Fund delivered a negative return over the month, which was driven by the Fund’s allocation to both growth and defensive assets.
In February, hedged international and Australian equities performed negatively with volatility increase significantly, detracting -1.6% and -2.6% respectively. With regard to fixed interest, the sector also delivered a negative result, detracting -1.4% domestically and -1.7% offshore. Finally, our global real estate and global infrastructure asset also delivered negative result, both detracted -3.6%. Markets were driven by inflation surprises to the upside during the month, which markedly increased the terminal cash rate in both the US and Australia. Our Model Portfolio maintained a defensive stance close to the maximum allowable level.
Given the market conditions, we continue to anticipate the possibility of increased volatility and plan to maintain this position for the time being. However, if growth assets show significant improvement in valuation or global monetary policy becomes less aggressive, we will re-evaluate and adjust our focus to seize upside opportunities within growth assets. The put-option protection in Australia equities we acquired last month provided reasonable protection as the market began to decline. We also increased Australian duration exposure, as the 10-year yield climbed sharply over the month to close to 4%. Over the next few months, we will continue to focus on managing downside risks while remaining alert to growth asset valuations.
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