Perpetual Diversified Real Return Fund invests across a range of strategies, regions and sectors. The Fund targets a pre-tax return of 5% per annum above inflation, before fees and taxes, over rolling five-year periods, while minimising downside risk. It aims to achieve this return with lower levels of volatility than a traditional balanced fund. Diversifying the sources of risk to form a more efficient multi-asset portfolio and seeking to reduce the uncertainty of investment outcomes over the investment horizon and protect returns against inflation.
The Diversified Real Return Fund returned 1.3% (gross) in the September quarter. Over the past year, the Fund has returned 4. 5% (gross) and over the past 5 years the Fund has returned 4.7% (gross) per annum compared with the objective of 8.6% (CPI plus 5%*) over rolling 5 years. Since inception (in 2010) the Fund has returned 6.4% (gross) per annum compared with the objective of 7.8% (CPI plus 5%*).
The Fund’s elevated cash allocation was the most substantial contributor to return during a quarter where equities and bonds recorded capital losses. Cash continues to offer robust returns following the 400bps of rate increases since early 2022, with the Fund’s US dollar exposure also reflecting the strength of the US economy in addition to its higher interest rates.
Equity exposures were mixed for performance over the quarter. Equities markets fell over the course of August and September as bond yields rose and weighed on equity valuations, but the Fund’s equity put options increased in value and provided solid protection.
Meanwhile, the Fund’s allocation to fixed income detracted over the quarter as US and Australian bond yields rose sharply in August and September, as did the small allocation to a diversified basket of commodities including Gold.
What is Perpetual Diversified Real Return Fund Perpetual Diversified Real Return 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 Perpetual Diversified Real Return Fund has Assets Under Management of 632.75 M with a management fee of 0.85%, a performance fee of 0.00% and a buy/sell spread fee of 0.22%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Perpetual Diversified Real Return Fund has returned 0.77% in the last month. The previous three years have returned 2.75% annualised and 3.22% each year since inception, which is when the Perpetual Diversified Real Return 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 Perpetual Diversified Real Return Fund first started, the Sharpe ratio is NA with an annualised volatility of 3.22%. The maximum drawdown of the investment product in the last 12 months is -0.65% and -3.56% 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 Perpetual Diversified Real Return Fund has a 12-month excess return when compared to the Multi-Asset - Real Return Index of -5.18% and -0.15% 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. Perpetual Diversified Real Return 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 Perpetual Diversified Real Return Fund provide? Perpetual Diversified Real Return Fund has a correlation coefficient of 0.81 and a beta of 0.32 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 Perpetual Diversified Real Return Fund and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Perpetual Diversified Real Return Fund with the Multi-Asset Growth Investor Index? For a full quantitative report on Perpetual Diversified Real Return Fund compared to the Multi-Asset Growth Investor Index, you can click here.
Can I sort and compare the Perpetual Diversified Real Return Fund to do my own analysis? To sort and compare the Perpetual Diversified Real Return Fund financial metrics, please refer to the table above.
Has the Perpetual Diversified Real Return 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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Performance Commentary - August 31, 2023 The Diversified Real Return Fund returned 0.7% (gross) in August. Over the past year, the Fund has returned 5.0% (gross) and over the past 5 years the Fund has returned 4.7% (gross) per annum compared with the objective of 8.7% (CPI plus 5%*) over rolling 5 years. Since inception (in 2010) the Fund has returned 6.5% (gross) per annum compared with the objective of 7.8% (CPI plus 5%”).
The Fund’s defensive positioning mitigated the impact of elevated volatility and sliding equity markets during August. In a month where global equities recorded a total return of -1.7%, the Fund’s low equity weight and elevated cash allocation culminated in positive returns. The aggressive tightening of monetary policy since early 2022 has increased the attractiveness of yields offered on cash type investments, whereas rising valuations and stretched earnings expectations leave regional equity markets quite vulnerable to even modest changes in sentiment or expectations.
The Fund’s modest allocation to developed and emerging markets were the largest detractor from performance last month as global equities sold off. Typically defensive assets such as government bonds and gold both experienced capital losses but cash bucked this trend, contributing to performance.
Performance Commentary - July 31, 2023 The Diversified Real Return Fund returned 0.9% (gross) in July. Over the past year, the Fund has returned 5.0% (gross) and over the past 5 years the Fund has returned 4.7% (gross) per annum compared with the objective of 8.7% (CPI plus 5%) over rolling 5 years. Since inception (in 2010) the Fund has returned 6.4% (gross) per annum compared with the objective of 7.8% (CPI plus 5%).
Global equities extended their rally during July, contributing to portfolio return. The Fund’s exposure to developed and emerging markets as well as Australian equities were all key positive contributors as Investors responded positively to data which suggested that global recession risks had declined, although they remain quite significant. Meanwhile, price gains in global and Australian REIT in response to firming expectations that central banks are close to ending their tightening cycles also added to returns. These contributors were partially offset by the cost of the Fund’s equity put options and negative stock selection within Australian equities.
Elsewhere, the Fund’s allocation to a diversified basket of commodities was a substantial contributor, led by gold which rebounded from a weak second quarter as the US Dollar depreciated against its peers.
Similarly, the Fund’s fixed income allocation performed well as our short position in 10 year Japanese government bond added value as the yield curve steepened in response to speculation that the Bank of Japan was set to tweak its yield curve control policy at its late-July meeting which was subsequently occurred. The gains from this exposure were partially offset by higher US bond yields in response to a stronger set of economic data
Lastly, the Fund’s substantial cash allocation continues to contribute to returns as 15 months of rate hikes are now rewarding patient investors who are concerned about elevated valuations and highly optimistic earnings expectations for the second half of 2023 and 2024 All groups CPI measured and published by the ABS as at 31 March 2023 and 2024.
Performance Commentary - June 30, 2023 The Diversified Real Return Fund returned 0.2% (gross) in the June quarter. Over the past year, the Fund has returned 4.4% (g ross) and over the past 5 years the Fund has returned 4.8% (gross) per annum compared with the objective of 8.6% (CPI plus 5%*) over rolling 5 years. Since inception (in 2010) the Fund has returned 6.4% (gross) per annum compared with the objective of 7.8% (CPI plus 5%*)
Allocation to global equities was the most substantial contributor to return during the June quarter, with price gains underpinned by higher valuations in in the tech sector as investors were buoyed by recent developments in artificial intelligence. Elsewhere. Australian equities were also constructive for performance, but were partially offset by the cost of Fund’s equity put options and stock selection alpha also weighed on performance.
The Fund’s substantial cash allocation also contributed to return reflecting the 400bps of rate increases over the past 13 months. During the first two months of the quarter, the Fund’s US dollar and Emerging market currency exposures performed well before the Australian dollar rallied in June. The Fund’s fixed income allocation was the most significant detractor from return during the period, as real and nominal bond yields moved higher in May and June in response to sustained elevated inflation and hawkish central bank commentary which signalled that their respective tightening cycles had further to go.
Elsewhere, the Fund’s small allocation to a diversified basket of commodities including Gold detracted as weakening Chinese demand weighed on prices.
Performance Commentary - May 31, 2023 The Diversified Real Return Fund returned •0.3% (gross) during May. Over the past year. the Fund has returned 2.7% (gross) and over the past 5 years the Fund has returned 51% (gross) per annum compared with the objective of 8.6% (CPI plus 5%’) over rolling 5 years. Since inception (in 2010) the Fund has returned 6.5% (gross) per annum compared with the objective of 7.8% (CPI plus 5%’).
The most substantial detractor from return during the month was the Fund’s fixed income exposure. The Fund maintains exposureto Australian and US government bonds which both saw yields move higher during May. The duration risk of these investments is partially offset by short Japanese government bond futures. During the month however. Japanese bonds held firm as the BOJ quashed the possibility of a near term change to their Yield Curve Control policy.
Global equity markets were mixed. with the strong performance of a small concentration of large cap US tech stocks offsetting falling valuations elsewhere. The value tilt of the Fund’s equity exposures was not rewarded, and stock selection detracted across global and dcmestic equities (with the exception of the underweight exposure to China within the Fund’s emerging markets exposure).
During a month of mixed returns for risk assets. the Fund benefitted from its substantial cash allocation. Notably the large US dollar exposure was the most significant contributor to performance as the Greenback powered ahead of peers on anticipation of further tightening from the US Federal Reserve (the Fed).
Elsewhere, the Fund’s allocation to a diversified basket of commodities including Gold detracted as weakening Chinese demandand anticipation of further monetary tightening impacted prices.
Performance Commentary - February 28, 2023 The Diversified Real Return Fund returned 0.0% (gross) during February. Over the past year, the Fund has returned 1.8% (gross) and over the past 5 years the Fund has returned 4.9% (gross) per annum compared with the objective of 8.4% (CPI plus 5%*) over rolling 5 years. Since inception (in 2010) the Fund has returned 6.5% (gross) per annum compared with the objective of 7.7% (CPI plus 5%*).
Performance Commentary - January 31, 2023 The Diversified Real Return Fund returned 0.6% (gross) during January. Over the past year, the Fund has returned 1.1% (gross) and over the past 5 years the Fund has returned 4.6% (gross) per annum compared with the objective of 8.4% (CPI plus 5%*) over rolling 5 years. Since inception (in 2010) the Fund has returned 6.6% (gross) per annum compared with the objective of 7.7% (CPI plus 5%*).
Global and Australian equity exposures were the key contributors to return during the month as the Fund benefitted from the strong rally in stocks. This positive contribution was partially offset by the negative performance of the Fund’s equity put options. Stock selection across global and Australian equities detracted slightly as growth outperformed value on the back of falling bond yields. The Fund’s emerging market’s exposure added value (although an underweight exposure to China was a drag on performance).
The Fund’s fixed income exposures – most notably Australian bonds – performed well as long term yields rallied strongly. Elsewhere, exposure to global and domestic listed real estate performed well and the Fund benefitted from the rally in gold.
The most significant detractor from return over the month was the Fund’s substantial US Dollar allocation. The Australian dollar rallied strongly against the greenback over the month on the back of Chinese reopening and rising commodity prices.
Performance Commentary - December 31, 2022 The Diversified Real Return Fund returned 1.6% (gross) in the December quarter. Over the past year, the Fund has returned 0.9% (gross) and over the past 5 years the Fund has returned 4.6% (gross) per annum compared with the objective of 8.0% (CPI plus 5%*) over rolling 5 years. Since inception (in 2010) the Fund has returned 6.6% (gross) per annum compared with the objective of 7.6% (CPI plus 5%*).
The rally in global and Australian equities through the first two months of the December quarter was the key driver of absolute return. Global equity stock selection contributed to performance as the value sectors and securities outperformed their growth peers. However, these gains were partially offset by the Fund’s exposure to the US dollar which gave back some of its very strong performance over the past year.
While the Fund’s exposures in Australian and US duration were little changed over the quarter, they experienced heightened volatility as safe-haven flows, inflation and policy decisions took their turn driving market trends. However, the Fund’s short position in Japanese government bonds was rewarded when the Bank of Japan lifted the cap on its yield curve control measures to 0.5%. Meanwhile, the Fund’s exposure to a diversified basket of metals including gold added to performance after China abandoned their zero-Cov-19 protocols and offered increased support to the beleaguered property sector. Elsewhere, the Fund’s Australian listed real estate exposure performed well, with the sector regaining a portion of recent losses.
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