Implementing our current asset allocation strategy

23 June 2020

Our quarterly managed funds report outlines the pathway best-suited to deliver on our current asset allocation strategy and the basis on which our chosen funds are vetted. The report provides an overview of our strategic position for the second quarter 2020, providing colour and context as to why specific funds have been included on our Focus List and the role they can play in investors’ portfolios.

Revisiting our strategic position

Global equity markets have rebounded strongly after one of the shortest and sharpest sell-offs in history following the outbreak of the COVID-19 health crisis.

Three factors have driven the rally in markets: unprecedented policy support from central banks and governments, peaking COVID-19 infection rates and rising hopes of the re-opening of many economies.

Our asset allocation strategy supports a medium-term favourable outlook for equities while conceding that shorter-term volatility may remain given the risk equities have rebounded too far, too soon, and there is potential for a second wave of COVID-19 infections.

We retain our overweight recommendations toward:

  • Cash – To use in the event of a renewed pullback in risk assets.
  • International equities – We hold a regional preference toward Emerging Markets which represent an attractive opportunity from a relative valuation and growth perspective. We instituted a 50/50 hedging A$/US$ recommendation in April but now recommend edging this back to a 40% hedge ratio given the sharp appreciation of the A$ in recent weeks.
  • Alternative assets – Given their low correlation to traditional investment assets. We recommend gold as a portfolio hedge against economic uncertainty and rising inflation and have moderately increased our already overweight alternatives position toward gold – notably for exposure to USD gold bullion as opposed to gold producing companies.

We retain our underweight recommendation toward:

  • Fixed income – Given the unattractive yield environment of bonds against the expectation of improving global growth. We prefer corporate credit over government bonds, and see sense in holding long-term inflation protection.

We have moved from a neutral to overweight recommendation in:

  • Domestic equities – In April we moved from a neutral to overweight recommendation in domestic equities on more attractive valuations relative to global equities, and a superior control of COVID-19, with a reopening of the economy to occur sooner.

Download the Quarterly Managed Funds Report

About Wilsons - www.wilsonsadvisory.com.au
 
Wilsons is a financial advisory firm focused on delivering strategic and investment advice for people with ambition – whether they be a private investor, corporate, fund manager or global institution. Its client-first, whole of firm approach allows Wilsons to partner with clients for the long-term and provide the wide range of financial and advisory services they may require throughout their financial future. Wilsons is staff-owned and has offices across Australia.
Disclaimer: This document has been prepared by Wilsons Advisory and Stockbroking Limited (Wilsons) (AFS License 238375, ABN 68 010 529 665). In preparing the information in this document Wilsons did not take into consideration the investment objectives, financial situation or particular needs of any particular investor. Before making any investment decision, you should consider your own investment needs and objectives and should seek financial advice.
In preparing the information in this document Wilsons did not take into consideration the investment objectives, financial situation or particular needs of any particular investor. Before making any investment decision, you should consider your own investment needs and objectives and should seek financial advice. Past performance is not a reliable indicator of future performance.

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