After a stellar November, global sharemarkets continued their gains in December as investors cheered the rollout of the first COVID-19 vaccines and the passing of both the US fiscal stimulus package and Britain’s Brexit trade deal with the EU.
The Six Park portfolios returned -0.1% to +0.5% for the month, with our highest risk portfolios benefiting most from the ongoing equity market recovery.
Returns for the 2020 year were -0.4% to +0.4%. This is a marked contrast to 2019, when our portfolios gained +7.9% to +23.1%, but pleasingly reflect a very strong recovery from the position at the end of the first quarter when our portfolios were down -6.7% to -16.8% as COVID-19 wrought havoc across global markets.
At that time, our recommendation was that investors hold their nerve amidst the market sell-off. Those who managed to do so were well rewarded over the course of the year. Over the past three years, our portfolios have returned +2.9% to 6.8% per annum after fees. These figures would have placed Six Park in the top 20% of all equivalent risk profile multi-asset managed funds tracked by Morningstar – a result which underscores the benefits of our passive investment focus and thoughtful asset allocation strategies (under the guidance of our Investment Advisory Committee).
Six Park Portfolio Performance – December 2020
|Period||Conservative||Conservative Balanced||Balanced||Balanced Growth||Aggressive Growth|
(1) Past performance is not indicative of future performance.
(2) All figures are illustrative in nature based on notional $50,000 portfolios which are assumed to have been fully invested at the start of the relevant period. Your actual investment performance may vary depending on factors such as the timing of your investment with us.
(3) All figures are pre-tax but net of Six Park’s and applicable ETF fees. The results are based on closing prices for each ETF, not NAV. They assume dividend reinvestment (at month end) but do not include dividend imputation, cash holdings or annual rebalances.
(4) 1 and 3-year returns are annualised
Asset class performance
Global equities were the standout performer in 2020, rising more than 10% (on an unhedged basis) by year end and erasing and surpassing their steep losses in Q1, when COVID-19 uncertainty was at its peak.
Global property was the weakest asset class, falling -19% over the year. It is worth contrasting this performance to the sector’s +29% gains in 2019. This performance differential is a useful reminder of the unpredictability of markets and a key reason why our portfolios are diversified across multiple asset classes and geographies. Read more about Six Park’s selected ETFs.
(1) Results reflect ETF closing prices, not NAV, so may differ from those published by the ETF issuers.
International equities ended the year strongly, gaining +3.2% in December. Despite a resurgence in COVID-19 across the Northern Hemisphere, US stockmarkets hit fresh record highs as the first vaccines began to be rolled out and US Congress finally passed a US$900 billion fiscal stimulus package. European and Japanese stocks also closed higher, notwithstanding the emergence of a new strain of coronavirus that forced new lockdown measures. Overall returns for the 2020 calendar year were +10.5%, a marked turnaround from the situation at the end of the first quarter when global equities were down -21% YTD. Returns on an unhedged basis were +5.7% for the year, dragged down by the AUD’s strong appreciation against the USD.
Emerging markets returned +4.8% in 2020. After falling sharply in February and March, the sector staged a gradual but steady recovery over the remainder of the year, supported by US dollar weakness and a rally in commodity prices. Chinese stocks (which comprise 44% of the sector) ended the year in positive territory despite being dragged down by escalating US-China tensions in the fourth quarter.
Fixed income declined slightly in December but still ended the year up +4.2%, boosted by the RBA’s decision to cut official interest rates by 65 basis points over the course of the year. Falling rates have a positive impact on bond prices (lower rates mean higher bond prices) and were one of the drivers of the sector’s advances in 2020.
Australian shares lagged behind their global counterparts, adding +1.6% in December and +1.8% for the calendar year. While this return is well down on its +23.2% rise in the 2019 calendar year, it is still a remarkable result considering the local market fell almost -30% over February and March on rising fears over the COVID-19 outbreak. IT stocks were the standout performers, gaining +56% for the year, while energy and utility stocks were the main laggards (down -22% and -30% respectively).
Returns on our cash yield ETF remained muted in December, gaining +0.7% over the year. This subdued result reflects the prevailing low-interest rate environment and the RBA’s decision to cut rates three times over the course of 2020. Despite its low returns, the sector continues to be an important asset class in our portfolio given capital security characteristics and relatively low risk correlation with our other ETFs.
Infrastructure declined -2% in December, with concerns over rising COVID-19 infections and an expected tightening in restrictions weighing on transport and electricity assets. The sector ended the year down -8.6% overall, a marked difference to the 2019 calendar year when it gained +23.8%. The majority of this decline was driven by losses across the transport and pipeline segments, which were hit hard by the pandemic (down -25% and 20% respectively) and far outweighed gains seen across railroad and telecommunication stocks.
Global property fell -1.2% in December, with gains across all overseas real estate markets more than offset by the +4.2% surge in the AUD. Over the course of the year, global property declined -19%. More than half of the decline was actually currency-driven (with the AUD gaining +10% over the last 12 months). The sector was also hit extraordinarily hard by the COVID-19 pandemic, with lockdown restrictions having widespread flow on effects on rental incomes and occupancy rates, especially across office and retail assets.