David Blumenthal Six Park by David Blumenthal

Six Park’s portfolios have returned up to +17.1% after fees in the 12 months to the end of October.

While the Six Park portfolios ended the month slightly down (-0.1% to -0.3%), our rolling 12-month returns actually increased to +7.2% to +17.1% for the year. These somewhat counter-intuitive results are a function of October 2018 dropping out of the 12-month calculation window. October 2018 was an especially weak month for global equity markets (one of the worst monthly sell-offs in the past seven years) and this had been a drag on annual returns up until now.

Over the past three years, our portfolios have returned an average of +4.6% to +11.9% per annum, even with the sharp market sell-off of October-December 2018 included.  These strong results underscore the advantages of our low-cost, globally diversified investment portfolios and are a reminder of the benefits of avoiding emotion-driven, reactionary investment decisions during times of market weakness.

Asset class performance

Emerging markets was the best performing asset class in October, gaining +1.5%. Fixed income and Australian shares were the weakest, declining -0.8% and -0.7% respectively.

Emerging markets gained +1.5% for the second month in a row. Russian markets were a key contributor, notching up strong gains on the back of larger-than-expected interest rate cuts by its central bank. Chinese, Taiwanese and South Korean markets also rallied on signs of progress in US-China trade talks (a boost for overall global trade confidence) while Brazil outperformed on news that the government had been successful in passing its long-awaited pension reform proposals. Overall, the emerging markets sector is now up +17.8% for the year, a far cry from 12 months earlier when the sector was the worst performing asset class with annual losses of -7.4%.

International shares rose 0.4% in October. US equities posted solid gains (the S&P500 was up +2.2% and hit all-time record highs) buoyed by a further cut in interest rates by the Federal Reserve, news of a potential mini-trade deal with China (which would see the US suspend tariff increases in return for China committing to significantly higher purchases of US agricultural products) and better-than-expected economic data (unemployment rates fell to 3.5%, beating market expectations and taking the jobless rate to levels not seen since 1969). European equities were also strong, with solid Q3 economic growth figures exceeding expectations.

Returns on our cash yield ETF were positive but muted (+0.1% for the month), reflecting the ongoing low interest rate environment across Australian banks.

Global property and infrastructure both registered declines of -0.5%.  Both sectors fell out of favour amidst a general pick-up in risk appetite while our property ETF was also impacted by the +2.6% gain in the AUD (which reduces the value of unhedged offshore assets in local currency terms).  Despite these falls, both global property and infrastructure remain the best asset classes over the past 12 months, with annual gains of +19.7% and +18.9% respectively.

Australian shares fell -0.7% in October, weighed down by concerns over a slowing economic outlook. Underlying sector performances were mixed, with 11 of the 22 sub-industry sectors posting gains. Pharmaceutical stocks were strong (up +9.6%) but offset by declines across food, beverage, banks and materials shares.

A further uptick in local bond yields produced a -0.8% decline in fixed income returns. On a rolling 12-month basis, the sector is up +9.8% but is now significantly trailing global and domestic equity returns (up 16.7% and 18.9% respectively for the past 12 months).

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Published November 9, 2019