Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
ASX market update; fifth straight month for the ASX
Weak open ahead, Fifth straight month for the ASX, IOOF loads up
The ASX 200 (ASX:XJO) finished Monday near its low, down 0.2%, yet the market was able to finish August 2.2% higher.
The result marketing the fifth straight month of gains and a 33% rally from the March lows; those who sold amid the volatility have now truly been left behind.
The monthly gains closely reflected the recovery of US markets, with the digitally enabled IT sector up 15% behind the likes of Afterpay Ltd (ASX:APT) and ASX Ltd (ASX:ASX) and the Consumer Discretionary sector up 11.6% driven by the e-commerce powered JB HiFi Ltd (ASX:JBH) and Kogan Ltd (ASX:KGN).
The biggest news of the day was the $1.6 billion IOOF Ltd (ASX:IFL) announcing the purchase of MLC Wealth from the National Australia Bank (ASX:NAB) for a price of $1.44 billion.
The successful acquisition would result in a $510 billion superannuation, wealth management and advisory platform, the largest of its type in the country.
In my view, the deal will take some convincing given the entire premise of the Royal Commission was on removing these vertically integrated institutions.
China on the front foot, Pacific riding the current, Temple and Webster shows no signs of slowing
The Australian beef and wine industries took another hit on Monday, after the Chinese announcement it would be launching an investigation into Government subsidisation of the domestic wine industry; with China our largest export market.
This follows last week’s banning of another Australian abattoir as the Chinese seek to exert their position of strength and comes amid news the some 17% of Victorians are employed but with no work to do.
Treasury Wine Estates Ltd (ASX:TWE) remained under pressure falling 0.8%. Pacific Current Group Ltd (ASX:PAC) the owner of the fastest growing boutique fund manager in the world, GQG Partners, added 1% after reporting a 21% increase in net profit to $25 million.
Funds under management increased 52% to $93 billion with GQG Partners alone accounting for $19 billion of the increase.
The result was a 40% increase in the dividend to 35 cents per share for the year.
Online furniture retailer Temple and Webster Ltd (ASX:TPW) announced a 77% lift in active customers, a 74% increase in revenue for the year and a further 161% in the short period from July to 27 August; shares finished 18% higher.
Buffet goes long Japan, Apple and Tesla push the Nasdaq higher
The records continue to fall with US markets posting their strong August since the 1980’s the S&P 500 finished down 0.2% for the day but 7.2% higher for the month.
It was a similar story for the tech driven Nasdaq, up 1% and 9.6% respectively behind another rally in both Tesla Inc (NASDAQ:TSLA) and Apple Inc (NASDAQ:AAPL), adding 12.6% and 3.2% after their stock splits.
As another month of positive returns passes it’s more evident than ever that those relying on traditional ‘value-based’ investing has been left behind, with digital-enabled businesses leading the way post-pandemic; this trend is unlikely to cease anytime soon.
Warren Buffets Berkshire Hathaway has announced another sweeping investment, adding substantial allocations to 5 mini ‘Berkshires‘ based in Japan.
The holdings include trading houses, Sumitomo, Mitsui, Mitsubishi and Itochu, with the news sending the Nikkei 225 up 1.1%. This week sees European inflation data and Australian GDP on Wednesday.
