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 snaps three-day losing streak
ASX finished 0.7% higher, Crown (ASX:CWN) under offer, Fortescue (ASX:FMG) tanks
The ASX200 (ASX:XJO) overcame a weak global lead to break a three day losing streak, adding 0.7% on Monday.
Every sector was higher barring materials, with Fortescue Metals (ASX:FMG) dragging the sector lower, falling 4.3% on a further weakening of the iron ore price.
Energy was by far the highlight, jumping 2.8% on the back of a stronger oil price and a 5.7% rally in Ampol (ASX:ALD).
The news of the day, however, was the release of a takeover proposal of Crown Resorts (ASX:CWN) by $111 billion global asset manager The Blackstone Group (NYSE:BX).
According to Crown, the offer is at a price of $11.85, a 19% premium to the previous price, valuing the business at over $8 billion. Naturally, the share price jumped 21.4% on the news.
The casino operator remains under extreme pressure just two days out from a Victorian Government Commission into their suitability to retain their casino license following the outcomes of a similar assessment in NSW.
Blackstone already owns 9.9% of the company and this appears a solid ‘out’ for the beleaguered group.
Telstra (ASX:TLS) plots a course for the future, Freedom Foods (ASX:FNP) trades again
The other major news came from Telstra (ASX:TLS) with management releasing more details on the long-awaited ‘structural separation’.
As previously flagged, the infrastructure assets will be split into three separate subsidiary companies being InfraCo Fixed, owning the physical infrastructure and data centres, InfraCo Towers, owning the telecommunications towers, and ServeCo, delivering innovative products and services.
According to the announcement, these will now be joined by an International subsidiary, owning the company’s global operations including their subsea cables, all of which will be owned by the Telstra Group.
Shareholders will receive a share in each company according to their current allocation.
Management highlighted the benefits of this structure, focusing on the ability to then consider the sale or monetisation of each business separately, hopefully realising value due to the greater transparency; shares finished 1.3% higher.
Insurance Australia Group (ASX:IAG) remains under pressure, falling 2.3% after announcing they could not yet quantify the costs of the NSW floods, whilst Freedom Foods (ASX:FNP) recommenced trading, falling 82.4% ahead of a massive capital raising.
More stimulus, Bitcoin instability favours hedging, markets move higher
US markets moved higher overnight offering a positive lead for the ASX, with the Nasdaq up 1.2% and the S&P500 0.8% following more insights from the Federal Reserve.
Yet once again it was all about bond rates, with a falling bond rate sending equity markets higher.
The Biden Administration is now expected to deliver another US$3 trillion in stimulus but with a particular focus on infrastructure and decarbonisation.
This will most likely be funded from tax hikes on the wealthy and corporations that have become stronger during the pandemic.
Tesla (NYSE:TSLA) is leading the market again after ETF provider ARK Invest upgraded their price target.
Federal Reserve Chair Powell was quoted as comparing Bitcoin as more akin to a hedge like gold, with its significant volatility making it near impossible to be considered an alternative to the US. So-called stable coins offered the best alternative, despite being linked to physical currencies anyway.
