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 sheds 0.3% as miners weigh
ASX down as Victoria braces, materials weaker, ALS profit jumps
The ASX200 (ASX: XJO) finished 0.3% lower on Wednesday, with the materials and e-commerce sectors leading the fall.
BHP Group (ASX: BHP) and Rio Tinto (ASX: RIO) remain under pressure, falling over 2% each as the hot commodity sector is cooled by increasing supply.
The Commonwealth Bank of Australia (ASX: CBA) briefly touched $100 per share for the first time, taking its market capitalisation to $177 billion, double that of Westpac (ASX: WBC); an incredible result given the pandemic continues.
Shares in Magellan Financial Group (ASX: MFG) jumped another 2.2% after the details of the soon-to-be-launched retirement income product were released.
The group is expected to offer investors a yield of around 4.3% per annum, supported by investments in global equities and a ‘mortality reserve’ to top up performance should it wane.
Australian Ethical (ASX: AEF), of which I am a shareholder, reported another $100 million in inflows in April taking total assets under management to $5.68 billion.
Management now expects an underlying profit of $8.8 to $9.3 million compared to $7.0 in FY20. Australian Ethical shares finished relatively flat.
Construction remains untouched, Fletcher capital returns
The domestic construction sector continues to navigate the pandemic with little interruption. Overall construction increased 2.4% to $52 billion in the March quarter, with building work 2.5% higher and engineering 2.2%.
Fletcher Building (ASX: FBU), which provides building supplies, rallied 3.9% after upgrading its earnings guidance and confirming they will undertake an on-market buy-back of NZ$400 million.
It now expects earnings to fall between $650 and $665 million as margins extend despite some input cost pressures.
Laboratory testing and inspection firm ALS Ltd (ASX: ALS) led the market gainers to jump 12.8% after reporting a 5.2% increase in revenue to $1.76 billion.
This supported a more than 50% jump in profit to $172 million, with management citing the decision to better align staff and resources to actual client demand amid the pandemic rather than seeking growth.
A number of impairments were offset by profits on the sale of its Asian business, with a doubling of the dividend to 14.6 cents per share cheered by investors.
Markets rally, positive lead, smaller companies outperform
US markets were powered higher by the smaller companies and technology sectors, with the Nasdaq jumping 0.6% after a stunning upgrade from chipmaker NVIDIA (NYSE: NVDA).
The more value-oriented Dow Jones and S&P500 weren’t as strong, adding just 0.03% and 0.2% respectively.
The Small Cap Russell 2000 index was the highlight, jumping 2.0% as the more diverse exposure to an improving domestic economy benefitted from continued reopening news.
Ford Motor Co (NYSE: F) jumped 8.6% after announcing its intention to double down on its investment into electric vehicles, adding US$30 billion to its investment intentions.
NVIDIA was the standout, beating sales expectations by over US$1 billion. Revenue was 84% higher than 12 months ago, hitting US$5.66 billion, powered by sales of chips designed for gaming which doubled.
The company is also seeking to reduce the use of its processing chips in bitcoin mining through a number of design changes, shares were broadly flat.
