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.
Record-setting miners drive ASX higher
Market rallies, trifecta of iron ore records, property hit by Victorian Government
The ASX 200 (ASX: XJO) delivered another positive day, adding 0.5% as the trifecta of iron ore miners including Fortescue Metals Group Limited (ASX: FMG), Rio Tinto Limited (ASX: RIO), and BHP Group Ltd (ASX: BHP) all hit record highs.
This sent the materials sector 1.5% higher, beaten only by the tech sector which added 2.6%.
It has been a big few days for iron ore miners and their dividends, with Rio’s result backed by a 71% increase in sales to US$33.1 billion and a 156% increase in earnings to US$12.2 billion; shares climbed 1.5%.
On Thursday it was all about Fortescue, with management reporting it had exceeded iron ore shipment guidance, delivering a record 49.3 million tonnes in just three months.
Average revenue was US$168 per tonne, well below the current spot price, with its primary cost now just US$15.23 per tonne showing the massive profit margin and benefits of scale.
The group has guidance to even higher shipments next year, shares jumped 1.9% with the dividend expected to be around the top of its range at 80% of profits, to be announced next month.
The property sector was the biggest detractor, falling 1.3% with retailers seemingly outperforming industrial and office assets.
Vicinity Centres (ASX: VCX) was flat after the Victorian Government announced new legislation forcing landlords to reduce their rent demands.
Equity Trustees bids for IRESS, Macquarie’s year starts strongly
Shares in technology platform owner IRESS Ltd (ASX: IRE) jumped 13.9% after announcing it had received an unsolicited bid for its entire business on the 4th of July.
The bidder was funds represented by Equity Holdings Ltd (ASX: EQT) with the price being $15.50 per share.
IRESS, which operates the XPLAN platform used by financial advisers, has a near-monopoly over this software and is apparently facing two bidders down.
Even after the rally, the IRESS share price remains at $14.25, a solid discount to the offer and potential arbitrage for those confident of a deal.
Thus far, the Board has suggested the offer does not represent ‘compelling value’ as is the par for the course in these types of offers.
Staying with takeovers, Boral Limited (ASX: BLD) is now two-thirds owned by Seven Group Holdings Ltd (ASX: SVW) through its nil-premium offer.
Investment bank Macquarie Group Ltd (ASX: MQG) offered a market update on Thursday, confirming ‘improving trading conditions’ in its first fiscal quarter, with profit contributions ahead of 2020 levels.
Its annuity-style businesses, being banking and funds management, were up only slightly with the capital markets, mergers and acquisitions division said to be significantly higher than a year ago.
This has been supported by the sale of the group’s UK smart meter portfolio, a positive sign for the all-important exits that allow the release of performance fees. Macquarie shares finished the day 0.3% higher.
Markets rally on US consumer, PayPal, Facebook report, Robinhood tanks on IPO
US markets returned to their winning ways with all three benchmarks finishing higher, led by the Dow Jones and S&P 500 which were 0.4% to the positive.
The Nasdaq was weaker, adding just 0.1%, as the tech earnings season rolled on with some concern about forecasts.
That said, analysts were happy with the US GDP result of 6.5% particularly given the stronger than expected consumer spending.
Facebook, Inc. (NYSE: FB) shares continued to fall, down over 4%, as signs that the group’s user growth was beginning to slow, up just 7% to 2.9 billion for the quarter.
That said, the advertising-led platform reported a 56% increase in sales to US$29 billion as companies seek to expand again.
There were signs that Paypal Holdings’ (NYSE: PYPL) entry into the BNPL space was an effort to remain relevant, with profits beating forecast but quarterly sales of US$6.24 billion weaker than expected.
Management cited their previous owner Ebay’s decision to take control of their own payments going forward as a key detractor.
Amazon.com, Inc. (NYSE: AMZN) reported a 50% increase in quarterly earnings to US$7.78 billion but flagged a ‘slowing’ in sales growth from 40% to 27% going forward. Online sales grew a meagre 13%, advertising 83%, and cloud computing another 37%.
Robinhood Markets Inc (NASDAQ: HOOD) may have been the story of 2020 with the user-friendly platform gamifying share trading, but its IPO debut fell flat, falling 8% overnight.
