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 buoyed by financial sector, rate pause hopes, Domino’s upgraded
Sharemarkets continue to navigate the escalating global banking crisis, with the S&P/ASX200 managing to deliver a 0.8 per cent gain on the back of a 1.2 per cent surge in the financial sector. The rally was led by the likes of Macquarie (ASX:MQG), up 3.3 per cent, as recent transactions highlighted the continued support for the banking system. The utilities sector was the biggest detractor, falling 1.6 per cent, while a broker upgrade of Dominos (ASX:DMP) saw the stock price jump 5.6 per cent, sending the retail sector 1.5 per cent higher. Investment bank Barrenjoey suggested the selloff in the company had gone to far and inflationary impacts were set to dissipate. The release of last month’s RBA minutes offer further hope that rate hikes were set to pause, with comments noting that the board would reconsider the impacts of the decisions made thus far within the April meeting.
Nuclear weakness continues, Incitec sells ammonium plant, Wyloo bids for Mincor
Explosives and industrial materials firm Incitec Pivot (ASX:IPL) jumped 3.8 per cent after the company announced a $2.5 billion deal to sell its US ammonia plant, after previously considering a demerger. Oil prices remain near 15 month lows on recessionary concerns, while uranium continued its recent weakness with Paladin (ASX:PDN) falling another 3.4 per cent. The materials sector performed strongly, gaining 1 per cent, with shares in Nickel (ASX:MCR) gaining 42 per cent after the company received a takeover offer from Andrew Forrest’s Wyloo Investments for $1.40 per share. The group already had a 19.9 per cent stake, with a significant opportunity in the WA-located Kambalda project. Sticking with materials, UBS has suggested that lithium supply would double by 2025, but remains positive on the share price of local players. Shares in coal miner New Hope (ASX:NHC) gained more than 8 per cent after the company reported a doubling in profit to $668 million and a significant increase in the dividend.
Yellen comments sooth markets, oil, banks surge, Nike beats expectations
Global markets have delivered back-to-back gains overnight, driven by the Nasdaq’s 1.6 per cent gain as the so-called ‘quality’ big tech names outperform the broader market. The Dow Jones added 1 per cent and the S&P500 1.3 per cent following comments from Treasury Secretary Janet Yellen, that more support will be provided to the regional banking sector and depositors if required. This comes ahead of another Fed rate decision for which the market is pricing in an 83 per cent probability of a 25-basis point hike despite the ructions occurring throughout global financial markets. In positive news the regional banking sector gained and UBS Group added 12 per cent after finalising the acquisition of Credit Suisse. Shares in athletic retailer Nike (NYSE:NKE) were trading higher after hours as the company reported a 14 per cent increase in revenue and profit that topped expectations for the quarter.
