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 claws back $33b as miners and banks rebound
Strongest day in four months, Fed backs off, lithium miners rally
The ASX 200 (ASX: XJO) experienced its best session in four months, adding 1.5% on Tuesday, all but erasing Monday’s losses.
Every sector but healthcare finished higher, with real estate and energy the biggest beneficiaries adding 2.2% respectively.
The positive sentiment came from Fed Chair Jerome Powell’s written testimony confirming his confidence that inflation would fall below 2% once ‘transitory supply effects abate’.
Property was among the biggest beneficiaries with Charter Hall Group (ASX: CHC) up 3.4% and Vicinity Centres (ASX: VCX) 2.9% even as tax changes impact valuations.
Yesterday VCX reported a 1.2% fall in its property valuations, primarily in CBDs, in order to price in the recent Victorian Government land tax and stamp duty changes as well as continued rent deferrals.
On the positive side, management announced a 6.6 cent distribution, nearing the 8 cents paid in 2020 as operations continue to return to normal.
Another one bites the dust, IGO gets approval, Nuix hits record low
IGO Ltd (ASX: IGO) and Pilbara Minerals Ltd (ASX: PLS), both lithium miners, jumped 7.4% and 6.2% respectively after the former received approval to finalise its joint venture with its Chinese partner.
Another listed investment company is set to disappear from the ASX boards as the inefficiencies of the structure remain in question.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is set to merge with Milton Corporation Limited (ASX: MLT) at a price of $6 per share. MLT shares jumped 14% to $5.80 on the news.
The deal will create a $10 billion investment company, with MLT shareholders receiving an 8 cent final dividend, a special dividend of up to 37 cents per share, and a 7 cent dividend from SOL.
The combined entity is expected to use its larger balance sheet and the greater flexibility that comes without the LIC mandate structure to finalise a number of deals to purchase alternative assets, says management.
Shares in Nuix Ltd (ASX: NXL) hit a new record low after it was announced that the Australian Federal Police would review the payout of options to a previous shareholder for ‘potential breaches of the Corps Act’.
US rallies on Powell testimony, Microsoft hits US$2 trillion, Bitcoin tumbles
US markets continued their sharp recovery with all three indices higher, led by the Nasdaq which was up 0.8%.
The S&P 500 and Dow Jones added 0.5% and 0.2% respectively, with retailers, energy, and technology stocks leading the gains.
Microsoft Corporation (NYSE: MSFT) was a key contributor, adding 1.1%, which sent the market cap past US$2 trillion for the first time, joining Apple Inc (NASDAQ: AAPL) as the only companies to do so.
Despite the lofty valuation, the company trades on a price-earnings multiple of around 30 times and has a massive amount of cash on the balance sheet.
The home price spike hasn’t been limited to Australia, with the US reporting a 23% annual increase in May despite a lower volume of properties being sold.
The dream 2021 run for cryptocurrencies continues to crater with Bitcoin falling below US$30,000 for the first time this year, cancelling out the 100% gains achieved by many.
The falls are widespread and come following an announcement by the Chinese Government that they would be seeking to ban Bitcoin mining but also restrict the likes of Alibaba Group (NYSE: BABA) from allowing customers to trade crypto on their platforms.
