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.
Financial Planner Morning Report – global markets mixed
The ASX 200 is likely to open slightly lower on Tuesday according to the Sydney Futures Exchange.
Global markets a little choppy
Markets were mixed around the world on Monday, the Nasdaq continuing its relentless charge, up 0.8%; the S&P 500 rose 0.1%.
European markets were weaker with the German Dax and FTSE both improving slightly, but the most strength was in Asia where the Nikkei rallied 1.1% and the ASX 200, 1.3%. The ASX rally was broad-based with every sector increasing for the day on the back of easing lockdowns around the world.
Oil improved to $30 per barrel sending shares in Santos Ltd (ASX: STO) and Woodside Petroleum Ltd (ASX: WPL) up around 2%. Global hearing implant leader, Cochlear Limited (ASX: COH), added significantly to the market, rising 5% as elective surgeries around the world began to open up.
China off-balance-sheet debt reopens
Amid continued discussions with the US, the Chinese central bank announced it would continue to support the domestic economy with a view to maintaining employment and seeking to remove poverty in 2020. A lofty goal. Reports indicated that the economy is once again relying on off-balance-sheet borrowing by domestic companies, called Local Government Finance Vehicles (LGFV) with issuance up to $206 billion for April.
UK PM Boris Johnson reduced restrictions whilst announcing a potential 14-day quarantine for all arrivals, impacting airlines including EasyJet.
It was a busy day for Australian companies, Macquarie Group Ltd (ASX: MQG) rallied 6% as management announced it was relaunching its $400 million raising via a long-dated preference share, suggesting market conditions were quickly improving.
US Cinema owner AMC Holdings was rumoured to have received a takeover offer from Amazon, sending the shares up 38%, whilst cable companies including Comcast and Charter are benefitting similarly to Telstra Corp Ltd (ASX: TLS) as consumers seek to install faster broadband connections.
Retailers in Australia also saw signs of improvement, shares of Kathmandu Holdings (ASX: KMD) rose 14% and car sales aggregator AP Eagers Ltd (ASX: APE) jumped over 10%.
This report was written by Drew Meredith, Director of Wattle Partners.
