Wealth Builder Portfolio
Portfolio Commentary
The Wealth Builder Portfolio fell 4.09% net of fees in September, giving back part of August’s strong gain. US large-cap technology and semiconductors contributed positively. Small-cap healthcare and biotechnology was the largest detractor, followed by financial technology, junior resources, uranium, natural resources and precious metals.
September rewarded the market’s largest companies and penalised most others. The majority of US and Australian shares fell. Outcomes across individual resources holdings varied widely, with sharp gains in several explorers offset by steep falls elsewhere. We exited an online brokerage and trimmed social media and a mineral explorer after strong runs, and sold a chip designer as its shares rebounded and a medical technology holding after a prolonged decline. Proceeds were added to cloud computing leaders, memory chips, Chinese e-commerce, lending technology, junior miners and biotechnology, at attractive prices.
Wealth Builder is designed for investors seeking the strongest long-term growth over seven years and beyond, and it accepts sharper monthly swings in exchange. Our conviction in the portfolio’s core themes is undiminished, the portfolio is exceptionally well priced and we regard the recent pullback in prices as being non-discriminatory and a highly attractive entry point simply because valuations are so attractive among companies we expect to deliver over time.
Market Commentary
September was a difficult month for Australian markets. A global bond sell-off and a renewed round of central bank tightening hit both equities and fixed income. Domestic yields rose sharply early in the month. On 10 September, Australian government bond yields tracked an overnight sell-off in US Treasuries to reach their highest levels across the curve since May 2011. The Bloomberg AusBond Composite 0+Y TR AUD fell 0.86%. Cash held its ground, with the Bloomberg AusBond Bank 0+Y TR AUD returning 0.36% as higher short-term rates flowed through.
The Reserve Bank of Australia raised rates again at month-end. The Board voted unanimously to lift the cash rate by 25 basis points to 4.60%. That is the highest setting in 15 years. The Board noted that the three earlier increases this year had tightened financial conditions and the economy appeared to be slowing, but inflation remained too high and further tightening was warranted. It also observed that some of the upside inflation risks flagged in August were now materialising, and it left the door open to further increases.
Inflation released on the final day of the month confirmed an energy-driven pulse rather than a broad acceleration. Headline CPI rose to 4.0% in the year to August, up from 3.5% in July, while trimmed mean inflation was steady at 3.6%. Automotive fuel prices jumped 14.8% in the month. Fuel and electricity were both excluded from the trimmed mean and explained most of the gap between headline and underlying measures. The labour market continued to loosen. Unemployment rose to 4.6%, above forecasts and the highest level since late 2021. The rise came despite 39,500 jobs being added, because labour force growth outpaced hiring.
Australian equities came under pressure. The S&P/ASX 300 TR returned -2.43% over the month. Rising bond yields, expectations of central bank tightening and weakness in mining and banking stocks pushed the market to an 11-week low by mid-month. The month's largest daily gain came on 30 September, when the inflation print came in slightly below expectations and traders pared back bets on a November hike. Listed property also struggled as rates repriced. The FTSE EPRA Nareit Developed NR AUD returned -2.81%.
Asset Allocation
| Asset Class | Current | Neutral | Variation |
|---|---|---|---|
| Australian Shares | 38.1% | 30.0% | 8.1% |
| International Shares | 42.3% | 25.0% | 17.3% |
| Property & Infrastructure | 0.0% | 25.0% | -25.0% |
| Fixed Interest | 0.0% | 0.0% | 0.0% |
| Alternatives | 18.9% | 20.0% | -1.1% |
| Cash | 0.7% | 0.0% | 0.7% |
Manager Profile
Dynamic Asset Consulting builds and manages a range of Goals Based Portfolios that are designed to match up with specific strategic investment outcomes. Different portfolios can be blended together to construct an overall portfolio targeting numerous outcomes. The portfolios target is real rates of return, over inflation, with a focus on preservation of capital.
Investment Objective
| Name | Info |
|---|---|
| Target return | CPI + 5.0% |
| Timeframe | Minimum 7 years |
| Defensive / Growth | 2% / 98% |
| Min Investment | $25,000 |
| Redemption Liquidity | Approx. 1 – 2 weeks, subject to investment liquidity |
Investment Strategy
The portfolio maintains a flexible asset allocation range so that capital may be dynamically allocated to help achieve the targeted return within the risk tolerances, depending on market conditions at the time. Once the appropriate asset allocation is decided, it is implemented by selecting those investments and managers which are considered best placed to produce the targeted risk-adjusted returns, when combined together as an overall portfolio, across the relevant timeframe.
Portfolio Analysis
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