Innova Wealth Creation Portfolio - Fundamental

October 2024

Performance Table

1MTH3MTH6MTH1YR3YR (PA)5YR (PA)INCEPTION (PA)
Innova Wealth Creation Portfolio - Fundamental0.27%1.18%5.74%15.69%5.23%5.59%5.93%
FE Peer Group Balanced-0.25%1.30%5.25%14.86%3.59%4.56%5.22%
Excess Returns0.52%-0.12%0.49%0.83%1.64%1.03%0.71%

Portfolio Performance

Post-election markets have behaved relatively normally compared to historical trends. Volatility quickly subsided following the definitive outcome, as markets inherently dislike uncertainty. The 'Trump Trade' materialized post-election, boosting sectors like financials, small caps, the US dollar, and Bitcoin, which stood to benefit directly from Trump's proposed policies. However, this euphoria was short-lived causing a pullback in equities. 10-year Treasury yields have continued their upward trajectory, reflecting robust growth expectations and rising term premiums due to fiscal uncertainty. Recent hawkish comments from Jerome Powell, driven by a resilient labour market, strong growth data, and volatile but declining inflation, have further clouded rate cut expectations for 2025, adding to market uncertainty. October saw global equities (AUD) up 3.9%, outperforming domestic equities which fell 1.3%. Rising yields hurt interest-rate sensitive bonds, who heavily underperformed floating rate credit for the month. A huge mover was the AUDUSD which was down around 5% leading up to the election as fear mounted over fiscal discipline. Gold also had a very strong performance in AUD terms at 10%. The Innova portfolios outperformed benchmarks across all risk brackets. Our overweight to unhedged positions in global equities, preference for shorter duration fixed income and floating rate credit, and overweight global equities relative to Australian equities helped achieve this outperformance.

Asset Allocation Exposure

Breakdown pie chart
Global Shares34.93%
Fixed Interest25.09%
Australian Shares22.92%
Real Assets5.21%
Alternatives4.58%
Cash7.28%

Top Portfolio Holdings

VanEck Vectors MSCI International Value ETF
11.42%
BondAdviser Income Plus Portfolio
7.21%
Macquarie True Index International Equities Fund
7.00%
Realm Short Term Income Ordinary
6.44%
Macquarie True Index Cash Fund
6.15%
Invesco Wholesale Australian Share Fund
6.10%
Betashares FTSE RAFI Australia 200 ETF
5.81%
Betashares Ftse 100 ETF
5.69%
Global X Us Treasury Bond
5.40%
Macquarie True Index Australian Shares Fund
2.77%

Growth of $100,000 since inception

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Market Outlook

Trump's proposed policies of deregulation and tax cuts are likely to be prioritized in the short term, providing significant support for cyclical sectors within the domestic economy, as well as boosting consumption and business investment. While there is a valid concern regarding a potential resurgence of inflation, the U.S. economy has demonstrated its capacity to allocate capital effectively into productive sectors following the COVID-19 pandemic. The implementation of tariffs may take longer to materialize; however, the overarching theme of deglobalization and an emphasis on national security will be central to the Trump administration's agenda. Additionally, constraints on immigration and possible deportation measures could lead to a tightening of labour markets by reducing labour supply. A critical risk to consider is that the Federal Reserve may struggle to return to a neutral monetary policy stance as intended by 2025, which could complicate economic recovery efforts.

We remain exposed to cyclicals within the US economy who were under loved throughout the past two years, and overweight defensives relative to cyclicals domestically where the real economic outlook is much bleaker. In fixed income we’re still slightly overweight floating rate domestic credit with intention to dial up duration when the time is right. We’ve increased hedged exposures as the AUDUSD has sold off quite meaningfully and the rate cutting pathway is a lot shakier for the RBA in 2025.

Investment Objective

The portfolio aims to provide a return exceeding the RBA Target Cash Rate +3% p.a., before fees, over rolling 7 year periods.

Key Information

Inception01/09/2017
Management Fee0.36%
Maximum Expected Volatility9.00%
Standard Risk MeasureMedium to High
BenchmarkRBA Cash Rate Target + 3.0%
Model CodeINR010
Investment Timeframe7 years
PlatformHUB24

About the Manager

Innova is a boutique portfolio management firm with institutional-grade capabilities that specialises in risk-focused portfolio solutions. Co-founded by Dan Miles and Dinyar Irani in 2010, Innova’s objective is to provide robust investment solutions that work with investor behaviour, rather than against it.

Innova has a comprehensive understanding of investment risk and has developed a proprietary risk management framework based on rigorous academic research to support their investment process. Their quantitative framework acts as the compass, with their experienced investment team determining the best approach to execute this outcome. Innova's systematic approach to portfolio construction has enabled them to navigate global markets successfully, even during challenging market cycles.

Innova has consistently adhered to their investment process across all market regimes. They have rigorously tested their process and analysed hundreds of historical data sources to ensure they always have conviction in their investment decision making. As a result, Innova is able to consistently manage portfolio risk during market downturns and their performance track record is a testament to the effectiveness of their approach.

Important Information

This document has been prepared by Innova Asset Management Pty Ltd (Innova), ABN 99 141 597 104, Corporate Authorised Representative of Innova Investment Management, AFSL 509578 for provision to Australian financial services (AFS) licensees and their representatives, and for other persons who are wholesale clients under section 761G of the Corporations Act.
To the extent that this document may contain financial product advice, it is general advice only as it does not take into account the objectives, financial situation or needs of any particular person. Further, any such general advice does not relate to any particular financial product and is not intended to influence any person in making a decision in relation to a particular financial product. No remuneration (including a commission) or other benefit is received by Innova or its associates in relation to any advice in this document apart from that which it would receive without giving such advice. No recommendation, opinion, offer, solicitation or advertisement to buy or sell any financial products or acquire any services of the type referred to or to adopt any particular investment strategy is made in this document to any person.
All investment involves risks, including possible delays in repayments and loss of income and principal invested. Any discussion of risks contained in this document with respect to any type of product or service should not be considered to be a disclosure of all risks or a complete discussion of the risks involved. Past performance information provided in this document is not indicative of future results and the illustrations are not intended to project or predict future investment returns.
The performance reporting in this document is a representation only. Innova has used a calculation methodology to simulate the performance of the relevant Investment Program since commencement, net of all fees and commissions at the fund/security level, and gross of other fees and commissions. Simulated performance does not reflect the performance of any specific account. Each account will have its own unique performance history, due to factors including varied methods of implementation, fee and tax structures. Therefore, simulated performance may vary significantly compared to that of any specific account. The out of sample backtested performance data has been simulated by Innova and is for illustrative purposed only, and is not representative of any investment or product, Results based on simulated performance results have certain inherent limitations as these results do not represent actual trading. No representation is being made that any account will or is likely to achieve profits or losses similar to those being shown.
Although non-Fund specific information has been prepared from sources believed to be reliable, we offer no guarantees as to its accuracy or completeness. Any performance figures are not promises of future performance and are not guaranteed. Opinions expressed are valid at the date this document was published and may change. All dollars are Australian dollars unless otherwise specified.

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