Innova Active Balanced Portfolio (S)

November 2024

Performance Table

1MTH3MTH6MTH1YR3YR (PA)5YR (PA)INCEPTION (PA)
Innova Active Balanced Portfolio (S)2.09%3.21%6.59%12.86%--10.16%
FE Peer Group Balanced2.20%3.10%6.63%13.52%4.22%4.68%9.80%
Excess Returns-0.11%0.11%-0.04%-0.66%--0.36%
RBA Cash Rate Target + 3%0.83%1.81%3.66%7.45%6.03%4.93%7.18%

Portfolio Performance

The past month has been supportive for risk assets, primarily within the US and partially abroad. The positive momentum coming from prospects of supportive policy such as tax cuts and deregulation have helped the post-election rally continue. The assignment of Scott Bessent as Treasury secretary brought optimism into bond markets due to perception of more sustainable fiscal arrangements. With markets pricing in an 85% chance of a US rate cut in December, the global economic outlook appears mixed. While US equities rallied 5% for the month, outperforming domestic equities (up 3.7%), the growth picture looks bleaker for regions like Europe, China, and Australia. Lower yields boosted interest-rate sensitive government bonds, outperforming floating-rate credit. The AUDUSD pair continued its downward trend, gold declined 2.5%, and Bitcoin surged 33%. In November, Innova portfolios underperformed benchmarks slightly due to overweight positions in non-US equities, including value and emerging market equities. Innova portfolios slightly underperformed benchmarks in November. While quality small-cap stocks (up 8%) and domestic duration overweights boosted returns, underweight positions in infrastructure real assets and underperforming non-US equities, especially emerging markets and value, weighed on performance

Asset Allocation Exposure

Breakdown pie chart
Fixed Interest29.54%
Global Shares26.67%
Australian Shares22.48%
Real Assets7.43%
Alternatives6.20%
Cash7.68%

Top Portfolio Holdings

Colonial First State Wholesale Index Global Share
13.12%
Western Asset Wholesale Australian Bond
12.92%
DNR Capital Wholesale Australian Equities High Conviction
10.85%
Perpetual Wholesale Diversified Income
10.09%
First Sentier Wholesale Strategic Cash
7.68%
Realindex Wholesale Australian Share
7.60%
Realindex Wholesale Global Share
7.50%
Resolution Capital Wholesale Global Property Securities
5.58%
CFS Index Australian Share
4.03%
GQG Partners Global Equity - Hedged
3.55%

Growth of $100,000 since inception

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Market Outlook

As we approach year-end, market consensus is converging around a preference for US small caps and cyclical stocks, fuelled by the Trump administration's policies and the ongoing rate cutting cycle.
2025 is expected to be a year of divergence, with Europe likely to implement deeper rate cuts than the US due to structural growth challenges and fiscal concerns. Conversely, US exceptionalism is projected to continue, driven by a robust consumer benefiting from real wage growth and a business environment boosted by deregulation and potential tax cuts. This resilience is further enhanced by the lower import dependency of small-cap US companies compared to large-caps.

However, two key tail risks could impact this outlook. Firstly, irresponsible fiscal policy could lead to persistent inflation, unsettling bond markets and negatively affecting interest-rate sensitive sectors like small caps and REITs. Secondly, escalating geopolitical tensions and an overly "data-dependent" Fed could lead to a tightening labour market and economic slowdown. While these scenarios are not our base case, we believe the risk of higher inflation and a higher terminal Fed funds rate is more probable.

To navigate this environment, we recommend avoiding overweight positions in interest-rate sensitive government bonds and small-cap equities. Instead, investors should focus on companies with strong pricing power that can withstand higher interest rates and a potentially more challenging economic backdrop.

Investment Objective

To deliver a total investment return in line with the benchmark, after fees, over a rolling six year period

Key Information

Inception14/12/2022
Management Fee0.00%
Maximum Expected Volatility9.00%
Standard Risk MeasureMedium to High
BenchmarkRBA Cash Rate Target + 3.0%
Model CodeCFSFC008
Investment Timeframe6 years
PlatformCFS FirstChoice

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.