Innova Lifestyle Preservation Portfolio

September 2024

Performance Table

1MTH3MTH6MTH1YR3YR (PA)5YR (PA)INCEPTION (PA)
Innova Lifestyle Preservation Portfolio0.76%2.95%3.38%9.06%2.90%-3.04%
FE Peer Group Conservative0.53%1.83%1.98%8.01%1.66%2.13%2.65%
Excess Returns0.23%1.12%1.40%1.05%1.24%-0.39%
RBA Cash Rate Target + 1.5%0.77%1.55%3.02%6.19%4.34%3.34%3.62%

Portfolio Performance

We see the Federal Reserve's September interest rate cut of 0.50% as a normalisation back to the “neutral” rate rather than responding to extremely soft economic data. The move clearly indicates that the Fed sees a softening labour market and a clearer path toward its 2% core PCE inflation target. This monetary easing, coupled with robust third-quarter GDP growth of 3% and unexpectedly strong nonfarm payrolls, created a favourable environment for stocks but a less ideal one for bonds. Government bond yields initially declined ahead of the FOMC meeting but rebounded following the stronger-than-expected economic data. Global equities were up 1% and domestic equities were up 3.05% in September. Floating-rate credit outpaced government bonds, and the AUDUSD appreciated 2.25%. The Innova portfolios underperformed their benchmarks primarily due to unhedged global equity exposures and higher allocations to Global Equities than domestic. We maintain our belief in a U.S. economic normalization and remain positioned toward equities that will benefit from a cyclical recovery. Chinese equities experienced a substantial positive sentiment shift fuelled by a pre-"Golden Week" shift in monetary policy by the Chinese government, despite a crumbling real economy,. The market was anticipating further fiscal announcements to address the deleveraging of the property sector but was disappointed leading to a pullback.

Asset Allocation Exposure

Breakdown pie chart
Fixed Interest39.69%
Global Shares16.94%
Australian Shares10.52%
Alternatives3.90%
Real Assets2.49%
Cash26.47%

Top Portfolio Holdings

Macquarie True Index Cash Fund
17.89%
Realm Short Term Income Ordinary
12.64%
Vanguard Australian Government Bond Index ETF
7.97%
Global X Us Treasury Bond
7.89%
Vaneck Vectors Australian Floating Rate ETF
6.80%
Janus Henderson Conservative Fixed Interest
6.29%
Macquarie True Index Australian Shares Fund
5.26%
Macquarie True Index International Equities Fund
4.95%
Western Asset Bond Fund
4.39%
Franklin K2 Athena Fund
3.90%

Growth of $100,000 since inception

ResetPerformance line chart
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Market Outlook

The U.S. economy continued to demonstrate resilience, with labour market indicators stabilizing, growth remaining solid, and inflation moderating. While geopolitical tensions in the Middle East caused oil price volatility, risk assets maintained their upward trajectory. Investors now await U.S. corporate earnings, which have been gradually revised downward despite rising stock prices. The market's primary concern remains the speed and extent of interest rate cuts, currently anticipating six by the end of 2025. Strong economic growth pushed long-term bond yields higher after the recent rate cut, steepening the yield curve and suggesting that the 10-year yield had overshot prior to the 50-basis point reduction. The election odds have shifted towards a Trump victory and less uncertainty of either candidate winning is generally a positive for equity markets.

The Chinese stock market surged following government announcements of monetary policies aimed at supporting asset prices and boosting domestic sentiment. Given the market's low valuation and negative investor positioning, along with the potential for short squeezes, the rally was particularly pronounced. The sustainability of this rally hinges on additional fiscal stimulus to address the property market downturn and stimulate consumer spending. Improved Chinese sentiment also positively impacted the Australian dollar and commodities like copper and iron ore.

Investment Objective

The portfolio aims to to provide a return exceeding the RBA Target Cash Rate +1.5% p.a., before fees, over rolling 5 year periods.

Key Information

Inception01/08/2020
Management Fee0.36%
Maximum Expected Volatility4.00%
Standard Risk MeasureLow to Medium
BenchmarkRBA Cash Rate Target + 1.5%
Model CodeCFSINNALP
Investment Timeframe5 years
PlatformCFS First Wrap

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.