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In August last year we launched an Emerging Leaders SMA (separately managed account), a portfolio that invests in companies outside the ASX100 with its primary focus being on industrial stocks held within the ASX100-ASX300.   We felt then that it was an optimal time to launch the SMA as we had seen a market resurgence led by large cap stocks, and as investor confidence was returning we expected to see the mid-cap space follow suit in terms of performance.

While our foray into this area of the market may have been somewhat premature, with the ASX Small Industrials underperforming the ASX200, the SMA’s performance has been outstanding, delivering 14.73% since inception and outperforming its benchmark by 10.54% over the previous six months.   We continue to see opportunity in this area of the market.

For more information on the portfolio, click on the link below and contact your adviser if you would like to discuss this investment option in more detail.

 

A focus on Hybrids and the FYM Income portfolio

 – getting yield in a low interest rate environment

Over the past few years there has been some quite sensationalist journalism in our major papers regarding the hybrid sector and some of the recent issues that have come to market. I thought I would put the issues raised into context by using an example of a recent issue that forms part of the FYM Income Portfolio, ANZ Capital Notes 2 (ANZPE).

Article & Performance Table

Today, economic fundamentals in the United States (the world’s largest economy) are as strong as they have been since 2011. One would expect, therefore, that bond yields would rise (bond prices would fall) and share markets would rally. Instead, recent turmoil in emerging market countries has led to lower Treasury yields and a sell-off in global share markets.

Over the longer term, improving economic fundamentals in the United States will ultimately drive interest rates and share markets higher and should see a resumption of weakness in bonds.

The indicators that I typically follow do not suggest that we have established a major top in the U.S. stock market, which is still a significant driver of global share market performance. The current sell-off feels more like a healthy correction, the first since the last major correction in 2011. I am somewhat surprised by the timing of the latest rout, given the typical seasonal strength in January and February, but the U.S. Federal Reserve is finally letting markets self-correct after years of intervention since the 2008 financial crisis.

I think that we will likely look back on this time as an opportunity to buy.

Adrian Rowley CIO, FYM Financial

Follow the link to read a short two page market update from Chris Caton, Chief Economist at BT.

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