Both our Australian and NZ Model portfolios performed strongly, up +10.2% and +13.6% respectively over the 2016 calendar year. A strong month for equity markets in December saw the Australian market (ASX 200) end the year with a 7% annual gain for 2016. While the NZ market (NZX 50) has pulled back from its high in September, it still made a healthy 9% gain in 2016. While equity markets have moved higher, in other asset classes the trends continue, as bonds have sold-off further, and the US dollar has also moved to fresh highs.
The late-year rally fuelled by the U.S. election has pushed stocks to peaks, which has seen more investors expressing caution that the market could be primed for a spill to start 2017. As we mentioned in our last update, given the strong move higher in markets, we would be hesitant in broadly buying stocks at the current juncture and would not be surprised to see some consolidation in markets. In saying that, we continue to recommend investors hold a “normal” allocation to stocks, although we are selective in what we own.
Investment Framework.
The New Zealand Equity Model Portfolio is focused on delivering positive and stable returns for investors seeking exposure to the Australian Equity market. Our investment philosophy is centred on finding attractive investments which fit with our big picture world views. This methodology provides us with a basket of stocks which we believe will provide superior returns over the medium term (1 – 3 years).
Our portfolio is relatively unconstrained as we will invest in companies of all sizes in all industries. The portfolio will generally hold between 10-15 stocks as believes this provides a good level of diversification while balancing transaction costs and maintaining meaningful exposures to any one particular investment. Although we refer to returns generated by the broader market (ASX 200) our main goal is to generate positive returns for our members and at any point in time portfolio returns may deviate significantly from the broader market.
Investment Philosophy.
The initial step in 's investment process is to identify big picture trends in the global economy. The next step is to identify investments which will benefit from this big picture thematic, which are then filtered down to what we believe are the most attractive stocks that should provide the highest potential return going forward.
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