Financial Keys - A member firm of Genesys Wealth Advisers

 




Key Growth Model - Portfolio Change

  • Redeem UBS Short Term Fixed Income Fund (previously UBS Cash Plus Fund)

  • Redeem UBS Diversified Fixed Income Fund

  • Introduce AB Dynamic Global Fixed Income Fund

  • Rebalance across existing holdings

Rationale

Redeem UBS Short Term Fixed Income Fund (previously UBS Cash Plus Fund)

Returns from cash and cash-like products are likely to be low for some time, especially on an after-fee basis, given the Reserve Bank of Australia (RBA) will anchor the cash rate very low to support an economic recovery. As such, the Investment Committee believes there are better risk/return opportunities from bond and fixed interest funds.

Redeem UBS Diversified Fixed Income Fund

In light of government bond yields being anchored at very low levels by virtue of central bank policy, which is likely to remain the case for some time, the expected returns and level of portfolio insurance (i.e. downside protection to equity market falls) from owning government bonds is likely to be very low going forward and potentially result in added risk to the portfolio. As such, we have re-configured the allocation within the Bond/Fixed Interest part of the portfolio to favour those funds with low to zero exposure to government bonds and those funds who very actively manage their exposure to government bonds. As such, this re-allocation has resulted in the removal of UBS Diversified Fixed Income from the portfolio. We have retained some exposure to government bonds through PIMCO Diversified Fixed Interest as we still believe a defensive element is required within the portfolio in the case of a significant equity market correction; and are comforted by PIMCO's best in class ability to manage government bonds and other bond securities over more than a decade. 

Introduce AB Dynamic Global Fixed Income Fund

The AB Dynamic Global Fixed Income Fund is one of the very active funds referred to above; designed for investors with higher risk tolerances who want to achieve income returns exceeding those of Australian bank bill rates over the long term by investing in global debt or fixed-income securities. The Fund implements a global, multi-sector strategy, investing in a broad range of debt securities. The Fund may hold corporate bonds, government bonds, asset-backed securities, mortgage-backed securities, closed-ended mutual funds (up to 5% of the Fund's assets) and bank loans located anywhere in the world, including developed and emerging countries. Up to 40% of the Fund’s assets may be high risk and rated below investment grade. The management fee is 0.55%, however we have negotiated a discounted fee of 0.45% for Financial Keys clients.

Rebalance across existing fixed interest holdings

The remainder of the proceeds from the above two redemptions have been allocated across existing fixed interest holdings.

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