Financial Keys - A member firm of Genesys Wealth Advisers


Key High Growth Model Update

From a market perspective, the sharp revision higher of economic growth and inflation expectations on the back of vaccine effectiveness and strong government and central bank support; saw government bond yields spike from extremely low levels back up to levels seen pre-Covid in a very short period of time. The result was capital losses on government bonds, but also a very strong rotation into value and cyclically exposed countries, sectors, and stocks which were punished in 2020 and also largely ignored by investors in the 3-5 years pre-Covid. As part of this rotation, we also saw a recovery in the fortunes of listed property and infrastructure which were treated unfairly by investors in 2020 with relatively stable earnings overall. Lastly, the Australian dollar subsided in the quarter moving within a narrow band and finishing a touch weaker as the US dollar saw some surprise strength.

From an asset allocation perspective, positive returns in the period were obtained by the overweight to global equities; and by the allocation to global listed property and infrastructure.

From an investment selection perspective, we were pleased to see strong absolute and relative return performers across the portfolio.

Within Australian Equities, Allan Gray was the highlight as the manager’s value investment style saw them significantly exposed to re-opening and recovery stocks (returning 7.80% for the quarter).  In light of the market rotation into these names, Greencape produced a more than admirable result given their growth style orientation almost matching the market return. Solaris saw somewhat of a recovery, particularly in the latter parts of the quarter, but lagged the market return given its weaker relative performance in January and some detractors on the short side of the portfolio. We remain comfortable with Solaris at this time. Flinders produced both strong relative and absolute returns in the quarter, exhibiting strong stock selection and portfolio construction.

Within Global Equities, a similar story to Australian equities in terms of those managers with value investment styles and/or those managers positioned towards a cyclical recovery, namely Orbis and AB respectively, seeing strong relative performance (over 8% each total return). We also saw admirable results from both Magellan and T. Rowe Price, even though they lagged the market, given their quality/defensive and growth investment styles respectively, with strong stock selection and portfolio construction efforts meaning they didn’t fall too far behind. Insync struggled during the quarter due to the nature of market movements as the bulk of the market’s rotation into value and cyclical names was funded via profit-taking from the more expensive quality segment of the market. Insync bounced back somewhat with a positive return for the month of March. Emerging markets lagged developed markets in the quarter however Fidelity produced strong relative returns against its emerging market benchmark owing to the portfolio manager’s strong portfolio construction.

Within Property & Infrastructure, both Quay and Magellan produced strong absolute returns (6.54% and 3.05% respectively), with Quay the highlight. Both were behind their respective benchmarks as the more Covid/cyclically exposed parts of their investable universes rallied strongly. Whilst both managers had been increasing their exposure to these sectors and stocks, they maintain more diversified portfolios positioned for the longer term.

Extraordinary Returns for Extraordinary Times

Now approximately 12 months on from the significant market correction experienced around this time last year, there are a number of notable investments which have provided extremely strong returns over this recovery period. We have to keep in mind that we don’t expect numbers like this very often and they only occur after a market correction. However, we note the 12 month returns ending March 2021 for some managers as follows:

Allan Gray Australian Equity Fund


Greencape Broadcap Fund 


T. Rowe Price Global Equity


Orbis Global Equity


Fidelity Global Emerging Markets


Flinders Emerging Companies




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