Portfolio Insights Value Strategy Q2

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In Q2 2020, what were the top drivers of recent investment returns?

Q2 saw the rebound of most sectors from the COVID-19 lows, driven from oversold levels seen during Q1.

Portfolio performance was strong in absolute terms, returning 990bps in local currency, with all sectors and regions contributing to a positive return.

 

What is the current five-year forward-looking return, also known as the internal rate of return (IRR).

We track the five-year forward-looking returns (IRR) of the portfolio over time, against the portfolio’s cost of equity.

While future performance cannot be guaranteed, as at 30 June 2020, the Strategy’s five-year annualised return was 12.7% p.a.

During the quarter, we deployed cash into GDP sensitive sectors based on our view that Roads and Rail would be amongst the first GDP sensitive sectors to recover from COVID-19 related limitations of movement. We also increased our weight in US towers, with the valuations becoming more compelling. Overall, however, we continue to position the portfolio with a bias towards more defensive utility assets which have a narrower range of return outcomes.

 

Overview of Contributors to Quarterly Performance

Top performing stocks for the quarter included American midstream company Cheniere, American rail company Union Pacific, Australian toll road company Transurban and American communications companies Crown Castle and American Tower.

Overview of Detractors from Quarterly Performance

Stocks which detracted from quarterly performance include American electric company Edison International, United Kingdom electric company National Grid, Brazilian electric company Equatorial, Canadian electric company Emera and finally, Sydney Airport in Australia. 

For specific stock related insights on contributors and detractors from quarterly performance please click on the button below for the full article.

1 Using a weighted average of the individual portfolio holdings, with the weights being each stock’s weight in the portfolio.
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