How your portfolio performed

The long-term game plan for the Cornerstone portfolios helped us navigate difficult markets in the last financial year. Our strategy is to diversify your capital over a range of asset classes to optimise returns and protect against losses over a full investment cycle.

Key positions and the ability to be nimble as circumstances required underpinned the returns generated over the past 12 months. Here are the top highlights:

What worked vs what posed challenges

• The portfolios benefited from having a relatively higher allocation to global and Australian equities – both of which delivered strong returns.
• Alternative credit – including private debt – also posted good returns, outperforming traditional fixed income investments such as corporate and government bonds.
• ASX-listed real estate investment trusts (REITs) had a rough year as higher interest rates and falling commercial property values conspired to push the sector lower across the board. However, the impact was mitigated by reducing the allocation to REITs by around 3% on average over the past year.

Source: Bloomberg and Metrics. The indexes for the asset classes are as follows for one year to 30 June 2023: (1) Global Equities: MSCI ACWI; (2) Australian Equities: ASX300 Accumulation Index; (3) Alternative Credit: Metrics DASLF; (4) Fixed Income: Bloomberg global aggregate bond index AUD hedged.

What we’re thinking now

• We’ve reduced allocations to equity and credit investments accumulated during COVID-19 due to the murky outlook – doing so in a planned series of sales to optimise the outcome. As a result, our allocation to growth assets is back to where it was three years ago.
• For managed portfolios with direct share holdings, we are adopting a stronger focus on what are known as “quality companies”. In simple terms, that means a company with a healthy balance sheet, stable earnings growth and low levels of debt. Or in other words – a steadier performer than a cyclical company which does well when the economy is booming but badly when it contracts.
• We remain confident alternative credit will continue to perform. More companies need alternative sources of finance as banks cut back on lending. Further, the low probability of a deep recession means there is unlikely to be a big uptick in the number of companies that default on their loans.
• The biggest risk to our outlook is that the world experiences a deeper recession than we anticipate. To mitigate this possibility, bonds (which would rally in a recession) may be added to portfolios, plus other assets such as hedge funds that provide an extra layer of diversification.

Cornerstone Financial Group Pty Ltd is a wholly owned subsidiary of Invest Blue Pty Ltd (ABN 91 100 874 744) which is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327, Australian Financial Services Licence and Australian Credit Licence No. 232706.

This website contains factual information only about the Cornerstone Portfolios. The information provided is not intended to imply any recommendation or opinion about a financial product. This website has not been prepared having regard to any retail investor’s objectives, financial situation or needs. Before making an investment decision, an investor should also consider the latest disclosure document in respect of the Cornerstone Managed Portfolio (‘‘Disclosure Document’’) and / or seek financial advice in deciding whether to make or continue to hold, an investment in the Cornerstone Managed Portfolio. The Disclosure Document can be obtained by contacting a financial adviser or the platform operator(s) offering the Cornerstone Managed Portfolio.

Russell Investment Management Ltd ABN 53 068 338 974, AFS Licence 247185 (RIM) is the Investment Manager of the Cornerstone Managed Portfolios.