How your portfolio performed
January 2025
The flagship Cornerstone balanced fund rose by 1.6%1 in the December quarter, largely driven by its U.S. shareholdings and a rising U.S. dollar which gave an extra bump to the part of our portfolio that is unhedged for currency risk.
A rising U.S. dollar boosts gains from unhedged shares because any returns are worth more when translated back into Australian dollars – just like travellers get more for converting US dollars back into Aussie currency.
The quarterly gain helped push the annual return from the portfolio to a robust 12.4%2 . This was further buoyed by strong performances from companies like JB Hi-Fi, Pro Medicus and the Goodman Group. The outcome also reflects the benefits of a long-term investment strategy that diversifies capital across a broad range of assets to minimise the risk of loss if one asset class has a weaker quarter than others.
Heading into 2025, we’re maintaining holdings in Australian shares at existing levels but continue to use put options to protect investors from any market fall. This strategy means Cornerstone clients will benefit if shares rise but also have some protection if shares drop from the relatively high levels at which they’re now trading.
As always, there’s no free lunch and the small cost of implementing the options strategy will be reflected in future returns.
We’ve also trimmed some of our higher yielding (and therefore higher risk) debt exposure, and slightly reduced our emerging market debt and global floating rate loan holdings.
The biggest risk for Cornerstone portfolios, and investors generally, in the months ahead is that inflation winds up higher than expected. This would potentially force central banks to delay interest rate cuts or even begin to raise rates again.
This scenario – although unlikely to occur – could drive a simultaneous correction in bonds and sharemarkets in a similar fashion to 2022. This is where the options strategy described above could come into its own.
Two final risks to the outlook are the geopolitical uncertainty that appears a hallmark of this decade and the lingering risk of a global recession. The probability of the latter occurring is falling – from 50% previously to around 30% now – but is a risk that is still factored into our investment strategy.
2 Russell Investments
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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) the investment consultant to Invest Blue Pty Ltd for the Cornerstone Retirement Solution and Cornerstone Managed Portfolios. RIM is also the investment adviser to the issuers of the Cornerstone Managed Portfolios.