Most of the gains are savings of course but net profit is now $A1,166. Against the MSCI World Index in Australian Dollars beta is 1.23 and alpha 2.2%. The allocation is as follows:
It always seems strange to see a fund with a sizeable allocation to fixed interest (>10%) and at the same time have a large allocation to geared shares (>20%). Just the spread between that rates available for borrowing and lending cash make this seem silly. Probably good from the fund managers POV though - they charge a 'small' MER on fixed interest and get to charge a much larger MER on geared investments.
One way to look at it is a cost of liquidity. We can't borrow on margin in this account and so the fixed interest serves as a buffer of money that could be withdrawn or reallocated. OTOH a diversified bond fund doesn't perform like cash. Anyway, that's the way I'm thinking about it.
BTW I doubt the spread between 10-30 year bonds etc. and what the fund manager pays to borrow in the geared fund is very much if anything. The rates I'd pay to borrow at Interactive Brokers are not very much above the cash rates for those countries (at least in normal times before the GFC took US rates to 0.25%).
3 comments:
It always seems strange to see a fund with a sizeable allocation to fixed interest (>10%) and at the same time have a large allocation to geared shares (>20%). Just the spread between that rates available for borrowing and lending cash make this seem silly. Probably good from the fund managers POV though - they charge a 'small' MER on fixed interest and get to charge a much larger MER on geared investments.
One way to look at it is a cost of liquidity. We can't borrow on margin in this account and so the fixed interest serves as a buffer of money that could be withdrawn or reallocated. OTOH a diversified bond fund doesn't perform like cash. Anyway, that's the way I'm thinking about it.
BTW I doubt the spread between 10-30 year bonds etc. and what the fund manager pays to borrow in the geared fund is very much if anything. The rates I'd pay to borrow at Interactive Brokers are not very much above the cash rates for those countries (at least in normal times before the GFC took US rates to 0.25%).
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