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| Newsletter and Ratings Update August 2024 |
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Our Research Service provides Quantitative Analysis for over 10,000 Funds, and more in-depth Fund Research & Ratings on a large number of Funds/Strategies
To subscribe at an affordable price and reveal rating reports Click HERE.
For more information, Visit us today! |
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By Michael Lindsay Senior Investment Analyst |
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2022 – Multi-Asset Annus Horribilis
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The 2022 calendar year was a terrible one for multi-asset funds. The Morningstar index, commonly used as a benchmark for multi-asset balanced funds in Australia (Morningstar Aus Msec Balanced TR AUD Index), lost9.2% in 2022. It was the worst calendar year for the index outside of 2008, and the third negative returning year in the history of the series, which commenced in 1996.
It was a similar story globally. The traditional multi-asset mix of 60% equities and 40% bonds, represented by the MSCI World NR AUD and Bloomberg Global Aggregate TR Hdg AUD indices respectively, lost 12.1% in calendar 2022 (with monthly rebalancing). It was the worst year for this blend during the 34-year period covered by the Bloomberg bond index, other than 2002 and 2008, and was in fact the only calendar year of these three when equities and bonds both made losses.
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The purpose of multi-asset funds is to deliver risk-adjusted returns superior to those of single-asset portfolios. They can do this because they mix asset classes whose returns are uncorrelated, with losses in one or more asset classes, where they occur, offset by gains in others, at least in part. In most years this is exactly what happens, including in the simple 60% equities and 40% bonds global combination. In the 2002 and 2008 calendar years global equities lost 27.2% and 25.3% respectively, but these were offset by gains in bonds, of 11.6% and 9.2% respectively.
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But calendar 2022 was different, with losses of similar magnitude in equities (-12.2%) and bonds (-12.3%). As the chart below shows, the short-term correlation (rolling one year) between equities and bonds spiked dramatically in 2022, to 0.83, its highest in the history of the Bloomberg bond index used in this analysis. |
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The previous highs were in the 1990s, which is the only other period in the time series when longer-term correlation (rolling three year) between equities and bonds was positive on a sustained basis. It was also the1990s that saw the only calendar year, other than 2022, in which equities and bonds both delivered negative returns. That was 1994, when the loss on the simple blended portfolio was less than half the loss in 2022. It was also when US official interest rates increased fastest across the period covered by the data used in this analysis, other than 2022.
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SQM Research - Recently Rated Published Rating ReportsAugust 2024 |
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SQM Research - Top 5 Rated Funds Ranked by 1 Year Total ReturnAugust 2024 |
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SQM Research - Top 50 ETFs Ranked by 1-Year Total ReturnAugust 2024 |
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SQM Research - Market BenchmarksAugust 2024 |
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SQM Research - Discontinued or Not RenewedAugust 2024 |
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| About SQM Research
SQM Research is an investment research house that specialises in providing fund ratings, fund research, investment and property data to financial institutions professionals and investors.
For more information please visit www.sqmresearch.com.au
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Research Methodology
Please see below for descriptions of each star rating, whose purpose is to act as a guide for dealer group research teams and investment committee:
4.5 stars and above - Outstanding. Highly suitable for inclusion on APLs.
4.25 stars - Superior. Suitable for inclusion on most APLs.
4 stars - Superior. Suitable for inclusion on most APLs.
3.75 stars - Favourable. Consider for APL inclusion.
3.5 stars - Acceptable. Consider for APL inclusion.
3.25 stars - Caution required. Not suitable for APLs.
3 stars - Strong caution required. Not suitable for APLs.
Below 3 stars – Avoid or redeem. Not suitable for APLs.
Hold - Rating is suspended until SQM Research receives further information.
Withdrawn - Rating no longer applies.
* The definitions above are not all-encompassing. Not all individual items mentioned will necessarily be relevant to the rated Fund. Users should read the current a comprehensive assessment.
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Disclaimer
The rating contained in this document is issued by SQM Research Pty Ltd ABN 93 122 592 036 AFSL 421913. SQM Research is an investment research firm that undertakes research on investment products exclusively for its wholesale clients, utilising a proprietary review and star rating system. The SQM Research star rating system is of a general nature and does not take into account the particular circumstances or needs of any specific person. The rating may be subject to change at any time. Only licensed financial advisers may use the SQM Research star rating system in determining whether an investment is appropriate to a person’s particular circumstances or needs. You should read the product disclosure statement and consult a licensed financial adviser before making an investment decision in relation to this investment product. SQM Research receives a fee from the Fund Manager for the research and rating of the managed investment scheme.
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