Download BlackRock Resources Model (BR0011) Model Portfolio

2016
Model Portfolio Update
BlackRock Resources
Model (BR0011)
Market Overview
The S&P/ASX200 Accumulation Index ended the fourth quarter higher (+5.2%) with very strong performance after the November US elections. Global
markets turned from concerns of possible deflation to expectations of reflation led by the US, buoyed by the prospect of the new US government
increasing fiscal spending, reducing regulatory burdens and potentially cutting taxes. As expected, the US Federal Reserve raised interest rates in
December, however they also signalled a higher pace of increases over the next few years. This further deepened the global sell-off in bonds over the
quarter. Resource prices were generally strong, helped by increased Chinese demand in iron ore and coal, whilst an OPEC agreement to cut production
saw the price of oil move higher.
In Australia, the inflation rate beat expectations coming in at +1.3% year on year, though that number still lies below the target range for the RBA. Third
quarter GDP numbers surprised on the low side, the economy logging a negative rate (-0.5%) for the first time in 5 years, taking growth for the year to
+1.8%. The unemployment rate also surprised, coming in at 5.7% as the participation rate rose. While the headline unemployment rate was relatively low,
the level of underemployment, defined as people currently employed but willing and available to work more, has been steadily rising since records began
in 1980. Another feature of the current labour market was a record low wages growth rate of just +1.9% over the last year. The RBA kept rates constant
through the quarter at 1.50%. A stronger US economy saw the US dollar strengthen, leading to the Australian dollar falling to US72.4c.
Over the quarter the best performing sector was Financials (+12.8%) led by Banks and Insurers rallying strongly. Utilities (+9.5%) and resource related
sectors also contributed, including the mining heavy Materials (+8.0%) sector, and the oil dependent Energy (+6.7%) sector. Defensive sectors were sold
off, as Health Care (-8.7%) saw widespread falls, as did Telecommunications (-4.3%) mainly in the smaller names.
The best performing stock for the quarter was lithium miner Galaxy Resources (GXT +61.5%). Over the quarter the company started production, and
announced initial lithium concentrate pricing significantly higher than analysts expected. Sirtex Medical (SRX -48.7%) was the worst performing stock for
the quarter, after the company surprised the market with a profit downgrade, citing slower than expected sales of its liver cancer treatment in the Americas
and EMEA. The company also announced a voluntary investigation into the trading activities of its CEO, to allay investor concerns.
In Equity Capital Markets there were 79 significant transactions for the quarter, totalling $8.3b. This consisted of 14 entitlements ($2.8b), 37 placements
($2.7b), 17 IPOs ($2.1b), 2 share purchase plans ($510m), 8 rights issues ($185m), and 1 block trade ($19m).
Performance as at 31 December 2016
Gross %
Out-performance %^
Benchmark %*
1 Month
4.94
0.56
4.38
3 Months
7.42
2.24
5.18
6 Months
15.81
5.21
10.60
1 Year
25.75
13.95
11.80
2 Years (pa)
-0.20
-7.28
7.08
3 Years (pa)
-3.57
-10.16
6.59
Since inception (pa)*
1.18
-2.87
4.05
* S&P/ASX 200 Accumulation Index.
^Shows the difference between Portfolio Gross Return and Benchmark Return.
# Model performance inception date: 22/2/2007.
Past performance is no indicator of future performance. Long term performance returns show the potential volatility of returns over time. The value of investments and the income from them can fall
as well as rise and is not guaranteed. You may not get back the amount originally invested. Fluctuation may be particularly marked in the case of a higher volatility Model and the value of an investment
may fall suddenly and substantially. Model portfolio composition and performance have been based on theoretical tracking of the model portfolio and are gross of fees and do not take tax positions into
account. Please note, actual portfolios may not perform in the same manner as the model depicted in this document, depending on the nature of your personal portfolio and any customisations.
Rounding used in the presentation of data may result in minor variations.
For use with institutional and professional investors only —
Proprietary and confidential
Model Portfolio UPDATE
DECEMBER 2016
About the Model Portfolios
Summary
Model Portfolio Name
BlackRock Resources
Model Code
BR0011
Model inception date
22/02/2007
Principal investment objective
To track the performance of the top
25 listed stocks , ranked by their
weight in their respective sector,
when the Energy and Materials
sectors of the S&P/ASX 200
Accumulation Index are combined
Can derivatives be used?
No
Indicative number of stocks
20 – 30
Minimum Model investment
No fixed minimum*
Performance Fee applicable?
Benchmark Index
The BlackRock Resources Model Portfolio (the “Model”) aims to
track the performance of the top 25 stocks, ranked by their weight
in their respective sector, when the Energy and Materials sectors
of the S&P/ASX 200 Accumulation Index are combined.
Investment strategy
The investment objective of the Model is pursued by investing in a
basket of securities listed on the ASX whose businesses are
predominantly involved with the following activities: the
construction or provision of oil rigs, drilling equipment and/or
transportation of oil and gas products, coal and other consumable
fuels and other energy related service and equipment, including
seismic data collection; or, companies engaged in exploration,
production, marketing and refining.
The Model will also invest in companies that manufacture
chemicals, construction materials, glass, paper, forest products
and related packaging products, and metals, minerals and mining
companies, including producers of steel.
Designed for investors who...
Model Provider’s Fees*
Investment Fee
Investment objective
0.40% p.a.
No
Seek exposure to the energy and material sectors of the
ASX
Are satisfied with market returns
Accept the risk of significant price fluctuations
S&P/ASX 200 Accumulation Index
* Please refer to the Product Disclosure Statement for further details.
For use with institutional and professional investors only —
Proprietary and confidential