With the onset of the Global Financial Crisis, the Investment Committee recommended clients make significant adjustments to their portfolios. These recommendations included exiting listed property and infrastructure securities and entering the market for physical gold.
We remained invested in some asset classes such as Australian equities which suffered from falling asset prices, but our asset allocation focused approach assisted clients to minimise losses caused by the Global Financial Crisis.
Some examples of specific Investment Committee recommendations include:
September 2007: Buy gold (ASX code GOLD)
On 20 September 2007, Deputy Chairman, Max Walsh, released an article to clients detailing the benefits of a physical exposure to gold as a hedge against both equity market volatility and inflation. The next day we sent advice to clients outlining Max’s reasoning and recommending they build a physical exposure to gold through the exchange traded fund GOLD.
At the time of recommendation, GOLD was trading on the ASX at around $85, versus a current trading price of around $135 (January 2011) representing a return for clients of approximately 60%.
December 2007: Exit the property and infrastructure sector
Based on market events (specifically the collapse of Centro announced on 17 December 2007) and serious concerns over the impact that frozen credit markets would have on the sector through 2008, the Investment Committee formed the view that clients should completely exit this sector until the committee saw some recovery in the credit market.
This recommendation, made on 18 December 2007, included every listed property and infrastructure stock.
June 2008 - February 2010: Purchase $A denominated corporate bonds
The Investment Committee identified significant opportunities in the fixed interest sector due to structural issues in global debt markets and continued equity market volatility.
The corporate bond market is not a market many retail investors can access due to minimum investment restrictions. Further, a prudent portfolio contains many bonds, not just a single bond.
As a result, an investor would normally need to invest a significant amount to obtain appropriate diversification of risk.
To overcome these obstacles and assist our clients take advantage from these opportunities, Dixon Advisory created a series of simple low cost standalone companies to buy and hold (in most circumstances) a portfolio of A$ denominated investment grade corporate bonds.
The annualised yield to maturity of the underlying portfolios was 9.6%, 8.6%, 11.1%, 9.4% and 8.7% for Australian Masters Bond Fund #1 through #5, respectively.
Dixon Advisory has received industry recognition for its leadership role in identifying and structuring products designed specifically to meet investors' requirements and take advantage of the opportunities present during difficult times.
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