Kirsty Dullahide, head of portfolio at Australian Unity Investments tells us about what’s in her portfolio at the moment and describes her favourite asset class right now.
Q: What to hold?
A: For a defensive portfolio, I would look for a blend of cash, high quality mortgages and high quality bonds. No credit, nothing leveraged and nothing fancy. It’s important to remember that defensive assets need to be true to their role and be acting defensively.
Q: How do you determine the allocation of assets?
A: As always, knowing what you will need to call upon from your portfolio and when will be critical in determining the right asset allocation for you. As is understanding how your investments might perform in uncertain times and being comfortable with that level of risk.
Q: Are there any opportunities in this market?
A: There is opportunity available for growth – but only for those who are comfortable living through he roller coaster ride. High volatility in equity markets is likely to continue for some time. I personally feel more comfortable with Australian assets than international, with currency being difficult to anticipate. Listed property trusts are looking cheap, but I’m leaning toward unlisted property trusts, with sober valuations and low levels of gearing, for their stability.
Q: So, what’s your favourite asset class at the moment?
A: I’m going for a blend of cash with high quality mortgages. With interest rates declining but capital scarce, mortgage funds invested in quality assets and available cash are in a strong position to benefit from expanding margins on loans and have the opportunity to improve the quality of their borrowers. As part of my portfolio is for longer term investment, I also like select Australian equities at their current valuations.
Q: How are you dealing with market uncertainty?
A: A prudent, conservatively managed mortgage trust can provide a compelling blend of capital defence and attractive income over the next 1 – 2 years as uncertainty reigns in other sectors. Diversification across the conservative part of a portfolio is also very important and mortgages sit very well with cash and high quality bonds to spread risk across this defensive part of my portfolio. I also look to be frank with myself about when I might need to call upon my investments - so nothing risky for money I may need in the next few years. This way, I can feel more comfortable with some more volatile investments for the longer term.
FEBRUARY 2009