Implemented Portfolios is a portfolio construction service for advisers which creates balanced portfolios using ETFs for sector exposure but focussing on asset allocation for investor protection and capital growth.

In the most recent update by the Asset Allocation and Investment Committee (AAIC), the defensive positioning strategy for its five model portfolios was affirmed as developed markets continue to face uncertainty and growth outlooks appear subdued at best. However, the neutral stance on Australian equities has been increased to overweight reflecting better valuations. This results in the overweight position in income securities being pared back slightly, while the zero allocation to listed property remains across all of Implemented Portfolios’ IMAs .

Providing further context on the positions, AAIC member Jon Reilly said despite recent volatility in commodity prices, fundamentals are expected to continue to be supportive of the resources sector, while the decline in bank share prices over the last couple of months provides an attractive yield to support future performance. On balance the AAIC is optimistic towards Australian equities on a long term basis.

“We will be looking to take advantage of any short term dips to add exposure to growth assets at good prices,” Mr Reilly said.

Over the last two quarters the committee viewed A-REITs as fully priced at best, if not expensive. This assessment has been revised in Q2 with the AAIC commenting values are returning to more reasonable levels. Despite this, the committee is maintaining its 100% underweight target position to listed property because current upside potential is not sufficiently compelling and the local sector is dominated by retail which is facing a very difficult environment.

According to Reilly, “The AAIC’s decisions this quarter reflect our cautious outlook. The remainder of the year is likely to be characterised by ongoing sluggish economic growth in the developed world which has the potential to be exacerbated by political and regulatory responses to debt problems in Europe and budget and debt ceiling negotiations in the US.

“As a result, we have positioned the portfolios defensively but will add to equities allocations when valuations become more attractive. We believe this is the best approach to ensure investors avoid disasters and protect their capital,” he concluded.

The AAIC is comprised of a team of professional managers that make implementation and investment decisions for Implemented Portfolio’s range of individually managed accounts.

The quarterly update is the AAIC’s long term assessment of each asset class amid the broader context of the economic environment and investment markets.

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