Summary

Given that the clients of YourSuper are people with the age of 75 and above, they should create a portfolio
with minimum risk that will attempt to track the ASX200 at minimum.

Customer Risk Profile

Elderly clients focus their Financial investment with the motive of creation of cash inflow and capital
preservation. Minimum risk portfolio is required for wealth preservation. Dividend and high yielding sectors are
popular because of their payout profiles. Diversification of Portfolio is necessary for minimizing the risk.

Strategy

To achieve the goal of tracking the ASX200 and potentially outperforming the index, I recommend allocating
the funds with respect to the index i.e.… same weights as the index); however, to outperform of the index, I
recommend a slight overweight in Real Estate, Industrials and Consumer Discretionary, with a slight
underweight in Materials and IT.

I. Allocations

I advise YourSuper to invest a portion of their capital as per the below:

a. Sector Weightings

Sector Weighting Rationale

Financials 40%  Neutral weighting. Being the largest sector in the index, Financials are
arguably the most important allocation when creating a portfolio. They
also provide a solid income stream through dividends. As I do not want to
risk being overweight or underweight Financials and potentially
underperforming the index, I will maintain a neutral weighting; while
benefitting from their dividend cash inflows.
Materials 15% Slight Underweight. Material sector is a large proportion of the index, it is
a sector that provides a high dividend yield but at a cost, with the cost
being risk to the investors capital preservation..
Healthcare 9% Neutral. The Healthcare sector, due to its moderate weighting in the index,
is a sector whereby one can seek outperformance. The stability of the
sector is attractive.
Industrials 7% Overweight. The industrial sector has many facets. Some names in the
sector are linked to bond yields due to their dividend payouts. Their
dividend yield is attractive as is their capital preservation qualities.
Real Estate 7% Overweight. Due to its structural nature (Trusts), REIT’s provide great
cash flows via dividends and little risk for capital preservation because of
the physical assets they own. This, paired with an RBA easing cycle,
should benefit my portfolio and act as an outperforming sector.
Consumer 4% Overweight. Consumer spending can be analysed via multiple macro-
Discretionary economic factors. As I believe the RBA is in an easing cycle and therefore
attempting to boost the economy and consumer spending, an overweight
allocation is an appropriate way to benefit from the current economic
climate
Consumer 8% Neutral. Staple sector is one that tracks inflation and various other micro-
economic factors. Keeping a neutral weighting could offset the risk that
Staples the RBA does not ease substantially.

Energy 4% The Energy sector is dictated by price movements in physical energy

products. The sector is extremely volatile and without a clear indication of
where physical prices are going, the sector remains a capital preservation
risk. As a result, I will be neutral weighted in Energy.
Communication 2% Neutral. Stability of the Communication sector is attractive. However, it
Services does not account for a large proportion of the index and therefore one
would have to be extremely overweight or underweight for its performance
to affect the portfolio. As a result, we will remain neutral to allocate funds
elsewhere.
IT 1% Due to the nature of IT companies, the IT sector does not provide a
dividend yield. Instead, the sector purely provides an opportunity for
capital returns. Sector is only 1% of the index, one can be significantly
overweight or underweight the sector to generate outperformance.
Although I believe the IT sector will continue to experience capital returns,
this type of investing does not suit my client’s needs, which is more
focused on cash inflows and capital preservation, and so I recommend
remaining neutral.
Utilities 3% Neutral. Stability of the Utilities sector is attractive. It does not account for
a large proportion of the index and therefore one would have to be
extremely overweight or underweight for its performance to affect the
portfolio. As a result, we will remain neutral to allocate funds elsewhere.

b. Bonds, Currencies, and Commodities

Instrument Allocation Rationale

Govt Bonds 6% A long term, low risk government bond that provides a 2.5%-3% yield.
Gold 6% A safe-haven commodity that can provide protection from volatile
equity swings.