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Question on the Income Portfolio & XARO AU

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Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

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Question asked 21/02/2021

Question on the Income Portfolio & XARO AU

“James & Team Thanks for all the insights over the past couple of years. It has been invaluable for our SMSF. Can you assist with an insight/answer to 2 questions please: 1. The income portfolio discussion states "The portfolio remains well ahead of its benchmark for the current financial year, up 16.01% vs the RBA + 4% target of 2.56%." This implies the RBA is a negative rate. What am I missing? 2 . XARO price dropped at about the same time that it delivered a similar sized dividend. It is now trading within a tight range around the low $26.00s. It remains listed as a Buy in the portfolio and of low risk. Any insights into its outlook.” - Thanks in anticipation Peter S.

Answer

Morning Peter,

1 – Income Portfolio Returns: The RBA cash +4% is an annual number and currently we’re about 60% through the year hence the portfolios benchmark is up 2.56% for the time period elapsed. i.e. RBA cash rate +4% *60%

2 – XARO: This is a bond fund that trades a relative valuation strategy, it’s very low risk / but low return as well, MM remains comfortable with it. Bonds accrue interest and this is shown in their price and when interest is then paid, the price will drop by the equivalent amount before the cycle repeats.

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Active X Ardea Real Outcome Bond Fund (XARO AU)

LAST UPDATED 21/02/2021 16:20

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