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Pendal diversified portfolios – neutral positions review and updated benchmarks

December 14, 2021

Pendal Active Balanced Fund (APIR: RFA0815AU, ARSN: 088 251 496)
Pendal Active Conservative Fund (APIR: BTA0805AU, ARSN: 087 593 100)
Pendal Active Growth Fund (APIR: BTA0125AU, ARSN: 087 593 682)
Pendal Active High Growth Fund (APIR: BTA0488AU, ARSN: 610 997 674)
Pendal Active Moderate Fund (APIR: BTA0487AU, ARSN: 610 997 709)
Pendal Balanced Returns Fund (APIR: BTA0806AU, ARSN: 087 593 011)
Pendal Sustainable Balanced Fund (APIR: BTA0122AU, ARSN: 637 429 237)
Pendal Sustainable Conservative Fund (APIR: RFA0811AU, ARSN: 090 651 924)

Neutral positions review outcomes and updated benchmarks

Following a review of the neutral positions of Pendal’s diversified funds (Funds), we believe the current portfolios are risk/return efficient and no change to the neutral positions is required.

The neutral positions reflect our latest asset class assumptions for return, risk and inter-asset class correlations and position the funds to take advantage of future market conditions. We are updating some benchmarks effective 1 February 2022 for the following reasons:

Alternative investments benchmark: we believe that in an environment of almost zero cash rates, the Bloomberg AusBond Bank Bill Index is not consistent with the risk/return profile of alternative assets and that the most appropriate benchmark is specified in the Your Future Your Super (YFYS) regulations and as stated in the tables below. It captures the desired risk and return characteristics of alternatives – i.e. assets which sit in between equities and bonds on the risk return spectrum.

International shares benchmark: we believe that moving from the current blended benchmark to a single consistent benchmark (with hedged and unhedged versions) best captures the investible universe for the Funds. The proposed index is the MSCI All Countries World ex Australia (Standard) Index (Net Dividends) in AUD, which includes both developed and emerging markets, weighted according to their relative market capitalisation.

With the move to a single international shares benchmark, which for the sustainable funds now includes emerging markets, we are also changing the neutral hedge ratio for international shares to be adjusted within the Sustainable Balanced and Sustainable Conservative funds to maintain a consistent level of developed market foreign exchange exposure to that which was held previously. No change is required to the hedge ratio for the other diversified funds as these funds already held emerging market equities. 

Australian Property Securities benchmark: we believe that the S&P/ASX 300 AREIT (TR) Index although only slightly broader than the S&P/ASX 200 AREIT (TR) Index, provides greater potential for diversification (as the number of stocks is 50% greater in the S&P/ASX300) and better represents the investment opportunity set available.

Australian shares benchmark: For the sustainable funds, with the same view Australian Property benchmark changes above, we believe that the S&P/ASX 300 (TR) Index although only slightly broader than the S&P/ASX 200 (TR) Index, provides greater potential for diversification and better represents the investment opportunity set available.

The details of changes are summarised in the tables below.

Table 1: Benchmark updates for the following funds:

  • Pendal Active Conservative Fund
  • Pendal Active Moderate Fund
  • Pendal Balanced Returns Fund
  • Pendal Active Balanced Fund
  • Pendal Active Growth Fund
  • Pendal Active High Growth Fund
Asset ClassCurrent BenchmarkNew Benchmark
Australian sharesS&P/ASX 300 (TR) IndexS&P/ASX 300 (TR) Index (no change)
International shares80% MSCI World ex Australia (Standard) Index (Net Dividends) in AUD
20% MSCI Emerging Markets (Standard) Index (Net Dividends) in AUD
MSCI All Countries World ex Australia (Standard) Index (Net Dividends) in AUD
Australian property securitiesS&P/ASX 200 AREIT (TR) IndexS&P/ASX 300 AREIT (TR) Index
International property securitiesFTSE EPRA/NAREIT Developed ex Australia hedged in AUD Net TRIFTSE EPRA/NAREIT Developed ex Australia hedged in AUD Net TRI (no change)
Australian fixed interestBloomberg AusBond Composite 0+ Yr IndexBloomberg AusBond Composite 0+ Yr Index
(no change)
International fixed interestBloomberg Global Aggregate Index AUD hedgedBloomberg Global Aggregate Index AUD hedged (no change)
CashBloomberg AusBond Bank Bill IndexBloomberg AusBond Bank Bill Index
(no change)
AlternativesBloomberg AusBond Bank Bill Index25% MSCI All Countries World ex Australia (Standard) Index (Net Dividends) in AUD
25% MSCI All Countries World ex Australia (Standard) Index (Net Dividends) hedged to AUD
50% Bloomberg Global Aggregate Index AUD hedged

Table 2: Benchmark updates for the following sustainable funds:

  • Pendal Sustainable Conservative Fund
  • Pendal Sustainable Balanced Fund
Asset ClassCurrent BenchmarkNew Benchmark
Australian sharesS&P/ASX 200 (TR) IndexS&P/ASX 300 (TR) Index
International shares75% MSCI World ex Australia (Standard) Index (Net Dividends) in AUD
25% MSCI World ex Australia (Standard) Index (Net Dividends) hedged to AUD
80% MSCI All Countries World ex Australia (Standard) Index (Net Dividends) in AUD
20% MSCI All Countries World ex Australia (Standard) Index (Net Dividends) hedged to AUD
Australian property securitiesS&P/ASX 200 AREIT (TR) IndexS&P/ASX 300 AREIT (TR) Index
International property securitiesFTSE EPRA/NAREIT Developed ex Australia hedged in AUD Net TRIFTSE EPRA/NAREIT Developed ex Australia hedged in AUD Net TRI
(no change)
Australian fixed interestBloomberg AusBond Composite 0+ Yr IndexBloomberg AusBond Composite 0+ Yr Index (no change)
International fixed interestBloomberg Global Aggregate Index AUD hedgedBloomberg Global Aggregate Index AUD hedged (no change)
CashBloomberg AusBond Bank Bill IndexBloomberg AusBond Bank Bill Index
(no change)
AlternativesBloomberg AusBond Bank Bill Index25% MSCI All Countries World ex Australia (Standard) Index (Net Dividends) in AUD
25% MSCI All Countries World ex Australia (Standard) Index (Net Dividends) hedged to AUD
50% Bloomberg Global Aggregate Index AUD hedged

Details of these changes can be found here. There have been no updates to the Funds’ Product Disclosure Statements (PDS) or Target Market Determinations (TMDs).

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