What are Model Portfolios?

We use the term "Model Portfolios" to describe the blending of the various asset sectors (cash, fixed interest, shares & property) in proportions that are designed to meet the various risk profiles of our clients. We currently have a number of model portfolios within each tax structure (non super, super & income streams). These risk profiles, and a dedicated model portfolio for each risk profile, is available to both our 50Plus Managed and 50Plus Direct clients.

Do Fund Managers offer Model Portfolios?

Most fund managers offer investors the ability to invest in a range of diversified portfolios. Like 50Plus, these portfolios also invest in the five core asset sectors (cash, fixed interest, shares, & property) in proportions designed to suit the risk of the investor. In most cases, a fund manager will offer five(5) distinct portfolios aimed at the five common risk profiles, namely;

• Defensive
• Conservative
• Moderate Risk
• High Risk
• Aggressive.

Using some examples;

• a Defensive investor may have a very large allocation towards cash & fixed interest - with only a small (if any) allocation towards shares & property.
• a Moderate investor, may have an allocation towards all sectors, with approximately 50% in shares & property (or similar) and 50% in cash and fixed interest (or similar).
• an Aggressive investor, may have a large allocation towards shares & property only - with no allocation towards cash & fixed interest (or a very small allocation).

Why does 50Plus not recommend the diversified portfolios offered by fund managers?

There are a number of reasons why 50Plus chooses to use it's own model portfolios. Some of these reasons are;

• the diversified portfolios offered by many fund managers are strategically set, with very long time horizons of 10, 20 or 30 years in mind. These portfolios generally ignore short term (which can become long term) influences/themes - preferring to adopt what they call a strategic approach to the portfolios asset allocation. For example, Australia's resource boom (now in it's 7th Year), the growth in China and India's economies and there influence on other equity markets, issues in the US relating to sub prime lending, US economic slowdown, Australia's rising dollar, Australia's rising interest rates, etc. All these influences can have significant impacts on the performance of your portfolio. By placing a weighting on the impact of these type of events, we are able to position our portfolios, which in turn enables us to control the desired asset allocation of our model portfolios more effectively.
• for most non super clients, the after tax return is very important. In recognition of this, our model portfolios have particularly large index weightings, in an attempt to minimise the level of trading in the portfolios underlying assets. By limiting the degree of trading within a portfolio, our non super client's tax liability at the end of each year is likely to be considerably lower.

These are just some of the reasons why we believe our model portfolios are likely to outperform the diversified portfolios offered by many fund managers. Of course, 50Plus cannot guarantee the performance of any of it's model portfolios, relative to any other portfolio.

Are there other benefits to having Model Portfolios?

An important benefit of offering model portfolios is that it helps us better manage our clients portfolios. By having five(5) clearly defined models, we are able to align each of our clients to a model which best suits their risk profile. This process then enables us to concentrate our efforts on fine tuning our models - knowing any adjustments will automatically apply to each of our clients who have aligned accounts. This is a much more effective way to manage the asset allocation of our clients portfolios - when compared with an approach where each individual client has a seperate asset allocation.