ASX: MVW Equal Weight's stand out performance in May

For Australian investors the well-known trading adage “sell in May and go away” seemed right on the money with the S&P/ASX 200 Accumulation Index down 2.75%. As a consequence of the surprise bank levy in the federal budget all big four banks fell significantly in May dragging down the market. 

Relative to the S&P/ASX 200 Accumulation Index, VanEck Vectors Australian Equal Weight ETF (ASX:MVW):

•           reduces banks’ exposure by ~23%;

•           reduces ASX top 10 exposure by ~35%;

In May MVW only fell 0.19%, an excess return of 2.57% compared to the market index.  Since its launch in 2014, MVW has outperformed the S&P/ASX 200 Accumulation Index by an average of 4.36% per annum.

In the highly concentrated Australian equities market, equally weighting a portfolio delivers investors significantly improved diversification by reducing stock and sector concentration, resulting in superior investment outcomes compared to tracking a market capitalisation weighted index.  Concentration risk inherent in the Australian market was emphasised in May when the market reacted to the bank levy.

Stock attribution

In May, all big four banks were down.  ANZ was the worst performer of the big four falling 12.22% for the month.  Westpac fell 10.38%, CBA fell 8.87% and NAB fell 8.63%.  Being underweight these four stocks added 1.77% to MVW’s performance relative to the S&P/ASX 200 Accumulation Index.   An overweight position to Qantas and Iluka Resources also contributed to relative performance.

An overweight exposure, relative to the S&P/ASX 200 Accumulation Index, to Mayne Pharmaceutical was the biggest detractor from performance.  Its share price was down 19.33% due to an earnings downgrade which was the result of tougher generic drug pricing in the US.  Mayne detracted 0.18% from relative performance.  Underweight positions to BHP and Telstra also detracted from relative performance in May.  

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This information is issued by VanEck Investments Limited ABN 22 146 596 116 AFSL 416755 (‘VanEck) as the responsible entity and issuer of VanEck Vectors Australian Equal Weight ETF (‘MVW’). Nothing in this content is a solicitation to buy or an offer to sell shares of any investment in any jurisdiction including where the offer or solicitation would be unlawful under the securities laws of such jurisdiction. This is general information only and not financial advice. It is intended for use by financial services professionals only. It does not take into account any person’s individual objectives, financial situation or needs. Before making an investment decision in relation to MVW, you should read the PDS and with the assistance of a financial adviser consider if it is appropriate for your circumstances. The PDS is are available at www.vaneck.com.au or by calling 1300 68 38 37. MVW is subject to investment risk, including possible loss of capital invested. Past performance is not a reliable indicator of future performance. No member of the VanEck group of companies gives any guarantee or assurance as to the repayment of capital, the payment of income, the performance, or any particular rate of return from MVW.}

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