Fully invested in ASX Roaring market yields results for AFIC

THE Australian share market has been sitting at record highs, but the managing director of Australia’s largest listed investment company says it isn’t tempting to take a little off the table.

Mark Freeman says the start of 2020 – during which time the ASX200 has risen nearly 6 per cent – has been “extraordinary” but the Australian Foundation Investment

Company remains nearly fully invested with just about 1.6 per cent of its assets in cash.

“People want us to ride up the ups and downs,” he said.

The market looked expensive months ago as well, he noted.

“If you’d taken that view you’d have really missed out.”

The foundation yesterday reported that in the half-year to December 31 it made a profit after tax of $146.1 million, down from $239.8 million a year ago.

Its investments in Australian equities resulted in a sixmonth return of 5.4 per cent, including franking, compared to a 3.8 per cent return for the ASX200 index in that time.

Mr Freeman said the foundation, which had $5.85 billion in assets as of December 31, had pared its holdings from 95 to 70 over the past four years to build a more focused portfolio.

Its notable acquisitions in the half year were Goodman Group, Macquarie and CSL, he said.

The focus now would be on the reporting season, he said.

While stocks looked expensive by historical levels,

Brendan Nelson on his new job as president of Boeing Australia, New Zealand and South Pacific there were questions about whether that metric was dated in this era of ultra-low interest rates, Mr Freeman said.

The foundation will be watching to see if Australia really does experiment with negative interest rates this year. Other investing themes for 2020 will include the USChina trade war, the US elections and climate issues.

The foundation doesn’t have a formal policy against investing in fossil fuel companies but its only exposure to them is through its investments in BHP and Rio Tinto, where fossil fuels are only a “tiny” portion of overall activities.

AFIC has also cut its exposure to the major banks, given the competitive and regulatory exposure the sector is facing.

Mr Freeman said they were a risky business.

It is an honour to join a global company like Boeing, whose proud legacy here in Australia dates back more than 90 years to the earliest days of Australian aircraft manufacturing.