WSP Model Portfolios are built from our universe of selected active Ucits funds. We manage actively the allocation according to current and expected market conditions and taking into consideration the fund managers’ exposure.

The aim is to demonstrate that an optimal combination of strategies, coupled with a careful selection of active fund managers, have the ability to deliver added-value to investors over the long run, while keeping a full exposure and constant asset allocation within the given investment profiles.

More detailed reporting including portfolio quantitative and qualitative data are available to customers having subscribed to the WS Partners Model Portfolio Services. Would you request more information on this service, please do not hesitate to contact us.

Portfolios Structure

• Portfolios are made up of 14 to 17  Ucits or Alternative Ucits funds (according to profile).

• Two currency based family of portfolios ; in US dollar and in Euro.

• Apart one fund with a bi-monthly liquidity, all funds have a daily liquidity.

• Usually we select the same funds for the USD or the EUR based portfolios, including currency exposure hedged for fixed income funds.

• The performances are shown net of fees, calculated on the cheapest share classes, hence making our Model Portfolios fully replicable.

Strategic Allocations

We keep a constant balance between equity and fixed income strategies according to Model Portfolio profiles and guidelines. We also maintain a neutral currency and regional allocation compare to benchmarks.

The portfolio outperformance should mainly arise from the alpha generated by active management. Tactical bets such as investment style (value, growth defensive), sector allocation (e.g., commodities, real estate), interest rate or spread duration might also contribute, time to time, to the value added generation.

Yield & Income Portfolio

A conservative portfolio with a 1/3 equity and 2/3 fixed income allocation.

Within the equity universe we tend to favour yielding strategies rather than pure price appreciation funds.

The objective is to outperform over time a benchmark composed by 1/3 of the MSCI All Country World Index, and by 2/3 of the Barclays Global Aggregate Bond Index.

Growth Portfolio

The most equity oriented portfolio with the aim to beat a benchmark composed by 2/3 of the MSCI All Country World Index and 1/3 of the Barclays Global Aggregate Bond Index. Growth of capital through capital appreciation is the main long term portfolio objective.

August has regularly proved to be a difficult month for financial markets and this summer was no exception. Investors had to digest the reintroduction of sanctions against Iran, new tensions between Turkey and the US, a deterioration of trade talks between the US and China, and volatility in the Italian government bond market. Most equity markets and risk assets sold off, with the notable exception of the S&P500. Amid the geopolitical turmoil, the search of a safe haven helped pushed government bond prices up, with the 10-year US Treasury yield falling by 10bps to 2.86%. The policy rate was held steady in August, but the Fed is expected to raise rates at a pace of 25bps points per quarter.

In Europe, markets are anxious about the new Italian government’s budget plan, which are due to be released by the end of September and submitted to the EU on mid-October. If Italy’s budget deviates from the objectives of the stability and growth pact, the European Commission could be forced to reactivate the excessive deficit procedure against Italy. The 10-year Italian government bond yield touched 3.2% by the end of the month, 290bps above that of Germany. European assets sold off in August, with the MSCI Europe ex-UK index down 2.0%. The euro fell 0.6% vs. the dollar.

In the context of trade tensions and a potential balance of payments crisis in Turkey, emerging market assets sold off in August. The MSCI EM in USD was down 2.7% last month, the JPM EMBI Global (debt in hard currency) down 1.9% and the JPM GBI-EM Global Diversified (local currencies) fell 6.1%.

Outlook

We have rebalanced our equity allocation from a value bias to a neutral stance and slightly rebalanced our EM debt allocation in the Yield & Income portfolio from hard to local currency.

The MSCI ACWI All Cap (USD) returned +0.9% during the month while the Barclays Global Aggregate index (USD hedged) was up 0.3%.

In August, active management was mixed. Over the 26 funds we have in all Model Portfolios, 13 had a positive excess return.

In absolute terms, Growth portfolio (+0.5%) outperformed the Yield and Income portfolio (-0.2%) and the Balanced portfolio (-0.3%).

Yield & Income Portfolio (USD)

The portfolio underperformed its benchmark by 62bps. The active management contribution was flat while the main factor for underperformance comes from the overweight in EM debt.

Year to date, the fund is slightly behind its benchmark by 18bps. Our diversifying fixed income strategies (ABS, CLOs, Cat Bonds) contributed positively by 38bps and active management by 94bps since the beginning of the year. These positive contributors almost entirely compensated the negative contribution from the EM overweight exposure. Since inception, the portfolio is however still largely above its benchmark (+7.9% annualized vs. +5.3%).

Balanced Portfolio (USD)

The balanced strategy was down relative to its benchmark by 80bps in August, and year to date the relative performance went slightly negative (-68bps). Exposure to Italy spread through an absolute return fixed income fund was the main detractor (-72bps). On the other hand, active management was a positive contributor (+27bps).

Since inception however the portfolio remains above its reference benchmark (+8.3% vs +7.4% annualized), despite the fact the total return pocket, meant to stabilise the portfolio’s performance during difficult markets period, has been a lag in an overall bull market.

Growth Portfolio (USD)

The portfolio was flat in relative performance in August. Active management was strongly positive (+77bps) while the overweight exposure to EM equity detracted from performance.

YTD the fund is underperforming by 135bps due to EM exposure and the value style bias, which has now been removed. Since inception the annualized performance is still largely above its benchmark (+11.3% vs. 9.5%).