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).

• We have started 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, with hedged currency exposure for fixed income funds.

• The performances are shown net of fees, calculated on the cheapest share classes, and 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.

Widespread positive macroeconomic data continued to drive global equities firmly higher in January. The MSCI All Country World Index ended the month with a performance of + 5.6%, driven by emerging markets (EM) equities. EM posted a robust return with continued strength in global growth and trade, as well as US dollar weakness supporting relative performance. Strong net capital inflows to EM equities were also beneficial. With the exception of EM equities, volatility edged slightly higher but remained in a historically low range. The VIX reached its highest level since August.

Government bond yields rose significantly in developed markets, reflecting higher growth and inflation expectations after the US tax reform bill passed in December. Ten-year yields in major developed markets finished about 30bps higher. US 10-year rates were up from 2.41% to 2.72%, with five and two-year yields keeping pace. In Europe, 10-year Bund yields increased from 0.43% to 0.70%.

Corporate bonds outperformed government equivalents amid a healthy environment for risky assets. The BofA Merrill Lynch Global index of investment grade credit returned -0.7%, while the high yield index rose 0.6% (both in local currency terms).

In emerging markets, local currency-denominated bonds returned +4.5% as the US dollar weakened. Both hard currency and corporates yields were little changed.

Outlook

No change in the portfolio in January, neither in the fund selection, nor in the portfolio construction. As we already mentioned at the end of last year, due to the expected resurgence of volatility in 2018, which by the way started at the end of January to accelerate significantly beginning of February, we have planned to slightly change the composition of our model portfolios during the course of the quarter, by taking profit on strategies that benefited the most over the last 12 months.

In equities we will then reduce our exposure to quality-growth funds in favour of lower beta strategies. We will pay specific attention to avoid funds that have drifted to valuations higher than their benchmarks, or peers.

In fixed income we will reduce our credit and EM local currencies exposure in favour of low correlated strategies like cat-bonds or mortgage related securities, as well as in emerging markets hard currencies debt.

In alternative strategies, we will expand our balanced portfolio diversification towards less directional strategies, seeking robust long/short exposure to the equity markets, and looking for risk premia exposures independent from an inflationary led interest rates environment.

The MSCI World Equity index (USD) had a performance of +5.6% during the month while the Barclays Global Aggregate index (USD hedged) returned -0.7%.

In January, the active management was a positive contributor to performance. 14 of the 24 funds we have in all Model Portfolios had a positive excess return.

In absolute terms, the Growth portfolio recorded the best performance with +3.7% total return, followed by the Yield & Income portfolio at +2.9% and the Balanced portfolio at +2.8%.