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 contact us.

Portfolios Structure

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

• Two currency based portfolios ; in US dollar or in Euro.

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

• Usually we select identical funds either for US dollar or Euro based portfolios, but keeping currency exposure hedge for fixed income funds.

• The performances are shown net of fees, calculated from 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, and to a certain extent to a diversification optimisation. Tactical bets such as investment style (value, growth defensive), sector allocation (e.g., commodities, real estate), interest rate or spread duration may 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.

Market Review – June 2020

It’s been a very strong quarter for equities and credit as central banks and governments provided massive amounts of stimulus and economies started to reopen. Despite the strong rebound in risk assets price, traditional portfolio hedges such as government bonds and gold have held up well. US Treasuries are up about 9% year to date, while gold is up close to 18%.

As economies have started to reopen, economic data has shown signs of a sharp rebound. For example, US retail sales rose 17% month on month in May, while UK retail sales rebounded by 12%. While sales are still down 6% and 13% year on year respectively, the speed and magnitude of the bounce back is a clear positive for the markets.

Central banks globally have made clear that they stand willing to use their full firepower to keep government and corporate borrowing costs low. The worst-case scenario of the Covid crisis morphing into a liquidity crunch has thus been avoided, and central banks don’t appear to be in the mood to back away from providing liquidity support where necessary. This central bank support has helped US high yield rally by nearly 10% this quarter, while global investment grade credit rallied by almost 9%.

The S&P 500 looks to be pricing in a V-shaped economic recovery, but it is worth noting that sector by sector performance tells a more differentiated story. For example, online retailers are up strongly year to date, while department stores are down sharply, along with other sectors that have been most affected by the virus, such as hotels, airlines, retail REITS, energy companies and banks. So it is important to look beneath the index level for both opportunities and risks, and to be aware that many companies aren’t starting the second half of this year where they were at the beginning of the year, even though some indices may give that impression. Value stocks are down 17% this year, while growth stocks are up 6%.

Outlook

The situation is not back to normal by far and will not be as long as the virus has not been fully contained, nor a vaccine approved. In addition, the Federal Reserve and other central banks have been clear that they can only lend, not spend, and so won’t necessarily be able to save companies that face solvency concerns, rather than just liquidity concerns. Some companies will therefore still face administration, and we have unfortunately already seen some examples this quarter.

Therefore, we maintain a defensive stance in Equities with a large cap quality growth bias. However, we remain mindful that a persistent deterioration in corporate earnings could cause markets to revisit their valuation of paid multiples. In this case, a rotation towards value securities would not be excluded.

In fixed income we believe there is still a potential for spread tightening by the riskiest assets such as high yield and emerging markets. We maintain a reasonable overweight exposure on these asset classes. We are considering also inflation-linked bonds as a mean to hedge against mounting signs that the massive injection of money could translate down the road into inflationary pressure for the real economy.

The MSCI ACWI (USD) was up +3.2% during the month while the Barclays Global Aggregate index (USD hedged) was up +0.6%.

Active management had a positive contribution in June for both, equities, as well as fixed income funds.

Our quality growth tilt helped in equities, while  most fixed income managers took profit following to risk premia tightening.

Over the 25 funds we have in the portfolios, 17 were outperforming their respective benchmark.

In absolute terms, the Growth portfolio (+2.8%) outperformed the Yield & Income portfolio (+2.8%) and the Balanced portfolio (+2.1%).

Yield & Income Portfolio (USD)

The portfolio outperformed its benchmark by +139 bps in June.

Our EM debt exposure was the main contributor due to Sovereigns hard currency (+5.5%) and Corporates EM (+3.9%).

Also the CLOs Investment Grade strategy was a strong performer (+4.3%), fully recovering from its March dislocation (-26%) during the last 3 months.

Active management contributed by +62bps to the performance.

Balanced Portfolio (USD)

The portfolio was outperforming its benchmark by +30bps in June (+2.1% vs +1.8%).

The absolute return exposure was a detractor to the performance mainly due to the merger arbitrage strategy which suffered from the uncertainties surrounding some merger deals.

This was more than compensated by the spread duration overweight in fixed income and the contribution of active management (+35bps).

Growth Portfolio (USD)

The Growth portfolio outperformed its benchmark by +57bps in June.

The slight overweight exposure to EM equities (+9.7% for our strategy) and the active management (+29bps) were the main drivers of performance.