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.

Global equity bourses experienced difficult conditions in March. The premise of a tariff war created uncertainty on stocks after the Trump administration proposed levies on steel and aluminium as well as certain Chinese imports. China’s announcement of retaliatory tariffs initiated a “sell-off” in U.S. equities, with the S&P 500 Index posting its worst week in over two years and its first negative quarterly return since 2015. Despite geopolitical headlines, stable economic fundamentals kept major central banks on course to normalize policy. In the U.S., the Federal Reserve lifted its target rate range by another quarter-point to 1.50 – 1.75%.

Despite generally strong fundamentals, developed market stocks fell 2.2%, led by large cap growth companies amid the prospect for greater regulatory scrutiny in the technology sector. Similarly, in emerging markets stocks lost 1.9% as concerns over a potential trade war weighed on risk assets. While in Brazil stocks recovered from an early sell-off to end the month flat after the country was temporarily exempted from US steel tariffs, Chinese and Indian equities fell 2.8% and 3.5% respectively.

Developed market bond yields fell in March. In the U.S., the 10-year Treasury rate fell 12 basis points (bps) to end the month at 2.74%. However, the two-year yield rose slightly on concern of more aggressive tightening by the Federal Reserve. The possibility of a global trade war supported German and UK bond prices as well: The 10-year bund yield ended the month 16 bps lower at 0.50%, while the UK 10-year rate was 15 bps lower at 1.35%.

On the credit side, global Investment Grade spreads widened by 12bps and global High Yield bonds fell into negative territory for the second consecutive month

Emerging market (EM) debt price rebounded in March, with most sub-sectors posting positive returns. Lower yields and EM currency appreciation versus the U.S. dollar drove positive local debt performance. External debt returns were mixed: Sovereign debt returns were positive as carry and a lower U.S. Treasury yields outweighed spread widening, while lower-duration corporate debt posted modestly negative returns.

Outlook

No change in the portfolio during the month of March, although we are still looking for more uncorrelated strategies, both in equities and in fixed income.

The expected resurgence of volatility, which started at the end of January to accelerate significantly in February, triggered some changes to the composition of our model portfolios at the end of the month of February.

In equities we have reduced 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 meaningfully higher than their benchmarks, or peers.

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

In alternative strategies, we expand diversification in our balanced portfolio 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.

For further details on changes, refer to our February report.

The MSCI World Equity index (USD) had a performance of -1.9% during the month while the Barclays Global Aggregate index (USD hedged) returned 0.8%.

In March, the active management was a positive contributor to performance. 15 of the 27 funds we have in all Model Portfolios had a positive excess return.

In absolute terms, the Growth portfolio recorded the worst performance with -1.1% followed by the Yield & Income portfolio (-0.7%) and the Balanced portfolio (-0.4%).

Overall, quarter to date the three portfolios (in USD) delivered an excess return vs their benchmarks ranging from 212bps for the balanced portfolio to 29bps for the growth portfolio.  To notice that the balanced portfolio delivered that excess return at lower volatility than the markets (4.7% vs 5.3%), thanks to the allocation to absolute return and alternative strategies.