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.

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.

Markets were again plagued by volatility in May, largely due to heightened political risk. The US administration’s approach to global trade, North Korea and Iran remain uncertain, while Italy’s new populist government added to market concerns. Risk-off sentiment contributed to a significant rise in the value of the US dollar, which strengthened 2% vs. a basket of major currencies and to a decline of the US 10-year Treasury yield from 2.95% to 2.83% at month-end.

US data were supportive for the equity market, both on a macro or on a micro level. April consumer confidence is still close to the 17-year high reached in February, and the PMI increased in May, indicating an acceleration in the pace of activity into the second quarter. The positive effects of growth and tax cuts contributed to a strong Q1 earnings season in the US. The first quarter saw record profits, with S&P 500 earnings per share growth of 24% year on year (y/y) and revenue growth of 8% y/y. Profit margins improved to a new record of 11%, and over three quarters of companies reported better earnings than expected. Consequently, the S&P500 rose by 2.4%, driven by the technology sector. The Russell 1000 Growth surged by 4.4% while the Russell 1000 value was almost flat (+0.6%). Other Equity markets experienced some mixed figures. While the MSCI Europe rose by 0.1% the Emerging Markets were again in negative territory in May (-3.5% in USD).

In fixed income, the headlines were dominated by the Italian crisis. While German government yields were falling, Italian yields rose on the month as Italy struggled to form a government. The spread of the Italian 10-year government bond yield vs. that of Germany, widened above 2% for the first time since June 2017.

The strength of the dollar and rising risk aversion weighed on emerging markets debt as well.

Outlook

No change in the portfolio during the month, neither in the fund selection, nor in the portfolio construction.

However, the recent developments in Europe with the Italian political turmoil crisis and its consequences on the financial markets push us to reassess our portfolios positioning and their diversification. We will review our value bias and duration exposures in the perspective of further risk-on/risk-off markets regime. The emerging markets is also reviewed, most notably in regard to regain some exposure to the local emerging market debt that has reached attractive valuation after the bold correction recorded this year.

Finally the main market indices managed to close the month by staying afloat. The MSCI World Equity index (USD) had a return of +0.4%, while the Barclays Global Aggregate index (USD hedged) returned +0.4% for the period.

In May, active management contribution was mixed as over the 27 funds we have in all Model Portfolios, 14 had a positive excess return. In absolute terms, the Growth portfolio (-0.4%) outperformed both; the Yield & Income portfolio (-0.6%), and the Balanced portfolio (-0.9%). Overall, each of our portfolios still maintain a flat to slightly positive outperformance on a year to date basis.

Yield & Income Portfolio (USD)

The portfolio underperformed its benchmark by 83bps. The Yield & Income, like the two other portfolios experienced strong headwind during the month, mainly due to the portfolios’ bias exposure, e.g. overweight in EM markets, both in equity and in fixed income, the value style bias, biais toward European equities vs US equities, the short duration and Italian overweight exposure in the fixed income space. While some funds contributed positively in active management, the overall  alpha contribution was slightly negative (22bps) during the month.

Balanced Portfolio (USD)

The balanced portfolio underperformed its benchmark by 116bps. It was hurt by the same bias as the Yield and Income portfolio and the active management contributed negatively by 54bps for the month. The funds in the absolute return allocation in the portfolio delivered a mixed bag of returns in absolute and relative, with one fund alone dragging the whole allocation into negative territory due to its exposure to the Italian debt market.

Growth Portfolio (USD)

As for the other portfolios same factors contributed negatively to the performance of the Growth portfolio, apart from the short duration bias. For that reason, the portfolio recorded a relative performance of -61bps vs. its benchmark, the smallest of the three profiles. To notice the active management that had a marginal positive contribution of 13bps in May.