Portfolios of Active Funds
Key Characteristics
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.
Balanced Portfolio
The portfolio aims to outperform a benchmark made of 50% MSCI All Country World Index, and 50% Barclays Global Aggregate Bond Index in a risk-adjusted return basis and with a capital preservation mindset.
For that reason, we maintain around 33% of the portfolio allocation into Absolute Return strategies, including Alternative Ucits funds.
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 and Outlook
With geopolitical concerns continuing to weigh on risk appetite, global stock markets were unable to bounce back after the sizeable declines registered in October. There were plenty of other political events for investors to digest in November. Tensions between Brussels and Italy persist. Some progress was achieved on Brexit as a withdrawal agreement was agreed between the UK and the European Union but there remains considerable scepticism amongst investors about the ability of the Prime Minister Theresa May to pass the deal through the House of Commons.
The third-quarter earnings season was reasonably strong, especially in the US where earnings per share grew in excess of 25% year over year. Yet strong earnings did little to buoy sentiment and markets were especially sensitive to any guidance about future earnings being constrained by margin pressure associated with higher costs.
In Europe, over 50% of companies beat EPS expectations and overall EPS growth was 10% year over year.
After an exceedingly difficult year, emerging market equities rebounded in November (+4.1% MSCI EM NR in USD) but remain down over 12% year to date.
The US 10-year Treasury yield fell back to 3.01% as markets became more concerned about the outlook for global growth and the oil price fell.
Credit, including Loans and ABS such as RMBS continued to struggle across the board as investors fretted about the high level of corporate leverage and the prospects for slowing growth.
Outlook
We made no change to the portfolio in November. While it is usually detrimental to make harsh moves in the middle of the storm, we will take time at the end of the year to evaluate our portfolios, both on the positioning, as well as on the fund selection side.
Some manager’s performances have been disappointing this year, particularly for equity strategies. With regards to the positioning, some bias have proved to be costly such as the underweight in US equities, the overweight exposure in emerging markets, both in equities and in debt. On the other hand, the short duration positioning of the portfolios, the absolute return exposure and the use of alternative fixed income strategies such as CLOs, Loans, RMBS or cat bonds have been beneficial.
We will pay close attention to the risk premia those alternative strategies are paying in front of more traditional liquid asset class which have reached some compelling levels. The spread of the US investment grade credit for instance is near 150bps which is above the 5 years historical level.
Performance Review – November 2018
The MSCI ACWI (USD) was up +1.5% during the month while the Barclays Global Aggregate index (USD hedged) was up +0.5%.
In November, active management was for the third month in a row a detractor to performance. Equity fund managers struggled the most, hurt mainly by the significant underperformance of small- and mid-caps names. The traditional defensive sectors such as utilities, telecom and healthcare were again outperforming in November, while the energy, materials and IT sectors were lagging.
Over the 26 funds we have in all Model Portfolios, 19 had a negative excess return.
In absolute, the Growth portfolio (+0.6%) outperformed the Balanced portfolio (-0.1%) and the Yield and Income portfolio (-0.2%).
Yield & Income Portfolio (USD)
The portfolio underperformed its benchmark by -102bps, hurt by active management (-58bps).
Only a very limited number of managers have generated positive alpha (+22bps), mainly in equities.
A main source of underperformance were the short interest rate duration and long spread duration exposure.
Alternative fixed income strategies had also a negative impact such as non-agency RMBS (first negative monthly performance in more than three years) and loans.
Balanced Portfolio (USD)
The portfolio benefited from a positive contribution from the allocation to equities (+23bps).
But it was hurt by disappointing performance of the absolute return strategies, to the notable exception of one fund that still records a positive performance Ytd, while staying uncorrelated to the main asset classes.
The active management contributed also negatively by -55bps, in spite of few managers having generated +16bps of alpha for the portfolio in the equity space.
The portfolio finished almost flat and underperformed its benchmark by -103bps.
Growth Portfolio (USD)
The Growth portfolio had a positive absolute performance of +64bps, mainly due to the equity allocation contribution (+82bps).
However, in relative terms it underperformed by -49bps in November. Active management was the main detractor (-23bps), in spite of a positive alpha contribution of + 53bps from few managers in the equity strategies.
Underweight in the US equity market also hurt slightly, while the fixed income bucket had no significant impact, as the Growth portfolio has little to no exposure to alternative fixed income funds.
US Dollar Portfolios
US Dollar - Yield and Income
Cumulative Performance to end November 2018
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2018 | 2.88% | -1.91% | -0.66% | 0.76% | -0.63% | -0.50% | 1.50% | -0.20% | 0.71% | -3.54% | -0.22% | -1.93% | |
| Benchmark | 1.42% | -1.55% | -0.21% | 0.07% | 0.26% | -0.04% | 1.00% | 0.42% | -0.12% | -2.63% | 0.80% | -0.65% | ||
| Portfolio | 2017 | 2.15% | 1.58% | 0.72% | 1.01% | 1.27% | 0.19% | 1.55% | 0.03% | 0.58% | 1.05% | 0.61% | 1.07% | 12.45% |
| Benchmark | 0.68% | 1.49% | 0.35% | 0.95% | 1.10% | -0.06% | 1.13% | 0.71% | 0.32% | 0.95% | 0.73% | 0.63% | 9.36% | |
| Portfolio | 2016 | 1.16% | 2.25% | 1.04% | 0.86% | -0.43% | -1.25% | 1.25% | 4.93% | |||||
| Benchmark | 1.04% | 1.81% | 0.06% | 0.17% | -1.23% | -0.86% | 0.84% | 1.81% |
Benchmark: 1/3 iShares MSCI All Country World ETF+ 2/3 X II Barclays Gbl Agg ETF
Source: WS Partners, Morningstar
US Dollar - Balanced
Cumulative Performance to end November 2018
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2018 | 2.75% | -1.59% | -0.42% | 0.82% | -0.97% | -0.54% | 1.49% | -0.32% | 0.78% | -3.58% | -0.07% | -1.77% | |
| Benchmark | 2.47% | -2.21% | -0.73% | 0.31% | 0.22% | -0.15% | 1.50% | 0.48% | 0.02% | -3.84% | 0.96% | -1.11% | ||
| Portfolio | 2017 | 1.85% | 1.21% | 0.74% | 0.84% | 0.87% | 0.64% | 1.73% | 0.04% | 1.19% | 1.03% | 0.93% | 0.66% | 12.35% |
| Benchmark | 1.19% | 1.82% | 0.56% | 1.10% | 1.37% | 0.07% | 1.54% | 0.63% | 0.72% | 1.23% | 1.02% | 0.88% | 12.82% | |
| Portfolio | 2016 | 0.01% | 2.83% | 0.94% | 0.65% | -0.55% | 0.36% | 1.59% | 5.93% | |||||
| Benchmark | 0.62% | 2.43% | 0.12% | 0.28% | -1.35% | -0.46% | 1.17% | 2.81% |
Benchmark: 1/2 iShares MSCI All Country World ETF+ 1/2 X II Barclays Gbl Agg ETF
Source: WS Partners, Morningstar
US Dollar - Growth
Cumulative Performance to end November 2018
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2018 | 3.65% | -2.87% | -1.07% | 0.82% | -0.44% | -1.19% | 1.66% | 0.54% | 0.00% | -6.66% | 0.64% | -5.15% | |
| Benchmark | 3.53% | -2.87% | -1.24% | 0.54% | 0.17% | -0.26% | 2.00% | 0.55% | 0.16% | -5.05% | 1.13% | -1.60% | ||
| Portfolio | 2017 | 2.83% | 1.52% | 1.28% | 1.65% | 1.88% | 0.46% | 2.48% | -0.28% | 1.77% | 1.50% | 1.22% | 1.64% | 19.45% |
| Benchmark | 1.70% | 2.14% | 0.78% | 1.25% | 1.65% | 0.19% | 1.95% | 0.54% | 1.12% | 1.51% | 1.32% | 1.12% | 16.37% | |
| Portfolio | 2016 | -1.01% | 4.18% | 1.46% | 1.17% | -1.04% | 0.28% | 1.33% | 6.44% | |||||
| Benchmark | 0.21% | 3.05% | 0.19% | 0.39% | -1.47% | -0.06% | 1.50% | 3.80% |
Benchmark: 2/3 iShares MSCI All Country World ETF+ 1/3 X II Barclays Gbl Agg ETF
Source: WS Partners, Morningstar
Euro Portfolios
Euro - Yield and Income
Cumulative Performance to end November 2018
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2018 | 1.46% | -1.36% | -1.10% | 1.26% | 0.42% | -0.66% | 1.26% | -0.03% | 0.64% | -2.96% | -0.39% | -1.54% | |
| Benchmark | 0.04% | -0.99% | -0.65% | 0.53% | 1.28% | -0.21% | 0.78% | 0.45% | -0.21% | -2.02% | 0.66% | -0.40% | ||
| Portfolio | 2017 | 1.24% | 2.08% | 0.35% | 0.20% | 0.10% | -0.38% | 0.23% | -0.41% | 0.61% | 1.46% | -0.20% | 0.56% | 5.97% |
| Benchmark | -0.24% | 2.01% | 0.03% | 0.26% | -0.09% | -0.64% | -0.11% | 0.31% | 0.41% | 1.35% | -0.17% | 0.26% | 3.39% | |
| Portfolio | 2016 | 1.12% | 2.05% | 1.00% | 0.53% | 0.20% | -0.23% | 1.34% | 6.16% | |||||
| Benchmark | 1.03% | 1.51% | 0.11% | -0.22% | -0.52% | 0.14% | 0.92% | 3.00% |
Benchmark: 1/3 iShares MSCI All Country World ETF (EUR) + 2/3 X II Barclays Gbl Agg ETF H EUR
Source: WS Partners, Morningstar
Euro - Balanced
Cumulative Performance to end November 2018
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2018 | 1.08% | -0.82% | -0.93% | 1.60% | 0.42% | -0.67% | 1.30% | -0.19% | 0.71% | -2.76% | -0.21% | -0.53% | |
| Benchmark | 0.48% | -1.28% | -1.26% | 1.10% | 1.86% | -0.28% | 1.28% | 0.65% | -0.01% | -2.80% | 0.88% | 0.52% | ||
| Portfolio | 2017 | 0.67% | 1.98% | 0.39% | -0.11% | -0.71% | -0.09% | 0.02% | -0.47% | 1.34% | 1.57% | -0.12% | 0.19% | 4.72% |
| Benchmark | -0.12% | 2.65% | 0.16% | 0.13% | -0.33% | -0.72% | -0.22% | 0.12% | 0.93% | 1.91% | -0.23% | 0.41% | 4.72% | |
| Portfolio | 2016 | 0.25% | 2.48% | 1.02% | 0.24% | 0.35% | 1.68% | 1.74% | 8.00% | |||||
| Benchmark | 0.67% | 2.03% | 0.27% | -0.24% | -0.20% | 1.13% | 1.38% | 5.13% |
Benchmark: 1/2 iShares MSCI All Country World ETF (EUR) + 1/2 X II Barclays Gbl Agg ETF H EUR
Source: WS Partners, Morningstar
Euro - Growth
Cumulative Performance to end November 2018
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2018 | 1.10% | -1.62% | -1.70% | 1.97% | 1.78% | -1.28% | 1.39% | 0.87% | 0.07% | -5.27% | 0.55% | -2.36% | |
| Benchmark | 0.93% | -1.56% | -1.86% | 1.67% | 2.43% | -0.35% | 1.78% | 0.85% | 0.20% | -3.58% | 1.10% | 1.43% | ||
| Portfolio | 2017 | 1.24% | 2.58% | 0.76% | 0.29% | -0.22% | -0.54% | 0.21% | -0.93% | 2.03% | 2.43% | -0.28% | 0.98% | 8.82% |
| Benchmark | 0.00% | 3.28% | 0.29% | 0.00% | -0.56% | -0.81% | -0.34% | -0.08% | 1.45% | 2.46% | -0.29% | 0.57% | 6.05% | |
| Portfolio | 2016 | -0.95% | 3.88% | 1.55% | 0.66% | 0.46% | 2.35% | 1.69% | 9.98% | |||||
| Benchmark | 0.31% | 2.56% | 0.42% | -0.26% | 0.12% | 2.13% | 1.83% | 7.28% |
Benchmark: 2/3 iShares MSCI All Country World ETF (EUR) + 1/3 X II Barclays Gbl Agg ETF H EUR
Source: WS Partners, Morningstar