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 – 3rd Quarter 2019

After a difficult summer for risk assets, investors returned from their holidays in a bullish mood and drove equities higher in September, leaving global equities broadly flat for the period. The quarter was marked by a continued slowdown in the global economic data, offset by further monetary easing from the US and Europe.

In the US, the Federal Reserve cut interest rates in July and September in an attempt to prolong the economic expansion in the face of a slowdown in the pace of growth and hiring. While the economy continued to add jobs, the pace of growth of aggregate hours worked in the economy has slowed meaningfully. Consumer confidence also declined from elevated levels. US equities delivered 1.7% over the quarter in USD.

In Europe, the ECB’s policy easing came against a backdrop of weakening growth, with the business surveys for September painting a picture of an economy that continues to slow, particularly in the manufacturing sector. With growth pushing in one direction and monetary stimulus pushing in the other, European equities delivered +2.5% return over the quarter.

Trade war also continued to play a prominent role in financial headlines throughout the quarter. As things currently stand, further tariffs are due to come into place by the end of the year unless renewed talks between the US and China make sufficient progress. As a result, EM equities declined by -1.9% over the quarter.

Helped by central bank easing and rising concerns about the global growth outlook, it was another good quarter for government bonds, albeit with a temporary sell-off in early September. US Treasuries delivered over 2% in the third quarter. Global IG credit delivered +1.2%, while US high yield returned +1.3% and Euro high yield returned +0.9%.

Market Review October 2019

Financial markets welcomed signs of an easing in geopolitical tensions in October, with risk assets generally outperforming traditional safe havens. The US and Chinese authorities moved closer to agreeing a partial deal on trade, while the UK once again edged back from the precipice of a no-deal Brexit. Global central banks reiterated their dovish stances and the US Federal Reserve cut interest rates for the third time this year.

October was a good month for equity markets, with emerging markets returning 4.2% compared to 2.6% from developed markets. The S&P 500 gained a further 2.2% and made new all-time highs at the end of the month. In fixed income, credit markets outperformed government bonds, with global investment grade returning 1.2%, while global government bonds gained 0.5%.

The US earnings season for the third quarter of the year is well underway, with companies so far doing better than expected. Earnings per share and sales are growing at 1% and 4% year on year (y/y), respectively on the S&P 500. However, US companies continue to give lower guidance for next year’s earnings, with the trade dispute an ongoing theme.

Outlook

We made some changes in the portfolios at the beginning of the quarter

On the equity side:

• We removed our exposure to MLPs infrastructure following the strong market upswing since the beginning of the year. While the yields remain a valid case for the asset class, it is also adding volatility in the current uncertain environment. We see more defensive characteristics in Healthcare sectors, which has been a constant underperformer for the last 3 years, particularly in the US. The sector seems to offer the most attractive value opportunities among the non-cyclical industries.
• We have added a small exposure on an equity defensive strategy and reduced a high-beta value fund.

On the absolute return side:

• We removed a disappointing long/short equity strategy on the Balanced Portfolio, and we added a Merger Arbitrage fund. Among the Hedge Fund strategies, we see the merger arbitrage with one of the most replicable and predictable characteristics, along with the least correlation to equities and rates.

The shorter duration exposure was the main detractor of performance. Subsequently, emerging markets holdings were also lagging factors. Although momentarily painful, we think our fixed income positioning in alternative strategies such as RMBS, CLOs, or Absolute Returns continue to make sense in this environment. The Euro Barclays Aggregate Index is now negatively yielding (-0.12% for 7.6 years Duration) and the US Global Aggregate (1.2% for 7.2 years of Duration). At such extreme valuations, it seems difficult to expect positive returns in traditional sovereign or corporates investment grade in the developed markets over the coming quarters.

We made no changes in the portfolio models during the month of October. On the equity side we are style-neutral and prompt to come back to growth equities should the value-style continue to outperform.

We have a slight overweight exposure in EM debt and in the healthcare industry.

On the fixed income side, we remain underexposed to duration with a strong exposure to fixed income alternative strategies. We are considering adding on the cat bonds strategies. Following two disappointing years, the premium looks compelling again and offers a good compensation for the underlying risks.

In September the MSCI ACWI (USD) was up +2.1% during the month while the Barclays Global Aggregate index (USD hedged) was down -0.5%.

Active management had a negative contribution in September. Over the 25 funds we have in the portfolios, 16 were outperforming their respective benchmark.

In absolute terms, the Balanced portfolio (+1.2%) outperformed the Yield and Income portfolio (+1.0%) and the Growth portfolio (+1.0%).

The MSCI ACWI (USD) was up +2.8% during the month of October, while the Barclays Global Aggregate index (USD hedged) was down 0.2%.

Active management had a negative contribution for the month. Over the 25 funds we have in the portfolios, 17 were outperforming their respective benchmark.

In absolute, the Growth portfolio (+2.3%) outperformed the Balanced portfolio (+1.9%) and the Yield and Income portfolio (+1.7%).

Yield & Income Portfolio (USD)

In September the portfolio outperformed its benchmark by +57bps.

Our alternative fixed income strategies such as Supply Chain, and CLOs did well during the month and stayed unaffected by the rise of the interest rates.

The overweight in EM debt was also a positive contributor. Active management contributed positively by +42bps.

The portfolio outperformed its benchmark by +90bps in October.

While the interest rates were globally up during the month, the portfolio took profit from the short duration and from uncorrelated fixed income strategies.

Active management contributed positively by +51bps.

Balanced Portfolio (USD)

In September the portfolio outperformed its benchmark by +43bps.

The short average duration of the portfolio, as well as the strong performance of the Total Return strategies were the main positive factors.

This was partially offset by the relative negative contribution of equity managers. Overall, active management contributed by +39bps.

The portfolio outperformed its benchmark by +66bps in October.

Again, the total return funds were positive contributors, in particular the macro strategy as well as the merger arbitrage.

In addition, active management contributed by +39bps.

Growth Portfolio (USD)

In September the portfolio had a performance of +1.0% vs +1.2% for its benchmark.

Equity managers as well as our overweight exposure in the healthcare sector had a negative contribution.

Overall, active management was detractor by -39bps during the month.

The portfolio had a performance of +2.3% vs +1.8% for its benchmark in October.

Contrary to the previous month, the healthcare fund helped (+5.5%) as well as the value-biased strategies.

The active management was a positive contributor (+19bps) during the month.