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).

• 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.

A booming US economy has driven US stocks and Treasury yields higher this quarter, leaving US equities some way ahead of the pack over the year as a whole.

In September, US consumer confidence hit its highest level since 2000, while the monthly average of initial jobless claims fell to the lowest level since 1969. Wage growth was robust, supporting retail sales growth of over 7% year on year. According to survey, small businesses were the most optimistic they’ve been since the survey began in 1974. On this strong backdrop, the S&P 500 index hit an all-time high, bringing this year’s performance to over 10%. Stronger-than-expected corporate earnings and a high volume of share buybacks have been driving the market higher. A rally in oil prices helped energy-related stocks to outperform the market. while in Europe, markets finished almost flat in average, but with wide divergence among countries.

Emerging market (EM) equities have been weak due to concerns in the pace of Chinese credit growth, fears over the consequences of a tighter US monetary policy and global trade tensions.

UK equities have been under pressure by fears of a no-deal Brexit. The inverse correlation between the pound and UK equities has broken down recently. Investors seems to doubt that a weak pound could benefit UK company’s stocks if in the context of a no-deal Brexit.

In Japan, employment is at extreme tightness with more jobs available per applicant than at any point since 1974. Banks continue to expand credit. A strong dollar against the yen has been supportive of Japanese equities over the quarter. Japanese stocks rose the most among the regions, adding more than 5 per cent and bringing the benchmark Nikkei average to a 27-year high.

In Europe, there has been a weakening in manufacturing export orders, mainly driven by a sharp slowdown in exports to China. This coupled with higher oil price could negatively impact domestic consumption in the region. Consumer confidence has fallen steadily since the start of the year, with a particularly sharp decline in France. Italian political developments and the approval of the new budget has been and could continue to be a source of volatility over the coming quarter, although Italian government bond yields have already risen materially since April.

Fixed income returns have been mixed, with high yield credit outperforming government bonds. Against a backdrop of very strong growth and rising inflation, US Treasuries had their worst month this year, with the 10-year yield briefly hitting a four-month high above 3 per cent. It is notable that fixed income returns haven’t been as bad as some might have predicted.

Year to date, EM debt has clearly underperformed, although it should be noted that the worst performing EM credits make up a small part of the index.

Outlook

No change in the portfolio during the month of September after the rebalancing we operated in the previous months, from a value bias to a more neutral stance in equity, and a slight rebalancing of the EM debt allocation, from hard to local currencies, in the Yield & Income portfolio.

In alternative strategies, we will take benefit of heigthen volatility and stresses in the markets to test and select fund managers with strategies able to navigate these environments with success.

Overall, we still favour a barbell approach in portfolio construction, by maintaining in one side fairly liquid assets with low price volatility, and on the other side, staying exposed to risky assets able to benefit from global growth opportunities in the equity as well as in the fixed income space.

The MSCI World Equity index (USD) had a return of +0.5% during the month while the Barclays Global Aggregate index (USD hedged) returned -0.38%.

In September, active management was mixed. Over the 26 funds we have in all Model Portfolios, 12 had a positive excess return. Active management remains challenging as it has been the case since the beginning of the year. Year to date, both the Yield and Income and the Balanced portfolios, continue to outperform their respective benchmarks.

In absolute terms, Balanced portfolio (+0.8%) gained slightly higher return than the Yield and Income portfolio (+0.7%) and the Growth portfolio (0.0%).