Portfolios of Active Funds
Key Characteristics
- Portfolios made up of 14 to 17 Ucits or Alternative Ucits funds (according to profile).
- Two currency based portfolios ; in US dollar and in Euro.
- All funds have a daily liquidity, apart one with a bi-monthly liquidity.
- Usually we select the same funds for the USD or the EUR based portfolios with foreign currency exposure hedged for fixed income funds.
- 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.
Profiles
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.
Review and Outlook – 4th Quarter and Year 2019
Several factors helped drive global equities (+9%) and bond yields higher in the final quarter of the year. First of all, the US and eurozone manufacturing business surveys picked up slightly from September, although they remain weak. Second, the service sector business surveys in the US and Europe also picked up. Most importantly, despite headlines involving large job cuts at some companies in Europe, overall employment has held up well, and in the US over 200,000 jobs were added in November. The pickup in the service sectors, and the resilience of overall employment in spite of the weakness in manufacturing, has helped restore market confidence that a recession is not imminent.
The fourth quarter also saw two significant political risks avoided, at least for now. US tariffs on China were scheduled to increase on 15 December, but a phase-one trade deal avoided that outcome and provided a significant relief for equity markets. The fact that the US didn’t impose tariffs on European Union auto exports also helped support equities.
The large majority for the Conservative Party in the UK election in December meant that the UK could pass a European Union withdrawal bill, activating a transition period during which little will change, until the end of 2020.
For the whole year, Equity markets delivered fantastic returns in 2019. The MSCI World Index was up 28%, led by US equities (+31%), and European equities (+27%) while EM et Japan equities were lagging (+19% and +18% respectively). Despite this roaring return from equities, government bonds also delivered good returns. Remarkably, by the end of September, the 20+ year Treasury index was up 20%, while the MSCI World was up 18%. The flood of central bank liquidity had lifted all boats. Such strong returns for both traditional risk-off and risk-on assets, at the same time, is unusual.
Outlook
2019 has been a great year to be invested, almost irrespective of what you were exposed to. It is hard to think that 2020 would be so indiscriminate. As we start the year, we continue to think a broadly neutral and balanced exposure into equities make sense before moving into a more defensive stance in the middle of the year.
Last year rally in equities resulted mainly into expansion of multiples due to stagnating earnings growth. It means valuations are now pretty rich, rendering markets vulnerable to pressure on margins, mostly in the US with its tight labor market. In this environment, we believe it makes sense to maintain a sound diversification in equity across regions, sectors and styles with a defensive tilt. We will consider a barbell approach by maintaining a defensive exposure on one side, while on the other side we will look for cyclically exposed portfolios.
On the fixed income side, we can’t see opportunities to have a directional exposure in the developed markets, both on the rate or on the credit side. We will then favour nimble total return strategies which would be able to navigate into different sub-asset classes and to actively manage their duration risk. We still see some value in the Emerging Markets debt where the risk continues to be fairly compensated, particularly in the local currency area.
Finally, defensive and uncorrelated fixed income strategies, still make sense in this environment. We are considering to add some of them. The Cat Bond market for instance looks pretty attractive again, after two years of poor performance. The risk premium has been upwards adjusted, offering a running yield of 9.5% with an expected loss of 2.8%.
Performance Review
December 2019
The MSCI ACWI (USD) was up +3.6% during the month while the Barclays Global Aggregate index (USD hedged) was down -0.2%.
Active management had a positive contribution in December. Over the 25 funds we have in the portfolios, 15 were outperforming their respective benchmark.
In absolute, the Growth portfolio (+2.5%) outperformed the Yield & Income portfolio (+2.2%) and the Balanced portfolio (+2.0%).
Year 2019
The MSCI ACWI (USD) was up +26.3% during the year while the Barclays Global Aggregate index (USD hedged) was up +9.6%.
Active management had a mixed contribution in 2019. Over the 25 funds we have in the portfolios, 13 were outperforming their respective benchmark.
In absolute, the Yield & Income portfolio (+16.3%) outperformed the Growth portfolio (+16.0%) and the Balanced portfolio (+14.4%).
Yield & Income Portfolio (USD)
The portfolio outperformed its benchmark by +211bps in 2019. It came from the fixed income allocation, which performed by +13.0% vs +9.6% for the Barclays Global Aggregate. The Emerging Market overweight was a strong contributor, as well as the Subordinated Financial strategy, and the Convertible Bond fund. Fixed Income alternative strategies such as Loans, CLOs, RMBS or factoring had a moderate negative impact due to their lack of duration exposure.
Equities had a neutral contribution (+25.4 vs. +26.3 for the MSCI ACWI). Active managers struggled to add value in 2019 due to a market dominated again by the large cap growth companies. Our small allocation to small and mid cap US had a relative negative contribution as well as our modest overweight in the Emerging Markets. On the other hand, our large cap quality growth fund was the best relative contributor (+31.5%). Our allocation to the Healthcare sector we initiated in August had also a positive contribution for the last 5 months. Overall, active management contributed positively by 122bps for the full year.
Since inception (June 2016) the portfolio has done remarkably well, performing by 7.7% (annualized in USD) with 2/3 of its exposure in fixed income strategies
Balanced Portfolio (USD)
The portfolio underperformed its benchmark by -283bps in 2019. It came as no surprise that our total return pocket was the largest detractor of performance in a year when equity and fixed income rallied in conjunction. It costed the portfolio -275bps in relative value. For the fixed income and equities, the portfolio was affected by the same factors than the Yield & Income portfolio. Overall, active management contributed positively by +80bps.
Since inception the portfolio is doing well on a risk adjusted basis. It is matching the performance of its benchmark (7.6% annualized return in USD vs 7.5%) while maintaining a more defensive allocation with 1/3 in equities, 1/3 in fixed income and 1/3 in total return strategies, vs. 50% equities and 50% fixed income for the benchmark.
Growth Portfolio (USD)
The Growth portfolio underperformed by -162bps in 2019. Most of the underperformance came from equity funds (+22.5% vs. +26.3% for the MSCI ACWI). The Growth portfolio is more exposed than the others to small cap strategies, as well as to a value-oriented style at the beginning of the year. Those two active bets didn’t work in 2019. We reduced our value-style bias during the summer, returning to a neutral stance, while the market-cap bias is still in place. Overall active management has had a negative contribution of -98bps in 2019.
Since inception the portfolio is doing slightly better than its benchmark in absolute terms (+9.1% annualized return in USD vs. 8.9%). We remain confident, that equity manager will contribute positively going forward when the one-way large cap growth thematic will be challenged.
US Dollar Portfolios
US Dollar - Yield and Income
Cumulative Performance to end December 2020
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2019 | 4.59% | 1.67% | 0.63% | 1.97% | -2.39% | 2.89% | 0.90% | -1.11% | 0.95% | 1.69% | 1.37% | 2.17% | 16.25% |
| Benchmark | 3.39% | 0.96% | 1.58% | 1.16% | -1.02% | 3.11% | 0.61% | 0.71% | 0.37% | 0.79% | 0.72% | 1.01% | 14.14% | |
| Portfolio | 2018 | 2.88% | -1.91% | -0.66% | 0.76% | -0.63% | -0.50% | 1.50% | -0.20% | 0.71% | -3.54% | -0.22% | -2.48% | -4.36% |
| Benchmark | 1.42% | -1.55% | -0.21% | 0.07% | 0.26% | -0.04% | 1.00% | 0.42% | -0.12% | -2.63% | 0.80% | -1.48% | -2.12% | |
| 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 December 2020
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2019 | 4.01% | 1.50% | 0.36% | 1.64% | -2.64% | 2.63% | 0.92% | -1.37% | 1.24% | 1.94% | 1.43% | 1.99% | 14.35% |
| Benchmark | 4.50% | 1.38% | 1.48% | 1.71% | -2.24% | 3.97% | 0.54% | -0.06% | 0.80% | 1.28% | 1.15% | 1.63% | 17.18% | |
| Portfolio | 2018 | 2.75% | -1.59% | -0.42% | 0.82% | -0.97% | -0.54% | 1.49% | -0.32% | 0.78% | -3.58% | -0.07% | -2.11% | -3.84% |
| Benchmark | 2.47% | -2.21% | -0.73% | 0.31% | 0.22% | -0.15% | 1.50% | 0.48% | 0.02% | -3.84% | 0.96% | -2.88% | -3.96% | |
| 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 December 2020
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2019 | 6.20% | 2.06% | 0.72% | 2.40% | -4.34% | 4.41% | 0.61% | -2.00% | 0.95% | 2.30% | 2.02% | 2.51% | 15.97% |
| Benchmark | 5.61% | 1.81% | 1.38% | 2.27% | -3.47% | 4.83% | 0.46% | -0.83% | 1.23% | 1.77% | 1.57% | 2.25% | 17.59% | |
| Portfolio | 2018 | 3.65% | -2.87% | -1.07% | 0.82% | -0.44% | -1.19% | 1.66% | 0.54% | 0.00% | -6.66% | 0.64% | -4.12% | -9.06% |
| Benchmark | 3.53% | -2.87% | -1.24% | 0.54% | 0.17% | -0.26% | 2.00% | 0.55% | 0.16% | -5.05% | 1.13% | -4.28% | -5.81% | |
| 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 December 2020
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2019 | 4.15% | 1.82% | 1.00% | 1.86% | -2.37% | 1.85% | 1.52% | -0.82% | 1.13% | 0.67% | 1.75% | 1.25% | 14.54% |
| Benchmark | 3.06% | 1.06% | 1.89% | 1.05% | -1.02% | 2.15% | 1.22% | 0.92% | 0.56% | -0.15% | 1.00% | 0.23% | 12.58% | |
| Portfolio | 2018 | 1.46% | -1.36% | -1.10% | 1.26% | 0.42% | -0.66% | 1.26% | -0.03% | 0.64% | -2.96% | -0.39% | -2.99% | -4.49% |
| Benchmark | 0.04% | -0.99% | -0.65% | 0.53% | 1.28% | -0.21% | 0.78% | 0.45% | -0.21% | -2.02% | 0.66% | -1.98% | -2.37% | |
| 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 December 2020
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2019 | 3.70% | 1.71% | 0.86% | 1.56% | -2.56% | 1.43% | 1.56% | -1.09% | 1.43% | 0.91% | 1.80% | 1.08% | 12.98% |
| Benchmark | 4.15% | 1.66% | 2.07% | 1.69% | -2.11% | 2.68% | 1.56% | 0.37% | 1.20% | -0.01% | 1.66% | 0.59% | 16.49% | |
| Portfolio | 2018 | 1.08% | -0.82% | -0.93% | 1.60% | 0.42% | -0.67% | 1.30% | -0.19% | 0.71% | -2.76% | -0.21% | -2.66% | -3.17% |
| Benchmark | 0.48% | -1.28% | -1.26% | 1.10% | 1.86% | -0.28% | 1.28% | 0.65% | -0.01% | -2.80% | 0.88% | -3.48% | -2.97% | |
| 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 December 2020
Calendar Returns
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | YTD | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2019 | 5.86% | 2.49% | 1.58% | 2.40% | -4.08% | 2.86% | 1.94% | -1.50% | 1.46% | 0.72% | 2.68% | 1.14% | 18.65% |
| Benchmark | 5.24% | 2.25% | 2.25% | 2.32% | -3.20% | 3.21% | 1.90% | -0.19% | 1.84% | 0.12% | 2.32% | 0.94% | 20.48% | |
| Portfolio | 2018 | 1.10% | -1.62% | -1.70% | 1.97% | 1.78% | -1.28% | 1.39% | 0.87% | 0.07% | -5.27% | 0.55% | -4.81% | -7.06% |
| Benchmark | 0.93% | -1.56% | -1.86% | 1.67% | 2.43% | -0.35% | 1.78% | 0.85% | 0.20% | -3.58% | 1.10% | -4.97% | -3.61% | |
| 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