Portfolio Reviews - Q2 2020
Our investment philosophy has always been anchored on a few key factors:
Factor & Beta Optimisation
Fortunately, as a result of these three areas of focus our portfolios have performed exceptionally well on a relative basis over the year. We were not overweight or underweight any one sector, nor were we trying to ride the wave of the last 18 months of equity performance momentum ending sometime in February 2020. What this means is that our portfolios went into the current environment at benchmark asset allocations. This allowed our diversification assets to act as successful counterweights to our risk assets (equity and property) and as a result, all our portfolios dropped significantly less than the equity market or property market segments. Our more defensive portfolios remain strongly positive in their performance year to date.
As our diversifiers outperformed into the teeth of the drawdown, we were able to rebalance our portfolios selling/trimming the relative outperforming assets and increasing our growth asset exposure that were now underweight relative to strategic weights. This meant that our portfolios were also able to participate fully in the markets’ rather unexpected upswing.
Many investors would have been experiencing the opposite going into the year overweight growth assets on the expectation that global growth and conditions remained supportive of growth assets. They would have experienced a far sharper downturn, also probably reducing exposures and adding risk-off assets at the most inopportune time -- near the bottom of the market.
As I look back over what has been a wild ride over the past 4 months, I have to say we are extremely happy with the performance of our funds and portfolios. We have outperformed most of the peers but probably most importantly been able to make portfolio decisions with a clear head as our processes and systems have always been set up for such environments.
It is still early in the year and there is likely to be a lot of volatility in the current environment. The only change in the current portfolio construction is a slight reduction in Global Bond/US Treasury duration, which we believe is prudent based on the current interest rate environment and Central Bank action. We still get the full benefit of the asset class diversification qualities but reduce the downside potential if inflation and interest rates begin to rise from current levels in future.
For more information on current unit trust and portfolio performance, please see our latest fund fact sheets. If you would like further information into the portfolio and fund performance, please feel free to get in touch.