Each month we feature the allocation in one of the three portfolios offered by FE Advisory Asia: cautious, balanced and growth. Data is included to show how well the portfolio has done compared to the previous month and year-to-date so that readers can get a sense of performance.
Additionally, Luke Ng, senior VP of research at FE Advisory Asia, provides a concise analysis on macro events and their potential impact on the portfolio.
A breakdown of the cautious portfolio at the end of June 2017. Performance figures are in the menu image above.
Source: FE Advisory Asia
Portfolio breakdown and holdings are based on latest published data for each constituent, which may have publication dates that differ.
Percentages are based on current holdings and should only be used as a guide. Some information is provided to FE from independent third parties whom FE does not control. FE cannot guarantee the accuracy or reliability of the data, or its suitability for use by all investors.
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How did the market perform in June?
Both emerging and developed markets made slight gains, with the former continuing to outperform the latter. However, we did see performance diverge between the regions. In developed markets, Japanese equities led the gains amid surveys showing increasing levels of confidence among Japanese corporates and a shortage of capacity in the economy, which is a marked reversal on the excess capacity which has plague the Japanese economy over the past 20 years. On the other hand, European equities retreated after remarks by the ECB President were interpreted to mean economic stimulus could soon be withdrawn. Previously reduced political risk and a positive economic backdrop had help lift European markets.
Emerging Asia was the best performing region among emerging markets. Taiwanese equities led the gains in the month thanks to the strong performance by the IT sector. Chinese equities also performed well as larger caps were boosted following the decision by MSCI to include China A-shares in their global equity indices. Elsewhere in emerging Europe and Latin America, markets generally traded flat in June. They were dragged by the poor performance of Russia and Brazil respectively. The former was hit by weakening oil prices and the latter faced new turmoil as President Temer was accused of corruption.
Fixed income generally traded sideway in June, with higher yield assets outperforming treasuries. The latter was hit in the last week of the month on the back of the hawkish tone from major central banks.
How did the cautious portfolio perform?
With stronger global growth and reduced political uncertainty, we took the decision to dial up our risk budget toward the upper end of our target range when we rebalanced our portfolio at the end of May. This has been done by trimming our fixed income exposure, and initiating a new position with First State Asia Opportunities. The move has proven positive in the month as riskier assets continued to outperform. The top performing fund in the cautious portfolio was the Matthews Asia China Dividend Fund, which rose 3.22% in the month. The fund outperformed the MSCI China and most of its peers if A-shares equity funds were excluded. On the other side, performance by our Japanese equity holding lagged behind its respective market. The fund holds a strong focus in growth stocks, whereas gains by the market were primarily driven by cyclical and value-oriented stocks.
In our fixed income sleeve, our holdings generally performed in-line with the Bloomberg Barclays Global Aggregate except the Templeton Global Total Return. This fund, as we have mentioned in our previous portfolio reviews, which has a strong focus on emerging market instruments and low duration, continues to outperform and rose 0.69%. Overall, our growth portfolio gained 0.44% in US dollar terms in June, marginally outperforming the MSCI World and Bloomberg Barclays Global Aggregate. The two indices grew 0.42% and -0.09% respectively.
FE Advisory Asia 2017 portfolio results
| Jan | Feb | Mar | Apr | May | June | YTD | |
| Cautious | 0.78% | 1.28% | 0.77% | 0.71% | 1.05% | 0.44% | 5.15% |
| Balanced | 2.03% | 0.78% | 0.19% | 1.23% | 1.85% | 0.44% | 6.69% |
| Growth | 2.57% | 2.00% | 0.53% | 1.19% | 2.81% | 0.17% | 9.61% |
Source: FE Advisory Asia. Growth rates in US dollar terms. YTD to end-June 2017.
FE Advisory Asia has designed the portfolios to target specific risk levels of cautious, with a target annualised portfolio volatility of 4%, balanced (7%) and growth (10%). They are rebalanced twice per year, typically in May and December.
The portfolios are managed using a proprietary optimisation system with strategic asset allocation insights from AKG to complement the shorter-term tactical asset allocation decisions made by FE’s research team.
The portfolios typically comprise eight funds chosen from the FE Advisory top 100 list of funds spanning all asset classes and sectors from the Hong Kong SFC-authorised fund universe.
