Each month we will feature allocation in one of the three portfolios offered by FE Advisory Asia: cautious, balanced and growth. Data will also be displayed 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, will provide a concise analysis on macro events and their potential impact on the portfolio.
A breakdown of the balanced portfolio at the end of April 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.
Luke Ng, senior VP of research
How did the market perform in April?
Luke Ng: Equity markets generally performed well in April, with emerging markets continuing to outpace developed markets, a trend that has now lasted for over a year. Among developed markets, the strongest area was European equities, with France in particularly showing strong growth. The Eurozone was boosted by poll results suggesting that Emmanuel Macron would win the French presidential election. US equities on the other hand advanced slightly in dollar terms over the month.
Emerging Europe equities also saw a strong rally after the first round of the French elections and ended up outperforming emerging peers from Asia and Latin America. Chinese equities also performed well as economic data remained resilient. Improving exports contributed to the 6.9% first quarter GDP growth year-on-year. Latin America underperformed, with equity markets trading sideways over the period.
For fixed income, the asset class also trended higher in the period, with the Bloomberg Barclays Global Aggregate up by 1.13%. The index includes debt securities denominated in multiple currencies, and thus a weaker US dollar proved a key positive contributor to the index return in April.
How did the balanced portfolio perform?
Luke Ng: Since the rebalancing of our portfolio composition at the end of November 2016, we have maintained a 57% exposure toward fixed income. This exposure has been acquired through several funds offering us a mixture of holdings in sovereign and corporates debt instruments mainly denominated in US dollar. Our fixed income sleeve performed well in April despite slightly underperforming the Bloomberg Barclays Global Aggregate amid the currency effect.
Among our equity sleeve, we are pleased to see that our holding in Schroder ISF Emerging Europe delivered a strong return, especially in the last week of the month as Emmanuel Macron looked to be the likely winner of the French presidency after the first-round election. The recent calls by Schroders to increase stock specific exposures in Poland also helped as Polish equities were boosted by upbeat earnings results. We also acquired equity exposures in the US, Japan and China via country specific funds that have served us well and have outperformed their respective peers in the period. For diversification purposes, our exposure to natural resources proved a slight drag on the performance as commodity prices lost ground over the month.
Overall, our balanced portfolio gained 1.23% in April, and 4.30% year-to-April in US dollar term.
FE Advisory Asia 2017 portfolio results
Source: FE Advisory Asia. Growth rates in US dollar terms.
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.