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FE Advisory Asia Portfolio review – August 2019

The three portfolios were down for the month, but fixed income products from Pimco and Fidelity limited the decrease.

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 impact on the portfolio.

A breakdown of the balanced portfolio at the end of August 2019*. Performance figures are in the menu image above.

Luke Ng, FE Advisory Asia

How did the market perform in August?

August saw equity markets fall across the board with no market immune to the decline. Safe havens such as government bonds and gold rallied. Concerns around an escalating global trade war, with President Trump introducing new tariffs on $300bn of Chinese goods — although many of these were delayed until December — and fears around global growth were the driving factors.

In the US there were fears that we may be entering a recession with the inversion of the yield curve, which more often than not has preceded a recession. There had been hopes that the Fed would aggressively cut rates in order to stimulate growth. But following July’s cut, it seemed at the time there was little appetite from the Fed for further action, adding to market anxieties in August. Market data does show that the US economy is growing at a slower rate, but so far recession worries seem overblown.

Germany’s latest numbers suggest that the manufacturing sector is contracting fast, raising real concerns regarding a recession. UK markets fell further, with increasing concerns that we may be heading towards a hard Brexit.

Finally emerging markets underperformed their developed counterparts, weighed down by the strengthening of the US dollar and concerns around an escalating trade war.

How did the balanced portfolio perform?

The FE balanced portfolio fell 0.80% in August in US dollar terms. While weakening risk appetite drove capital to safety assets, our core holdings in the fixed income sleeve, which account for about a quarter of the portfolio, benefited. These exposures are mainly acquired through Fidelity and Pimco, which have a prime focus on investment grade global bonds with medium- to long-end duration. Our equity exposure inevitably fell alongside the broad markets. However, we are glad to see that our strategy selections among various regions were doing well, including emerging markets, Japan and Europe. The three regional strategies outperformed their respective markets in the month. On the other hand, after a strong run earlier in the year the US equity exposure in the portfolio, which is acquired through a Legg Mason product, was hit hard during the correction.

FE Advisory Asia portfolio performance 

Jan 2019 Feb 2019 Mar 2019 Apr 2019 May 2019 June 2019 YTD*
Cautious  3.25% 1.19% 1.00% 1.23% -1.54% 2.77%   8.18%
Balanced 5.51% 1.42% 1.30% 1.81% -1.94% 4.17% 12.83%
Growth  7.36% 2.27% 1.75% 2.74% -3.95% 5.20%  16.05%
July 2019 Aug 2019 Sept 2019 Oct 2019 Nov 2019 Dec 2019 YTD**
Cautious 0.79% -1.20%   7.72%
Balanced 0.24% -0.80% 12.20%
Growth  0.30% -2.70%  13.25%
Source: FE Advisory Asia. Growth rates in US dollar terms. *To 30 June 2019. **Data as of 31 August 2019.

Full-year 2018 performance for the FE Advisory portfolios can be viewed here.

*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.
FE Advisory Asia has designed the portfolios to target specific risk levels: 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.

Part of the Mark Allen Group.