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 detailed breakdown of the cautious portfolio as of end December 2016. 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 the market has performed in December?
Luke Ng: US equities extended gains in December driven by heightened expectations the Trump administration will pursue an expansive fiscal policy and away from monetary stimulus. This helped lift inflation expectations and temporarily help divert any potential negatives directed at the incoming administration. Alongside US equities, the European counterparts also recorded strong gains for the month. Overall, developed market equities were generally supported by a banking sector-led rally as a steepening yield curve gave renewed optimism on the profit outlook for the sector.
In emerging markets, Russian equities proved the top performer in USD terms, mainly thanks to a stabilising rouble and the recovery of oil prices. On the other hand, Chinese equities lagged due to a tightening in liquidity and stricter policies to stem the capital outflows that have been driving the RMB lower. In fixed income, the asset class saw a reprieve from the sell-off we saw in November, with the Barclays Global Aggregate trading only marginally negative for the month.
How has the cautious portfolio performed?
Luke Ng: We are glad to see our holding in the Templeton Global Total Return in our cautious portfolio – as highlighted in last month’s commentary, was the top performer across our holdings. Thanks to a low duration stance and close to zero exposure in key developed economies, the fund gained around 3.5% for the month. Our portfolio also benefited from our call to increase US exposure by taking a position in a US-focused mixed asset fund during the last rebalance of the portfolio.
Our new holding in Matthews Asia China Dividend, which we used to replace a growth-focused Chinese equity fund, did however lag performance slightly. Still, we believe this switch should provide better downside protection as already proven during the correction in Chinese equities in the month when the MSCI China fell around 4% in US dollar terms. Overall, the cautious portfolio rose 0.21% for the month of December to help us end 2016 up 2.86%.
____________________________________________
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.
