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 December 2018*. Performance figures are in the menu image above.
Luke Ng, FE Advisory Asia
How did the market perform in December?
Luke Ng: Ongoing concerns over global trade and slowing economic growth meant December proved another difficult month for equity investors. The US market was one of the hardest hit as a combination of the Fed raising rates, ongoing fears over the China trade dispute and warnings from several tech firms (notably Apple) on their earnings sent markets tumbling. The only areas that really held up were defensive sectors such as utilities, reflecting a difficult environment for riskier assets.
In Europe, we saw warnings of lower demand from car manufacturers, whilst data showed that business activity was at its lowest level in four years. Political unrest continues in France, although there was some good news as the long running budget dispute between Europe and Rome on Italy’s budget was finally resolved. In the UK, domestic-focused sectors suffered as the threat of a “no deal Brexit” grows. Emerging markets significantly outperformed developed markets during December, but still ended the month sitting on a loss.
Fixed income generally benefited during this risk-off environment, with treasuries and high quality bonds registering positive returns. These assets performed better than the higher-yielding instruments as the latter marginally fell in the month.
How did the balanced portfolio perform?
Luke Ng: The FE balanced portfolio fell 2.79% in December in US dollar terms. We rebalanced our portfolio at the end of November, and the key moves were to reduce our exposure to developed market equities, particularly from the US, and re-invested them into emerging market assets due to more attractive valuations.
The changes certainly helped in the month as developed market equities led the correction following a stronger run earlier in 2018. Adding Schroder Asian Asset Income into the portfolio last month further enhanced our downside protection as it increased our exposure towards defensive sectors among our equities portion. Our strategies investing into fixed income performed broadly in-line with the markets, all posting positive returns in the month.
FE Advisory Asia portfolio performance
| Jan 2018 | Feb 2018 | Mar 2018 | Apr 2018 | May 2018 | June 2018 | YTD* | |
| Cautious | 1.43% | -1.58% | -0.14% | 0.06% | 0.39% | -0.52% | 0.39% |
| Balanced | 3.64% | -2.68% | -0.18% | 0.44% | 1.22% | -0.96% | 0.75% |
| Growth | 5.19% | -3.60% | -1.17% | 0.63% | 1.75% | -1.22% | 1.36% |
| July 2018 | Aug 2018 | Sept 2018 | Oct 2018 | Nov 2018 | Dec 2018 | 2018 | |
| Cautious | 0.65% | -0.17% | -0.43% | -2.47% | 1.15% | -0.92 | -2.21% |
| Balanced | 1.99% | 1.12% | -0.59% | -6.67% | 1.40% | -2.79 | -5.69% |
| Growth | 2.90% | 0.29% | -0.60% | -8.78% | 2.46% | -4.95 | -8.86% |
