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 Cautious Portfolio at the end of March 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 March?
Luke Ng: March was another broadly positive month for equity investors, with the European markets delivering the strongest returns. Markets were boosted as the flash composite purchasing manager’s index hit a six-year high of 56.7, as well as receding political worries about the rise of populism following the Dutch elections, whilst the latest opinion poll data suggests Marine Le Pen’s chance of victory are declining. In the UK, the market secured a small positive return amid the triggering of Article 50, signaling that the start of the process to withdraw from the EU had little impact on markets.
The US traded flat for the month as concerns about President Trump’s ability to deliver on his campaign promises grow. The failure of the administration to pass healthcare legislation has led to doubts regarding plans to cut taxes and boost infrastructure. This all proved good news for emerging markets, which benefitted from US dollar weakness and an increasing belief that Trump would not be able to follow through on his protectionist policies.
While the Barclays Global Aggregate traded broadly sideways in March, we saw tightening in the yield spread amongst emerging market debt and credit as the US Fed raised its rates mid-month.
How did the cautious portfolio perform?
Luke Ng: With a stronger run for emerging market equities, our holding in the Matthews Asia China Dividend Fund posted strong returns. The fund was also one of the top performers among Chinese equity funds during the month, thanks to its stronger bias toward mid- and smaller caps. Among developed equities, we have missed the rally by European equities due to our limited exposure to the region. However, our selection of a Japanese equity fund performed well and ranked highly among sector peers.
In the fixed income sleeve of the portfolio, we are glad to see that the Templeton Global Total Return Bond Fund – which we had discussed in our previous reviews, continued to outperform with its focus on emerging market debt and lower duration position. The fund gained 2.51% over the period, ranking top among peers in the global bond fund sector. On the other hand, our various core holdings in global bond funds, which primarily invest into high quality bonds in developed markets, generally performed in-line with the market during the month.
Overall, our cautious portfolio gained 0.77% in March, and 2.83% for the first quarter of 2017 in US dollar terms.
2017 portfolio results
| Jan | Feb | Mar | Q1 | |
| Cautious | 0.78% | 1.28% | 0.77% | 2.83% |
| Growth | 2.57% | 2% | 0.53% | 5.10% |
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.
