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 Cautious portfolio at the end of October 2018*. Performance figures are in the menu image above.
Luke Ng, FE Advisory Asia
How did the market perform in October?
October proved a brutal month for equity investors as markets saw their biggest monthly decline in over six years, with all major markets posting losses of over 5%. The selloff began with the Fed raising rates as expected, before going on to indicate that we should expect faster and more frequent rate rises. This raised concerns that the US is moving into a late economic cycle and that the era of cheap money was coming to an end.
Despite this, not all was doom and gloom. News in the US was relatively good with strong corporate earnings season continuing and unemployment hitting its lowest level for fifty years.
Overall the month saw a global selloff across equity and bond markets. The selloff was even more pronounced in the emerging markets, led by the economies in Northeast Asia. While the export-oriented economies such as South Korea and Taiwan were dragged lower by a weakening global economic outlook, China was also plagued by fears of an economic slowdown and its ongoing trade tensions with the US, despite government support through share buybacks.
With very few safe havens out there for investors, the Brazilian market proved an exception and one which rallied on the back of presidential elections, the results of which were seen as market friendly.
How did the Cautious portfolio perform?
The FE cautious portfolio fell 2.47% in October in US dollar terms. Our equity exposure was inevitably hit during the brutal market correction. However, our holdings, especially in Asia, had a strong focus on quality and were less severely hit.
Core parts of our cautious portfolio are comprised of fixed income exposure, which were broadly diversified into multiple sub-asset classes. All of these holdings proved better off than the Bloomberg Barclays Global Aggregate, which was down 1.12%.
The best performing holding of the month was the Templeton Global Total Return Fund. It is a strategy that has strong exposure to emerging market debt, with active positions to long selective emerging market currencies and short euro and Japanese yen against the US dollar. Exposure to long Brazilian real and Argentina’s peso, as well as shorting the euro, were positions that made positive contributions to the fund in October.
FE Advisory Asia portfolio performance
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