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 growth portfolio at the end of October 2019*. Performance figures are in the menu image above.
Luke Ng, FE Advisory Asia
How did the market perform in October?
October was a very positive month for global equity markets as risk appetite returned. The US Federal Reserve cut interest rates for the third time this year, and this combined with improving negotiations in the US-China trade deal. US markets returned around 2% in US dollar terms. Trade negotiations still have a long way to go, meaning markets are likely to continue to remain highly sensitive. Among the developed regions, Japan was one of the best performing markets due to rising expectation that the central bank will cut rates further into negative territory — though that did not happen at the end of the month. Europe and the UK also fared better than US equities, and the strengthening of euro and sterling against the US dollar partly contributed to the gains. The sterling was particularly boosted by the receding risk of a no-deal Brexit, with the offering of a “flextension” by the EU until January and the calling of a general election.
Finally, emerging markets outperformed developed markets for the first time since January. Positive trade developments and a weakening of the US dollar translated into a risk-on environment, for this high-risk, high-reward asset class.
How did the growth portfolio perform?
The FE growth portfolio rose 3.04% in October in US dollar terms. After a strong run in September, our holding in BlackRock GF World Energy retreated, and it was the only holding of our portfolio that recorded a negative return in the month. Our equity exposures in Asia and emerging markets that invest via First State and JP Morgan did well and outperformed their respective benchmarks. They were the top two performing holdings of the portfolio in October. Among developed markets, our US equity exposure, which pursues a growth strategy, outperformed. However, exposure in Japan and Europe slightly underperformed the respective markets.
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% | 0.05% | 1.13% | 9.00% | ||
| Balanced | 0.24% | -0.80% | 0.37% | 1.81% | 14.66% | ||
| Growth | 0.30% | -2.70% | 1.05% | 3.04% | 17.91% |
Source: FE Advisory Asia. Growth rates in US dollar terms. *To 30 June 2019. **Data as of 31 October 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.
