The volatility test

Added 21st January 2016

Funds that claim to mitigate volatility have been put to the test over the last six tumultuous months. Which ones have actually navigated well?

The volatility test

The wild global market swings that began around August 2014 have continued into January this year, sending the S&P in the last few days to its lowest level since October 2014.

Make no mistake, major indices were negative:


More than a few fund managers have made claims that their portfolio helps to mitigate market volatility. But the data from FE Advisory shows that most funds during this period were also negative.

Only 28 funds out of 2273 equity funds (1.2%) available for sale in Hong Kong and or Singapore were in positive territory over the trailing six months. That compares to the trailing 12-month period, when 12.7% of the total were in positive territory.

Of the 28 top performers, the top five performing equity funds (ex-exchange traded products) were:


UBS and Hang Seng

Extending the period to the trailing 12-months using the same criteria, only the HS China B-share and the UBS Equity Opportunity Long Short funds were also in the top five in terms of performance, with returns of 25.5% and 17.8%, respectively.

The Hang Seng vehicle invests in companies listed in mainalnd China that are traded in foreign currencies (B-shares). Sector allocations to industrials and consumer products together make up more than half (54%) of the fund.

The UBS product uses a long-short equity strategy seeking to exploit short-and mid-term stock price anomalies in companies mainly in Europe.

While the Hang Seng factsheet made no claims about a portfolio that navigates well through market volatility, it appears that the fund did just that.

The UBS fund did make the claim: “An investment strategy that aims to produce returns driven by stock selection while achieving some downside protection in declining equity markets.”

However, it seems to have done as promised, at least over the difficult last six-months.

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