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 Growth Portfolio as of end- January 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.
How did the market perform in January?
Luke Ng: The US started the month by hitting an all-time high, with the Dow Jones surpassing the 20,000 mark as investors were optimistic over future tax cuts and higher infrastructure spending. After President Trump’s inauguration, markets fell back on concerns over his more controversial campaign pledges causing the dollar to weaken. Europe proved a mixed bag with Germany and Spain both performing well while the French and Italian markets retreated. In Japan, the market traded sideways over the period.
The big winners for the month were those invested in emerging markets, which comfortably outperformed their developed counterparts. This is mainly attributed to a weakening dollar rather than any particular change in fundamentals. Brazil proved the top performer, posting double-digit returns in US dollar terms. For fixed income, the asset class further stabilised, with the Barclays Global Aggregate benchmark rising over 1% for the month.
How did the growth portfolio perform?
Luke Ng: Since our rebalancing at the beginning of December 2016, our growth portfolio is currently positioned with approximately 20% fixed income and 18% mixed asset, with the remainder invested into equities spread across different regions and sectors. The growth portfolio gained 2.57% over the month with all our underlying funds posting a positive return. Thanks to the strong performance by Brazil, our holding in the Aberdeen Global Latin American Equity Fund turned out to be the top performer. In addition, our bias toward Asia-Pacific equities also contributed a meaningful return.
Despite the stronger performance in equities and a weakening USD, our holding in fixed income – the Fidelity US Dollar Bond Fund -- rose marginally in January. Overall, we continue to see our holdings well-diversified across asset class, region and sector, all with low correlations to each other. This diversification we consider is key for helping investors capture the growth opportunities while also being protected when market volatility arises.
Last month, FSA featured FE Advisory's cautious portfolio. In January, the cautious portfolio was up 0.78% month-to-month to end-January, in US dollar terms, Ng said.
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.