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- February 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.
Luke Ng, senior VP of research
How did the market perform in February?
Luke Ng: February proved to be a positive month for investors, with all major markets exhibiting a strong return. The US once again led the way with markets hitting record highs. Economic data helped drive returns. Strong employment figures and PMI numbers provided the good news, along with the promise of a “phenomenal tax plan” from US President Trump, which was heavy on emphasis but light on any actual detail. Banking and pharmaceuticals were the leading sectors as the president promised to remove many of the regulatory restrictions on both industries.
Europe, meanwhile, saw similar but less impressive growth. All sectors were up with the exception of financials. There was positive news in the UK for a change, with the Bank of England revising upward growth forecasts for this year and the Office for National Statistics confirming the economy was expanding faster the expected. All of which helped the markets to outperform mainland Europe.
The Japanese market mildly increased in the month. Growth was largely attributable to the Japanese yen appreciation against the US dollar. Emerging markets once again outperformed their developed counterparts, excluding the US.
Aside from equities, investors also saw a mild uptick in fixed income, with high yield bonds generally performing better than investment grade and government bonds.
How did the growth portfolio perform?
Luke Ng: Thanks to the strong run in emerging markets, our holding in Aberdeen Global Latin American Equity, which was the top performing fund in the growth portfolio in January, continued to perform well in February. The top performer in our growth portfolio over the month was the Invesco Korean Equity Fund, which gained over 7% and significantly outperformed the respective market. Fund manager Simon Jeong has a solid long-term track record, with a preference of sticking to companies that can demonstrate sustainable and predictable growth. The fund did suffer during the rally by cyclicals in 2016. But with strong performance by the portfolio’s consumer and health care companies, we have seen this fund claw back some of the lost performance.
Aside from equities, our fixed income exposure, which is primarily through the Fidelity US Dollar Bond Fund, performed broadly in-line with the market. Overall, our growth portfolio gained 2% in February, and 4.62% year-to-date in US dollar terms.
In February, FE Advisory's cautious portfolio was up 1.28% month-to-month and 2.07% year-to-end-February, 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.