Modelportfolio March 2014

Our allocation was changed in the modelportfolio in March. The modelportfolio generated a negative return of 0.48 per cent in March versus a slightly positive return of 0.20 per cent for the benchmark, a relative performance of minus 0.68 per cent as such.

Our modelportfolio has generated a negative return of some 0.10 per cent for the first quarter of this year versus 0.79 per cent for the benchmark. As such, the benchmark has generated some 0.89 per cent better returns than of the modelportfolio.

The negative deviation stems from a very weak performance from the selected East Capital Russia fund which was a part of our equity selection until mid-March. This fund has experienced a major negative return this year, influenced by a very bearish Russian equity market so far this year. By the date of removal, the fund had generated a negative return of some 32 per cent since the start of this year. Even though the East capital Russia fund was weighting a marginal 3.5 per cent in our modelportfolio, the negative impact has been some 1 per cent-point on our model portfolio performance this year. This explains more than our negative deviation versus the benchmark as such.  

In our mid-March update we communicated and argued for some changes made to our modelportfolio in addition to scrapping of the Russian fund. Our modelportfolio has consisted of the following recommendations and weightings since March 13:

InvestmentsPortfolio
Equities  

J O Hambro’ European Select Values Fund

10,0%
Fidelity Asian Special Situations 10,0%
SEB Nordic Focus 10,0%

TreeTop Global Opportunities

10,0%
Sum Equities 40,0%
   
Fixed Income  
Norwegian High Yield Bonds 25,0%
BlueBay Emerging Market Bond Fund 10,0%
Bluebay High Yield Fund 10,0%
Muzinich Short Duration High Yield 10,0%
Bluebay Investment Grade Fund 5,0%
Sum Fixed Income 60,0%

 

Performance200820092010201120122013YTD
SEB Modelportfolio -6,73%  26,55% 6,45% 0,17% 12,00% 13,01%  -0,10%
Benchmark -12,77% 11,92% 6,01% -1,06%  8,23% 15,27% 0,79%
Outperformance 6,04% 14,63% 0,44% 1,23% 3,77% -2,26% -0,89%
MSCI World -30,06% 26,51% 10,57% -4,96% 16,42% 29,57% 1,15%

Overall, we are still somewhat cautious in regard of global equity markets and we still put a lot of attention on inflation and fiscal stimulation issues, well aware of that at one stage these two factors might be the catalysts for an equity markets brutal downturn. This is the main reason for our 60 per cent fixed income and 40 per cent equity allocation in our modelportfolio. With that said, we do not expect any massive (20 per cent+) collapse in equity markets in the imminent future. However, we still want to raise a “red flag”:  a world economy without monetary stimuli combined with inflation above a certain level is a very unattractive cocktail for equity markets.