At its meetings, the Investment Committee decided on the following changes to the asset allocation for medium-risk balanced Swiss Franc portfolios, not subject to client’s restrictions (mandates in different reference currencies at times display different nominal weightings and weighting changes).
Nothing has changed in this asset class. Liquidity is slightly overweight.
No active changes were made on the bond position either, maintaining its slight underweight. As a consequence of the lower economic dynamics, and the swinging back of almost all central banks to a course of cheap and easy money, government bond yields in Europe and Japan fell back into negative territory. According to Bloomberg, over 10 trillion US Dollars (a ten plus 12 zeros) are currently trading at negative yields, which is an environment we cannot fully escape from either.
Since the beginning of the year, yields on 10-year government bonds declined across the board:
Other funds employed by us developed as follows:
We remain unchanged neutral weight in Swiss stocks. The directly-invested “Swiss Stock Portfolio” (SSP) recovered well. Its performance, including dividends, amounts to 10.4%. The Swiss Performance Index (SPI) is in positive territory, at 14.4%. Since 2010, the average annual performance of the SSP, typically comprised of about 20 stocks, amounts to 10.3%, a result that clearly beats the average benchmark’s performance of 7.8%
Since 2010, the total cumulative return of this strategy amounts to about 148%, while that of the index to 99.8%. The SSP figures bear transaction costs, whereas the benchmark index does not bear any costs. The “Strategy Certificates linked to the SIM Swiss Stock Portfolio Basket” (Valor: 36524524, ISIN: CH0365245247) achieved a performance of exactly 10% during the first three months of the year.
For the second quarter, the annual rebalancing is on the agenda, whereby the Swiss market’s fundamentally most attractive stocks will remain in, respectively, be added to the portfolio, whilst the priciest stocks will be sold off. At the same time, the size of all components will be set back to equal weight. Direct investments, as well as the composition of the certificate, will be equally affected.
Measured on the price/earnings ratio using the latest 12 months profit figures, most equity markets have become more expensive:
European equities also moved ahead during the first quarter. The directly-invested “European Stock Portfolio” (ESP) added nearly 11%. The benchmark index managed 13%. Both values are total return, i. e. price change plus distributions. Since 1993, this equity selection’s average annual performance amounts to about 8.4%%, compared to the 6.9% achieved by the above-mentioned broad benchmark. The transaction costs, as well as taxes withheld, are deducted in ESP figures, whereas the index is calculated without bearing any costs. The cumulative performance of the ESP since 1993 amounts to above 800%, that of the benchmark to about 508%.
The positioning remained unchanged during the first three months, with that maintaining its neutral weight. For European stocks, the rebalancing described in the “Equities Switzerland” section is scheduled to take place in the coming weeks.
American stocks were also going strong. The benchmark index MSCI Total Return USA, which we newly adopted in 2019, replacing the S&P 500 Index (see also section “New Benchmarks” at the end of the report), achieved a total return of 14%. The equity fund employed by us even achieved a markedly better 17.7%. No changes were made to the weighting, maintaining a slight overweight.
Price/Book and Dividend Yield of major equity markets:
Equities Asia (excluding Japan)
Asian equities produced an impressive run into the new year, with Chinese A Shares (domestic stocks) leading the way with a sprightly 24%, as measured by the Shanghai A Index. Hopes of a compromise in the trade dispute between China and the USA, as well as an improving economy, were particularly helpful here. The broader, and for international investors accessible, Index (MSCI Asia ex Japan) managed a plus of 11%. The weighting of Asian stocks has not been changed during the reporting period.
Equities in the Land Of The Rising Sun rose as well, though less strongly than on other exchanges. This lagging-behind is all the more surprising as Japanese stocks show relatively attractive fundamental valuations compared to other countries. We have not changed the positions, leaving Japanese equities neutral weight,
Alternative investments too contributed to the positive performance. The funds employed by us (unchanged in selection and weighting), achieved between 3.5 and 4.7% depending on currency and product.
Gold rose marginally during the reporting period, and with that remained markedly behind other asset classes’ performance. The positioning remained unchanged in the portfolios.
Summary of our current Asset Allocation: