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).
Since the beginning of the year, the money market allocation has remained broadly unchanged. With that, it lies just below its strategic target, or in other words, we are slightly underweight.
Markedly underweight is our bond position. The rise in interest rates during the first quarter startled many investors and had a negative impact on performance. We are, however, still far from attractive levels for bond buyers. We have not made any active changes to our bond position during the past three-month period.
No changes have been made to the position in Swiss stocks. The local market has experienced quite a lot of turbulence in the past two months. Our selection of Swiss equities composed according to value criteria (see also last paragraph “And finally this”), the ‘Swiss Stock Portfolio’ (SSP), experienced a negative return (including dividends) of 5.2% in the year to date. Its benchmark index SPI (Total Return) corrected by the same percentage during this period.
Since 2010, the SSP’s mean annual performance amounts to 11.6% p.a., clearly beating the 7.5% achieved by its benchmark. Since 2010, the cumulative total return of this strategy amounts to 148%. The SSP figures are net of transaction costs and withholding taxes. The benchmark, however, does not bear any such costs. The certificate we launched in July 2017, the “Strategy Certificates linked to the SIM–Swiss Stock Portfolio Basket” (Valor: 36524524, ISIN: CH0365245247), which mirrors this equity portfolio 1:1, lost 5.4% in step with the negative development on the market.
Amongst the European equities, the UK (FTSE 100 Index -8.2%) and German equities (DAX -6.4%) experienced particular stress during the first quarter, losing more than the pan-European indices. The pan-European composed price barometer, the DJ STOXX 600 Index, lost 4.2%. Compared to this, our selection composed according to value-criteria (see also last paragraph “And finally this”) once again put up a good show. The directly-invested “European Stock Portfolio” (ESP) achieved a -2.5% return since the beginning of the year (both values are total return, i.e. including dividends), yielding an outperformance of 1.7 percentage points. Compared to a pure value index, which reflects our investment approach more closely, the performance is identical.
Since 1993, the mean annual performance of our equities selection amounts to about 9%, compared to the 6.9% of the above general 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 861%. We have not made any changes to the positions during the first quarter and carry an unchanged neutral weighting.
At the end of the day, due to their high fundamental valuation, the spring storms did not inflict lasting damage on the performance of the much-berated American stocks. Admittedly, Wall Street also suffered from at times tempestuous distortions and on occasion downright shocking single-day losses. Ultimately, however, after three months, the trendsetting S&P 500 Index was only 1.2% lower than at the end of 2017. The technology-based Nasdaq Index even stands 1.8% higher than its New Years Eve reading. The Performa US Equity Fund proved itself a tower of strength with a sparkling performance of up 4.9%. The position remained unchanged throughout the quarter. We are currently overweight in US stocks.
Measured on the price/earnings ratio using the latest 12 months profit figures, most equity markets have become more attractive:
Equities Asia (excluding Japan)
The Far East and emerging economies were also unable to escape the price caprices. However, the fund managers employed by us managed to avoid any substantial damage and distanced themselves from the downdraft on the broader market, closing the quarter slightly positive. We did not make any changes to the positions. We remain unchanged, neutral weight.
In Japan, where we are slightly overweight against out strategic target, the threatening gestures from Washington were not perceived well. Japan, which sees itself as a staunch ally of the USA, has to date not been exempted from the steel and aluminium customs duties. The leading index’s quotations on the Kabutocho dropped by 5.6% during the first quarter, the fund employed by us in similar magnitude. No changes have been made to our position in the Land of the Rising Sun.
We have not made any changes to the alternative investments either. Overall, about 7.6% of a portfolio is engaged in this segment, making it an overweight position. Both positions show a slight negative performance of around 0.5 to 0.9% and with that did better than most equity and bond markets.
No changes have been made to the gold position. Measured in US Dollars, the Gold ETF delivered a positive performance of 1.4%, re-confirming the adage that precious metals are a safe haven for investment in a storm.
Summary of our current Asset Allocation