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).
The target weighting for liquidity is slightly lower than in the past, and with that, at a near neutral weighting. The reason behind this you will find in the bond section below.
Unreplaced maturities saw the bond allocation decline below 30 % during the past months. As we operate with bandwidths, and the strategic bandwidth for bonds in a balanced portfolio is 30 to 60%, we decided to observe the lower limit where possible, which in this instance was at the expense of the money market allocation. As regards performance, this asset class was inconsistent during the past quarter. Whereas classical bonds did not pull their weight, USD corporate bonds as well as bonds of lower credit quality, which we cover with specialist funds, managed to put on a very pleasing performance.
The Swiss equity allocation did not experience any changes during the past quarter. Unchanged, we maintain a “home-bias” and hence, attach the highest weighting to stocks of the reference currency’s country. Consequently, Swiss Franc referenced clients with a balanced portfolio held about 26 % Swiss equities. For Euro referenced clients, a similarly large block of European stocks is thus the focus of the equity allocation. Our selection of Swiss equities composed according to value criteria, the “Swiss Stock Portfolio” (SSP), grew marginally during the third quarter, taking the total performance (incl. dividends) for the first nine months to 19.85 %. Its benchmark SPI (total return) achieved 16.53 % total return during the same period. With that, the SSP achieved an outperformance of 3.32 %. Since 2010, the SSP’s mean annual performance amounts to 12.92% p.a. clearly beating the 8.31% achieved by its benchmark. Since 2010, the cumulative total return of this strategy amounts to 156 %! 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 this year, the „Strategy Certificates linked to the SIM–Swiss Stock Portfolio Basket“ (Valor: 36524524, ISIN: CH0365245247), which mirrors this equity portfolio 1:1, has declined 1 % since its launch early July.
The position in European stocks equally remained unchanged during past three-month period. We continue to be overweight here. The directlyinvested “European Stock Portfolio” (ESP) achieved a 16.2 % return in the first nine months of 2017. The DJ STOXX 600 Index achieved only a return of 9.95 % during the same time span (both values are total return, i. e. incl. dividends), yielding an outperformance of 6.25 percentage points to the ESP. Compared to a pure value index which more closely reflects our investment approach, the outperformance even amounts to some 6.88 percentage points.
Since 1993, the mean annual performance of our equity selection amounts to about 9.24 %, compared to the 7.21 % of the 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 872 %!
We have not made any changes to this position, and are neutrally positioned. The American market fundamentally ranks among the expensively valued markets, in spite of which it managed to rise during the third quarter and climb to new record highs.
Measured on the price / earnings ratio using the latest 12 months profit figures, some of the equity markets have become dearer since beginning of the year, while others have become more attractive
Equities Asia (excluding Japan)
Asian equities put their feet down on the gas again during the summer months. With that, they advanced to top region for the last quarter, as well as over the nine-month period. We did not make any changes to the weighting and as such, continue to be about neutral weight.
Summary of our current Asset Allocation
For a Swiss Franc referenced portfolio.
Again, our position here remained unchanged. Japan currently tends to count as one of the fundamentally attractive markets. With a plus of 26 % during the past twelve-month period, the broad Topix-Index represents one of the best established stock exchanges.
Price / Book and Dividend Yield of major equity markets:
No changes in this asset class either. Although hedge funds’ returns are in the positive range, they remain unspectacular this year. This is partly due to the ups and downs on the financial markets, namely the volatility, being rather subdued, trending more or less upwards in a rather sedate fashion.
Gold picked up some momentum and managed to build up its US Dollar performance into the double- digit figure range. No changes have been made to the gold position.