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1 May 2013

Performance figures
April 2013            1.45%
YTD                       4.45%
1YR                       4.80%
2012                      3.00%
2011                      4.18%
Since inception   5.02% (since 1-Jan-11, annualised)
Cash                     0.19%
CPI (to Feb-13)    2.30%

Risk Figures since inception 1-Jan-11, daily data
Volatility                 4.87%
Max drawdown    -5.08%

With US government bond yields so low and commodities currently not selected the performance of Spectrum is currently driven to a great extent by the US equity market. However it’s interesting to analyse the upside capture.

Over the last 6 months the average allocation to equities was 28% and the S&P500 has returned 13% which would imply a return potential of 3.6% in beta terms. However Spectrum returned 5.1% which is an upside capture of 39%. Where did this additional upside come from?

The largest contribution was from the equity sector selection. For example, over the last 6 months Healthcare and Cyclicals have returned 20% and 18% respectively whilst Energy and Technology returned 9% and 6% respectively. Spectrum had exposure to the former, but not the latter.

The other is aspect is currency exposure. Due to general strengthening of the USD Spectrum exited all long FX positions except for AUD and NZD which have returned 1.6% and 5.4% respectively over the last 6 months.

But let’s not forget these are active decisions, just has not holding commodities for 18 months now, and one should also compare performance to the portfolio that would be held in the absence of views. We consider this “Naïve” portfolio to be the equally weighted opportunity set of Spectrum. Here the comparison is striking and we argue shows the benefits of active management.

The asset allocation for the coming month is as follows
  • Equity allocation remains at 31% in Cyclicals, Non-Cyclicals, Healthcare, Financials, Telecomms and Utilities
  • Commodity allocation remains at zero due to continued poor relative performance as an overall group
  • FX exposure remains at 4% with positions in AUD and NZD
  • Fixed Income exposure to 2YR and 5YR US Treasuries remain at 15% and 47% respectively with 3% in cash.
See overview sheet SPECTRUM-IDX-OVERVIEW_30APR2013.pdf

You can find this item and other news and articles on our blog at www.qlabi.com/news.asp

Also, our low risk strategy Fusion (which is the Fixed Income and FX part of Spectrum) is also now published daily on our website at www.qlabi.com/fusion-idx.asp

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DISCLAIMER: This document does not constitute an offer, a solicitation, an advice or a recommendation to purchase or sell any investment products associated with the material described herein. The purpose of this document is to describe the principles, research and ideas behind the QLAB Invest strategy indices. Prior to an investment in any product tracking a strategy index, you should make your own appraisal of the investment risks as well as from a legal, tax and accounting perspective, without relying exclusively on the information provided by QLAB Invest. Investment products tracking the indices must be issued or/and marketed by a regulated company. This document is strictly for informative purpose. The single source of the underlying asset data is Thomson Reuters Datastream and QLAB Invest cannot guarantee the correctness of the underlying asset data and cannot be held legally responsible in this regard. Any references made to historical performance up to the official live inception do not reflect actual live performance and can be subject to selection, curve fitting and other statistical biases. Performance in investment products linked to the indices may be reduced by the effect of commissions, fees or other charges in excess of those already factored into the index calculations. The level of the indices will fluctuate due to the volatility of the underlying exposures and past performance or volatility is not necessarily indicative of future results.