October 2012 -0.77%
YTD 2012 2.34%
1 Year 3.02%
Since inception 3.55% (since 1-Jan-11, annualised)
Risk (volatility) 5.20% (since 1-Jan-11, daily data annualised)
The phrase “unprecedented market conditions” is certainly overused and probably not true, however it is hard to avoid the conclusion based on the following observations:
- Government bond yields close to zero or negative in absolute or real terms in many developed markets
- Continuing precarious situation of government debt levels with impending further bailouts or defaults
- A handful of central banks and politicians wielding influence on investor behaviour
- Glimpses of economic recovery mixed with paradigm changes and great uncertainty in the financial industry
- Divided expert opinion on what lies ahead, unhelpful in making investment decisions.
Some of you who follow Spectrum have asked about individual exposures “How much equity are you holding?” or “Why are you not holding gold?” in order, perhaps, to come up with individual trade ideas. However the true value of Spectrum comes not from unrelated bets but from treating the opportunity set as competing.
Behavioural finance studies show that investors navigate the asset landscape in search of return or safety based on common instincts. Our statistical analysis shows that repeating tendencies can be exploited and this works best in a multi-asset portfolio context. The result is that Spectrum holds assets with generally good positive trends but also remains diversified and conservative due to strict risk budgeting and portfolio construction techniques.
These techniques can also be applied to different opportunity sets or applied as overlays to existing portfolios, please contact us for more information.
The asset allocation for the coming month is as follows
- Equity allocation reduced from 31% to 25% due to exiting positions in Basic Materials, Industrials and Technology with small increases to Financials, Healthcare and Telecomms
- Commodity allocation remains at zero due to continued poor relative performance as an overall group
- FX exposure slightly increased from 10% to 12% with positions in CAD, AUD, NZD and GBP
- Fixed Income exposure to 2YR and 5YR US Treasuries slightly increased to 15% and 45% respectively with 2% in cash.
See overview SPECTRUM-IDX-OVERVIEW_31OCT2012.pdf