August 2012 0.87%
YTD 2012 3.13%
1 Year 7.16%
Since inception 4.20% (since 1-Jan-11, annualised)
Risk (volatility) 5.28% (since 1-Jan-11, daily data annualised)
September saw the official return of Quantitative Easing in the US, the fourth such action by the Federal Reserve in as many years. In the past QE1, 2 and Operation Twist had the desired effect of lowering interest rates and boosting equity markets in the US, and that is also the intended impact this time, however only time will tell due to many other factors currently on investors’ minds. Behavioural finance has powerful roots and policy driven intervention such as the QEs can lead to rather steady trends driven by investor herding instincts. For example since QE1 started in November 2008 US equity markets have returned approximately 100%. However, policy driven interventions are not necessarily benevolent, hence the need for constant vigilance, which means smart risk management and diversification.
In the month of September Spectrum delivered a positive performance of 0.87% coming from equity and FX exposure offset slightly against a small reduction in 2yr and 5yr Treasury returns (QE3 it seems has not worked as intended this month). This brings YTD performance to 3.13% and since inception annualised to 4.20% for a stable risk under the target of 6% volatility.
The asset allocation for the coming month is as follows
- Equity allocation increased from 25% to 31% with new positions in Basic Materials, Industrials and Financials, the latter not present since 2010
- Commodity allocation remains at zero due to continued poor relative performance as an overall group
- FX exposure slightly increased from 9% to 10% with positions still in CAD, AUD and NZD plus a new position in GBP
- Fixed Income exposure to 2YR and 5YR US Treasuries slightly decreased to 14% and 42% respectively with 3% in cash.
See overview SPECTRUM-IDX-OVERVIEW_28Sep2012.pdf