Saxo Stronghold USD Q4 2019 commentary

SaxoSelect Commentaries 5 minutes to read
Saxo Bank

Instruments traded
Asset classesGlobal equities, bonds and alternatives
Investment styleQuantitative portfolio management
Quarterly return+0.5% (net of fees)
Annualised volatility (since inception)5.1%

Market overview

While the third quarter of 2019 offered volatility as the US-China trade tensions escalated, the fourth quarter marked a ceasefire with a Phase-One deal. The trade deal, combined with improving economic activity numbers, lifted equity markets in general. Despite being exposed to equities, the portfolio did not get the full benefit as the exposure was mainly in minimum volatility stocks that declined somewhat as the relative safe-haven in equity markets was no longer needed by investors.

During the fourth quarter, the Stronghold EUR model reduced its exposure to minimum volatility stocks and generally increased its exposure to equities, as the expected returns across equities improved and volatility declined further. 

Despite a slightly disappointing ending to the year, the total return in 2019 ended at 11% after fees. The yearly performance was much better than the benchmark that only gained 8.3% in 2019. In the first month of 2020, the Stronghold EUR portfolio is already ahead of the benchmark, but with the coronavirus in China worsening every day, the quarter could become quite volatile. The Stronghold model, however, should be able to swiftly react to changing volatility conditions. 

2019 in total+9.6%
Inception (01.07.2017)

(Performance is net of all fees)

  • The best performing position in the portfolio has been the exposure to US large cap equities, which contributed more than 1.4%-pts over the quarter.

  • The exposure to 7-10 year government bonds was the largest drag on portfolio performance over the quarter with -0.5%-pts. This exposure, however, ensures that risk in the portfolio is kept at a relatively low level.

Portfolio changes

Asset class
Asset sub-class
As of 02-10-2019
As of 03-01-2020
CreditUS Corporate IG
US Corporate HY
EM Bonds (USD)
 EquityUS Large-cap Equities
US Small-cap Equities
International Equities
EM Equities
US Minimum Volatility
US Momentum
US Govt 1-3Y
US Govt 7-10Y

The past quarter demonstrates how the quantitative approach to risk management allows the portfolio to benefit from the gains in the equity market, but still keep a part of the allocation in more defensive assets, to be prepared for periods of high volatility. 


OECD’s global leading indicators have been revised and now show that the global economy went from contraction to recovery phase in September as monetary and fiscal stimulus arrested the economic slowdown. This has probably avoided a global recession, but the recovery is still fragile and the latest coronavirus outbreak in China poses a critical risk to the global recovery as China is 20% of the global economy and basically the world’s manufacturing facility.

As economic activity has improved, equity markets have delivered positive returns. Volatility has also declined, and as a result, the Stronghold model has increased its equity exposure during the fourth quarter from 36% to 40%. If economic activity continues to expand, the portfolio should experience higher returns amid this increased equity exposure.

The key risk to our outlook is the Chinese coronavirus, which comes with many unknowns and nonlinearities. Higher interest rates will impose losses on the bonds in the portfolio, but the extent of the losses depends on whether rising rates come from inflationary pressure or improving economic activity.


Any information found in this document, including performance information and statistics are subject to change. You can find the latest updated pricing information on the description page for each available portfolio. In providing this material Saxo Bank has not taken into account any particular recipient’s investment objectives, special investment goals, financial situation, and specific needs and demands and nothing herein is intended as a recommendation for any recipient to invest or divest in a particular manner and Saxo Bank assumes no liability for any recipient sustaining a loss from trading in accordance with a perceived recommendation. All investments entail a risk and may result in both profits and losses, and all capital is at risk. In particular investments in leveraged products, such as but not limited to foreign exchange, derivatives and commodities can be very speculative and profits and losses may fluctuate both violently and rapidly. Speculative trading is not suitable for all investors and all recipients should carefully consider their financial situation and consult financial advisors in order to understand the risks involved and ensure the suitability of their situation prior to making any investment, divestment or entering into any transaction. Any mentioning herein, if any, of any risk may not be, and should not be considered to be, neither a comprehensive disclosure of risks nor a comprehensive description of such risks. Any expression of opinion may not reflect the opinion of Saxo Bank and all expressions of opinion are subject to change without notice (neither prior nor subsequent).

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