Balanced ETF portfolios CHF Q2 2020 commentary

SaxoSelect Commentaries
Saxo Bank

Asset classes
Stocks, bonds, non-traditional
InstrumentsETFs
Investment styleMacro, diversified investment focus
Quarterly return (net of fees) 
Defensive
+5.70%
Moderate
+8.95%
Aggressive 
+10.9%

Market overview

While 2019 has been proven to be a year of positive returns for most asset classes, the tide has turned dramatically since the beginning of 2020. The first quarter was a particularly difficult one as concerns over the outbreak of the coronavirus started to control the markets. While the global economy was already in the late stage of the economic cycle, the pandemic caused an almost abrupt halt of the economy. The conversation has since shifted drastically towards debating a global recession, its impact on markets and the duration of it. While volatility had declined since, it remains on elevated levels. Noteworthy is the unprecedented monetary action from central banks and significant stimulus measures by governments across the globe. We believe these actions, along with declining infection rates, contributed to the strong rebound in April and May.

In line with these developments, we saw a strong rally of risky assets and those benefiting from monetary stimulus. Within equity, US equity as seen the strongest rebound with almost 13% in April alone. The US market was closely followed by Emerging Markets as well as Asia – most likely driven by a perceived speedy improvement of the situation in China. Europe, the United Kingdom and Japan also rallied but to a lesser extent.

Looking at fixed income, BlackRock have observed a preference for riskier assets including corporate credit and Emerging Market debt. This strong reversal has put pressure on fixed income yields, which declined substantially. European and US high yield were amongst the best performing asset classes, followed by global investment grade credit and emerging market debt. Global government bonds, in aggregate, performed positively although with some level of deviation on the country level.

Portfolio performance

  Defensive Moderate Aggressive
Second quarter 20205.70%8.95%10.9%
Year to date 2020-5.30%-7.30%-9.30%
20199.45%14.1%18.6%
20186.00%-7.70%-9.20%
20174.65%8.60%12.4%
2016-0.40%0.40%0.90%
2015*1.90%3.20%4.70%
Since Inception1.50%6.40%10.7%

*Inception:14/08/2016

The multi asset portfolios produced positive returns in the second quarter of 2020. The solid performance was a result of a moderately risk-on positioning as risky assets rallied. 

Broadly speaking, on the equity side, all allocations contributed positively to portfolio performance. The US equity was the largest performance contributor followed by EM and European equity. 

Looking at the fixed income side, absolute contribution was generally positive for credit. In particular, global corporates and EM corporate bonds were additive. 

Outlook

The portfolios were rebalanced in Q2, with the aim of lowering the risk of each profile in the wake of the highly volatile market environment seen in the last few months. Equity exposure is reduced by 6%-13% across the profiles. Fixed income duration exposure is increased between 0.6 and 1.3 years, in response to the short end of yields curves dropping into deeply negative territory across Europe. In this rebalance, a broader transition into ESG across the portfolios was also initiated.

Within equities, consideration for the effect and spread of the Coronavirus is helping to guide decision making. This has led to a reduced allocation to Japanese, emerging market and US equity across the range. Allocation to European and Pacific ex-Japan equites remain unchanged, bar a small reduction in European equities in the conservative profile. As part of the ESG transition, ESG enhanced US, European, Japanese and emerging market equities replace their non-ESG counterparts, with the overall allocations in line with the above changes. 

Within the alternatives space, developed market property is reduced in the moderate-aggressive and aggressive profiles.

In the fixed-income space, capital was redeployed with allocation to European government bonds increasing across the range, with an additional focus on German government bonds in the defensive risk profile. With the exception of the highest risk profile, allocation to European corporate bonds is increased across the range.

Disclaimer

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).

SaxoSelect Balanced Portfolios are offered by Saxo Bank. BlackRock’s data which is utilised by Saxo Bank in building the SaxoSelect Balanced Portfolios is based upon certain internal assumptions and BlackRock has not considered the suitability of the content of its data against individual needs and risk tolerances for all investors. As such, BlackRock’s data is for information purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buy the securities described within. BlackRock’s data has not been prepared in accordance with the legal requirement designed to promote the independence of investment data and is not subject to any prohibition on dealing ahead of the dissemination of the data provided to Saxo Bank and, as such, is considered to be a marketing communication to Saxo Bank. 

iShares and BlackRock are registered trademarks of BlackRock, Inc. and its affiliates (“BlackRock”) and are used under license. BlackRock is not affiliated with Saxo Bank. BlackRock makes no representations or warranties regarding the advisability of investing in any product, portfolio or service offered by Saxo Bank or any of its affiliates. BlackRock has no obligation or liability in connection with the operation, marketing, trading or sale of any product, portfolio or service offered by Saxo Bank or any of its affiliates nor does BlackRock have any obligation or liability to any client or customer of Saxo Bank.

Saxo Bank (Schweiz) AG
Beethovenstrasse 33
CH-8002
Zurich
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved, we have put together a general Risk Warning and a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed here or within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.