Balanced ETF portfolios GBP Q2 2020 commentary

Balanced ETF portfolios GBP Q2 2020 commentary

SaxoSelect Commentaries
Saxo Markets

Asset classes
Stocks, bonds, non-traditional
Instruments ETFs
Investment style Macro, diversified investment focus
Quarterly return (net of fees)  

Market overview

While 2019 proved 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 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 has seen the strongest rebound with almost 13% in April alone. The US market was closely followed by emerging markets (EM) 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 among 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 2020 6.70% 9.80% 11.7%
Year to date 2020 3.26% 3.06% 1.08%
2019 9.33% 13.4% 16.4%
2018 -4.08% -5.15% -6.21%
2017 4.53% 8.26% 10.1%
2016 N/A N/A N/A
2015 N/A N/A N/A
Since Inception* 26.6% 37.3% 39.3%

*Inception: October 2015
Performance is net of all fees

In March, risk was purposefully increased in the portfolios, and this helped all portfolios to materially benefit from the market recovery, after hitting bottom on March 23rd.

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. 


Following the sharp recovery in markets, into Q3 some profits have been taken and risk has been reduced from the equity allocation of all risk profiles. The long-term focus will be positioned by closely monitoring risks of a second wave of coronavirus as well as geopolitical risks of the US elections and Brexit negotiations.

Risk has been reduced by cutting exposure to EM and GBP hedged European (ex UK) equities. Additionally, global equities (in GBP hedged) and European (ex UK) equities have bee neduced in the Moderate, Aggressive and Aggressive Growth profiles. As part of the continuing ESG transition, positions were initiated in the ESG versions of Japanese, EM and European equities, whilst increasing exposure to existing US equities position.

Within the fixed income sleeve, duration is modestly decreased across risk profiles. This was carried out by rotating out of the long-dated 20+ year US treasuries, into 7-10 year US treasuries. As part of the ESG transition, ESG versions of the short-dated GBP and USD (in GBP hedged) bonds in the Conservative, Moderate and Aggressive profiles, were added. In the Conservative profile, exposure was cut to USD denominated EM debt.

Within the non-traditional sleeve, Gold has been added across all profiles. Whilst cautiously monitoring Brexit negotiations, non-GBP FX positions were added across all risk profiles.


Saxo Markets provides personal portfolio management via its SaxoSelect service. Before entering any managed portfolio, we must first take into account your investment objectives, goals and financial situation. 

This material should be considered as a marketing communication under the Financial Conduct Authority’s rules. Saxo Capital Markets UK Limited (SCML) undertakes reasonable efforts to ensure that any information published in this communication is reliable. SCML makes no representation or warranty, and assumes no liability, for the accuracy or completeness of any information contained in this communication. 

Investing in financial products always involves risk. As a general rule, you should only invest in financial products if you understand the risks associated with them. Investing in a portfolio with currency that differs from the base currency of your account carries the risk of exposure to changes in the rate of exchange between them. See the full Managed Portfolio Disclaimer for more information. Past performance is not a guide to future performance.

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. 

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