SaxoWealthCare Quarterly Commentary ESG SaxoWealthCare Quarterly Commentary ESG SaxoWealthCare Quarterly Commentary ESG

SaxoWealthCare Quarterly Commentary ESG

Market Rewind

Summary:  After each quarter you can download your personal quarterly report into your SaxoWealthCare account. In this article we would like to further explain what has happened in the market and how we have responded to this within your profile and portfolio.

Market Review

In the fourth quarter of 2023, both stock markets and bond markets finished positively. This benefited investment portfolios across all risk levels.

Supporting this rally was the decline of inflation towards target, whilst the major developed economies have so far been able to avoid recession. As a result, the global stock market rose an attractive 6.21% as per the Morningstar Global Target Market Index in Euro terms, whilst global government bonds also enjoyed a 5.36% return as per the Morningstar Global Core Bond index, Euro hedged.

2023 represents a sharp recovery for many equity investors, recouping 2022 losses. Regionally, the US has experienced the above economic story to the greatest extent and performed best. The Magnificent seven (including Microsoft, Amazon, Meta, Apple, Alphabet, Nvidia and Tesla) overwhelmingly contributed to market returns for a large part of 2023 as investors flocked to safety in cash rich companies as well as to gain exposure to the AI theme, especially with respect to Nvidia. By the fourth quarter overall market sentiment had extended beyond the Magnificent Seven and by 2023-end many sectors produced positive returns, whilst the energy sector was the distinct underperforming sector. On the other hand, China is a noteworthy country that is struggling beyond others, who have entered deflationary environment and whereby stock markets have been bleeding returns throughout the year.

Bonds also produced positive returns in the end, although they have yet to recoup last year’s drawdown. In the first half of 2023 the interest rate hikes pushed bond yields upward (deceasing bond values), yet by Q4 interest rate hiking had paused and rather the market started anticipating rate cuts, pushing bond yields downward (increasing bond values). Bond values increase as their yield[1] declines and all bond yields are influenced to a degree by the movement of “safe haven” government bond yields, with US Treasuries being a primary indicator for the West. The 3-year US Treasury yield, a good indicator for the short term, finished the year at 3.84%, down from 4.60% at September end, representing a meaningful decline as the market anticipated that central banks could reduce interest rates to support the economy, enabled by improved inflation rates.

[1] Yield is the return a bond investor receives in the form of an interest payment (the “coupon”) as a percentage of the bond price.


Source: Saxo Bank, Morningstar. Global Equities are represented by Morningstar Global Target Market Exposure NR EUR. Global Bonds are represented by Morningstar Global Core Bond GR Hedged EUR.

Moving into 2024, the biggest questions remain whether the global economies can avoid a recession and if interest rates can be reduced in conjunction with more reasonable inflation rates. Europe has so far lagged the US in this regard. Whilst the mantra of central banks in 2023 was to contain inflation, with inflation at better levels the apparent mantra now is to be economically supportive and (attempt to) avoid a recession, also indicating a decline of interest rates. Some analysts expect the recent rally in stocks to continue as central banks continue their transition to being more economically supportive. More cautious analysts note geopolitical risks and that many stock valuations are expensive and stock prices could therefore be highly sensitive to any negative news.

Regarding bonds, the end-of-year consensus is that interest rates and bond yields could decline, to benefit bond investors so long as inflation remains on its downward trajectory. Many bond owners are now earning a much more attractive positive real yield[1] that they have not enjoyed since 2010, meaning investors are now receiving a healthy return than outperforms inflation to grow the purchasing power of their capital.

[1] Real yield is the yield you receive from a bond net (after) inflation is considered. If the inflation rate is greater than the yield of your bond, then the real yield is negative. The trick is using the correct inflation rate as today’s inflation rate is probably not the same as the expected future inflation rate.

Portfolio Performance

Fixed Mix Strategies 


Quarter to Date

Year to Date

Since Inception

10Y Annualised Return

10Y Annualised Volatility

Very Dynamic
























Very Defensive







Source: Data from Bloomberg, Morningstar, BlackRock, Amundi, from 12/31/2013 to 12/31/2023. Inception date of the strategy is 5/31/2022. Returns are shown in HKD and gross of costs such as management fee and transaction costs but net of ETF costs (TER). Returns are calculated with a monthly rebalance to target allocation. Returns before the launch of the strategy with Saxo are calculated based on the portfolio allocation at the launch date. These historical returns do not attempt to simulate investment decisions that could have been made before the first portfolio was implemented with Saxo. The returns presented are indicative of the returns of individual investors, which may differ slightly.

In the fourth quarter of 2023, both the equity and bonds portfolios delivered positive gains. Hence all five risk profiles ended 2023 with a positive return, recovering part of the negative returns incurred in 2022.

The full year returns range from +8.78% for the Very Defensive profile to +17.05% for the Very Dynamic profile. Equities outperformed bonds this year so more aggressive risk profiles with a higher allocation to equities ended 2023 on a more positive note than more defensive risk profiles.

Portfolio Protector and Goal-Based Strategies 

Investors who have opted for Portfolio Protector or Goal-Based strategies have their own unique asset allocation that depends on their individual preferences and constraints. Still, the mix of assets in their portfolios will fall somewhere on the spectrum of the Fixed Mix portfolios since they are composed of the same building blocks for equity and bonds. Hence, we believe the information presented in this report should bring them some light to interpret the performance of their portfolios accordingly.


Portfolio Changes


In the fourth quarter of 2023, the global ESG equity portfolio was rebalanced two times by BlackRock.

This portfolio gives investors a broad exposure to sustainable equities. It aims to outperform global stock markets via dynamic tactical adjustments to the mix of ETFs in the portfolio. These adjustments are done via two investment models: country rotation and factor rotation. Country rotation is implemented through ETFs that track the general market of various countries and represents the biggest share of the portfolio. The rest of the portfolio is allocated to the factor rotation strategy which is implemented through ETFs that select stocks based on a set of attributes associated with higher risk-adjusted returns.

All the ETFs in this portfolio are selected according to ESG characteristics. They follow MSCI SRI indices which were designed to represent the performance of companies with high ESG ratings.

Early October
The allocation to regions with stronger fundamentals was increased. The weight of US equities in the portfolio was brought up, as decelerating inflation, a resilient economy and the AI-related boom have been supporting valuations. The underweight to EM equities was slightly decreased on the other hand, on the back of cheaper valuations. The allocation to European equities was also reduced.

Within factors the overall view remained unchanged. The portfolio was realigned to reflect a preference for Quality and Min Vol over Value and Momentum. Quality continued to be the largest position within the factors sleeve.

Mid December
The focus is kept on regions with strong fundamentals and economic resilience, guided by a proprietary earnings-based systematic signal. The exposure to US equities was increased and the underweight to EM equities was reduced. In turn, the allocation to Europe and Japan was reduced. The outlook remains positive for Japan, but the allocation was slightly trimmed to balance the addition to EM and to manage the active risk in the portfolio.

Within factors, the allocation to Value and Momentum was increased, funded from Quality and Min Vol. This rotation is motivated by the proprietary economic regime signal, indicating favourable conditions for Value and Momentum. Quality continued to be the largest position within the factors sleeve.


In the fourth quarter of 2023, the bonds portfolio was rebalanced one time by Amundi.

This is a yield-seeking bond portfolio. It is composed of global government and corporate bonds with a medium duration. The foreign currency exposure is mostly hedged to USD in this portfolio. It is designed to invest for more stable returns than equities and to act as a diversifier to equities during negative periods.

Late October
The changes took advantage of some of the volatility in rates and credit to increase the allocation to Euro Investment Grade bonds (“EUR IG”) and Global Aggregate bonds (“Global Agg”), with a reduction in the allocation to US Treasury duration. A large increase in the EUR IG allocation might have been too aggressive at this stage and might have resulted in excessive exposure to EUR duration so this was diversified by allocating to the Global Agg SRI ETF.

There were also changes in US duration with a decrease in US Treasury 7-10y in profit of US Treasury 20y+. This comes as the recent curve steepening looked overdone in the short term and Fed speakers were starting to push back against the move. These changes kept the portfolio duration around 6.5y and increased the hedged yield from 3.77% to 3.92%. The option-adjusted spread (OAS) also rose, reflecting the decision to take more credit risk in the portfolio.


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