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Stronghold EUR: Up 0.7% in November driven by strong equity markets
Equities 3 minutes to read
Peter Garnry
Chief Investment Strategist
Summary: The Stronghold EUR came back in November after a disappointing October with gains of 0.7% while the benchmark delivered 1.1%. The portfolio has not changed much on its exposures during November with the most notable change being a 2 %-points shift between global momentum stocks and European small caps. Overall, the portfolio remains well balanced across many different asset classes and is well prepared for increased market volatility.
Last month’s performance update was missed due to unfortunate events, but we are now back with a fresh update on last month’s performance. Stronghold EUR was up 0.7% in October and 11.2% for the year compared to 1.1% and 7.4% respectively for the benchmark. The portfolio continues with a balanced risk profile and is quite diversified across many different asset classes. The portfolio has delivered 1% annualised outperformance against the benchmark since the inception in July 2017 which is satisfactory and the average loss in the worst weeks has been well contained within the model’s risk limits. Last month’s performance was driven by global equities printing news highs while the slightly higher interest rates cause minimal losses among the portfolio’s bond exposure.
The strategy has a reference benchmark consisting of 65 % global government bonds (EUR-hedged) and 35 % developed market equities (EUR hedged). Stronghold performance includes trading costs and management fee. Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of capital may occur.
Since the last update two months ago the portfolio has lowered its equity exposure by around 2 %-points and re-allocated this into Alternatives which cover real estate (REITs) and listed private equity. During November the model also shifted around 2 %-points of exposure from global momentum stocks and into European small caps.
As the chart below shows the asset class weights have been fairly stable for almost two years with only significant changes around the fourth quarter of 2018 when equity markets fell almost 20%. During 2019 the model did increase risk a bit as tail risks diminished in financial markets allowing the model to increase risk.
As the chart below shows the asset class weights have been fairly stable for almost two years with only significant changes around the fourth quarter of 2018 when equity markets fell almost 20%. During 2019 the model did increase risk a bit as tail risks diminished in financial markets allowing the model to increase risk.
The current portfolio weights are still painting a picture of a cautious model attempting to get some returns but overall trying to mitigate any large drawdowns. The model has reduced equity exposure a bit during the sell-off in global equities in August so the recent comeback has hurt a bit. As a result the portfolio is currently outperforming on days with more risk-off and as such strong risk-on sessions will most likely create underperformance relative to the benchmark.
For those not familiar with the Stronghold portfolio is a tactical asset allocation strategy offered by Saxo Bank through its managed portfolio platform SaxoSelect. The minimum investment amount is EUR 30,000 and the annual performance fee is 0.75%. The portfolio is based on a mathematical framework which aims to limit large drawdowns by dynamically responding to changes financial markets while aiming to provide stable returns.
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