Balanced ETF portfolios USD Q3 2021 commentary

Balanced ETF portfolios USD Q3 2021 commentary

SaxoSelect Commentaries
Saxo Markets

Asset classesStocks (developed and emerging equity), bonds, non-traditional
InstrumentsETFs
Investment styleMacro, diversified investment focus
Quarterly return (net of fees) 
Defensive-0.2%
Moderate-0.02%
Aggressive 
-0.01%

Market overview

The third quarter of the year was volatile for most financial markets. Whilst it started well, some gains were erased in September when global equities and fixed income assets retreated. Risk appetite deteriorated towards quarter-end due to a combination of risk factors such as potential monetary policy normalization, concerns over the rate of growth, supply disruptions and rising inflation. Nonetheless, there is currently limited evidence showing a derailed global recovery. Growth resilience and improving fundamentals have helped providing supports to equity markets year-to-date.

Developed market equity performance was generally positive over Q3 after a moderate correction in September. Emerging markets were down over the quarter, with attention remaining on China’s regulatory crackdown and the contagion effect of potential default of large property developers. Within emerging markets, there was a high level of dispersion across countries and sectors, partly driven by the differentiated pace of COVID-19 vaccination rollout and mobility restrictions implemented by government. The resurgence of the Delta variant does post a risk to countries with relatively low vaccination rates. On the other hand, Japanese equities rallied over the quarter amid decline in Covid cases and more certainty around the political front after the Prime Minister election.

On the fixed income side, financial markets saw a broad-based rise in yields towards the end of the quarter on the back of a hawkish pivot by key central banks around the globe. In the US, the Federal Reserves signaled their intention to slow the pace of asset purchases (potentially in November). Government bonds were pressured after their rally earlier in the quarter. Corporate spreads remained resilient, with high yield outperforming investment grade over the quarter.

 

Portfolio performance

Returns net of feesDefensiveModerateAggressive
Jul0.8%0.8%0.9%
Aug0.7%1.7%2.1%
Sep-1.7%-2.5%-3%
Since Inception (Feb 2017)21.1%38.56%52.13%

The multi asset portfolios produce positive returns in Q3 and YTD Allocation to equities, notably developed markets, remained the key contributors to absolute performance YTD. 

The fixed income allocations reflect the general market observations. YTD, in absolute terms, contributions were negative with an exception of high yield, floaters and interest rate hedged credit. The low duration position had helped limiting the downside as long-dated US treasuries remained the largest underperformer year-to-date.

 

Portfolio Allocation and top portfolio holdings (end of Sept 2021)  

q321-conservative-usd

q321-moderate-usd

q321-aggressive-usd

Outlook

The turnover of this rebalance is low. Supply chain disruption and increasing demand driven by reopening pushed oil prices higher. Therefore, Canadian equities were added given the energy exposure in the country which would benefit from the higher energy price.  As vaccination rate stay high in developed markets, it is expected that the region will continue to benefit from the broadening restart. The underweight in emerging market equities is kept. Growth expectations have been reduced and policy risk in China, coupled with a weak earnings season relative to the other regions. Within the fixed income sleeve, it was added the long end of US Treasury yield as the recent increase in yield has provided a good entry point to unwind some of the underweight positions.

Disclaimer

SaxoSelect is offered and issued by Saxo Capital Markets Pte Ltd (“Saxo Markets”). Products or services offered by Saxo Markets or its affiliates or related entities are not sponsored, endorsed, sold, guaranteed or promoted by BlackRock (Singapore) Limited (“BSL”) or its affiliates or related entities (collectively, “BlackRock”) and BlackRock is not affiliated with Saxo Markets. BlackRock does not make any representation or warranty, express or implied, to the investors or any member of the public regarding the advisability or suitability of investing in any product or service offered by Saxo Markets, including SaxoSelect. BSL’s role is limited to the provision of model portfolios to Saxo Markets which are non-binding on Saxo Markets (for the avoidance of doubt Saxo has full discretion and responsibility for SaxoSelect and may make investment decisions that are independent of and differ from the model portfolios). BlackRock (i) is not an investment advisor or fiduciary to any client or potential client of Saxo Markets, or investor in SaxoSelect and (ii) is not responsible for determining the suitability or appropriateness of the model portfolios for any clients or potential clients of Saxo Markets, or investor in SaxoSelect and (iii) will not be liable to any client or potential client of Saxo Markets for any losses, damages, costs or expenses associated with the model portfolios provided to Saxo Markets. BlackRock does not place trade orders for Saxo Markets or any product or service offered by Saxo Markets, including SaxoSelect. BlackRock does not guarantee the performance of any of its funds or products. iShares® and BlackRock® are registered trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other trademarks, service marks or registered trademarks are the property of their respective owners.

This material is provided for marketing and/or information purposes only. Fee charges mentioned herein are subject to change – you may find the latest updated pricing information on the description page for the respective portfolios. None of the information contained herein constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy. Saxo Capital Markets does not take into account your personal investment objectives, specific investment goals, specific needs or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. The information and commentaries are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Saxo Capital Markets. Any expression of opinion (which may be subject to change without notice) is personal to the author and the author makes no guarantee of any sort regarding accuracy or completeness of any information or analysis supplied. Although every endeavour has been made to ensure that our trading platforms are secure and reliable, please note that as with all facilities and systems, our trading platforms may be vulnerable to temporary disruption or failure. If you undertake transactions on an electronic trading system, you will be exposed to risks associated with systemic failure, i.e. failure of hardware and software.  

See the full Managed Portfolio Disclaimer for more information. Please also consider our Risk Warning and General Business Terms before trading with us.

Saxo Markets
Most of our staff in Singapore are working from home to help limit the spread of the coronavirus. We remain at your service on the details below. Thank you for your understanding.

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.