May 2012 FMx Dynamic Equity ISM
Friday, May 4th, 2012
The FMx Dynamic Equity ISM seeks capital appreciation without regard to current income. The strategy primarily uses no-load institutional and exchange-traded funds. The portfolio is divided into 4 distinct segments. Each is designed to take advantage of those sectors and areas of the market that offer the best opportunities for good returns based on the [...]
Strategy Diversification
Wednesday, May 2nd, 2012
Our ten investment strategy models (ISMs), which are blended to create Optimized Portfolio Models (OPMs), provide the benefits of diversification through differing market conditions. The last year has been marked with uncertainty, and although the markets have moved upward, there have been very few periods of overly strong trends, either up or down. In fact, [...]
FMx Premier Asset Management Investment Strategy Model (ISM)
Wednesday, April 25th, 2012
The FMx Premier Asset Management Investment Strategy Model (ISM) identifies outstanding global investment managers who have a proven performance record of at least 5 years and a methodology for risk management. The month to date return is -1.09% versus -2.09% for its benchmark, the S&P Global BMI. The year to date return is 10.19 versus [...]
FMx Tax Managed OPMs
Monday, April 16th, 2012
The FMx Tax Managed Objective Portfolio Models have the objective of generating tax free income and tax managed appreciation over a long time horizon with differing degrees of portfolio risk. There are six portfolios including Aggressive, Moderately Aggressive, Moderate, Moderately Conservative, Conservative and Protective. The FMx Tax Managed Protective Model consists of approximately 90% fixed [...]
September 2011 Fixed Income Portfolio Review
For the month of September 2011, the Fixed Income FolioModel returned -1.23% while the BarCap US Aggregate Bond Index returned 0.73%. The underperformance comes from the overweighting and subsequent awful performance of the emerging markets debt within the Opportunistic segment of the model portfolio.
Of course people tend to care much less about volatility when their investments are doing well, however, when the Fixed Income FolioModel is concerned, FolioMetrix is always paying attention to this. In fact the structure of the portfolio was designed with this analytical measure at the forefront of importance.
As for the volatility, the portfolio has been keeping the volatility in check. This is especially important when you consider just how volatile the fixed income markets have been these past few months. The standard deviation of the Fixed Income FolioModel was 1.86 compared to the BarCap US Agg Bond at 5.50. The model portfolio was about 34% less volatile.
It is important to note that the Morningstar Emerging Market Composite Bond Index was down 5.65% this past month. Just less than 10% of our portfolio was actually invested in this category of mutual funds and the portfolio came away getting only a little hurt in terms of performance.
At FolioMetrix, we remain confident that over the course of the next 12 months we will continue to do what we have been doing: providing a portfolio that outpaces inflation (in terms of the return of the US BLS CPI All Urban NSA 1982-1984 Index) and that has returns in line with the BarCap, while being less volatile.
Obviously the portfolio was structured incorrectly to take advantage (or avoid) certain trends in the market this past month. This will occasionally happen when different sectors perform better or worse than others. Since that 10% allocation mentioned previously is usually in High Yield or Emerging Markets, when these sectors get hit, the model portfolio will lag its benchmarks.
To give you a better sense of what the fixed income markets look like right now and how the FolioModel navigates these markets, consider the following:
- Over the past 60 months, the Fixed Income FolioModel has only returned below -1% twice (one of which was this past month).
- The last time this happened was in September 2008 and the emerging markets and high yield were both down 6.57% and 8.44%, respectively.
- Those returns were followed up in October 2008 with returns of -17.11% and 14.21%, respectively (The FolioModel was positioned out of those sectors in that month and returned only -0.39%).
- Double digit GAINS followed in the months after that.
- The Fixed Income FolioModel returned +14.55% in 2009 as those sectors rebounded.
In short, markets go through trends, some up and some down. A solid structure that insulates you from the big downs and can capture the ups will provide your clients a stable portfolio that will complement their equity positions.
This article, written by Chase Weaver, Portfolio Analyst, was originally published at FolioMetrix LLC .