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 21st Fixed Income Portfolio Update
The performance of the BarCap US Agg Bond TR (BarCap) index has been on a tear as of late. The FolioMetrix Fixed Income FolioModel is designed to provide absolute real return for investors and to mitigate risk. We have experienced short term under performance in relationship to the BarCap, but we are comfortable that we are meeting our performance objective of providing real returns in excess of the Consumer Price Index (CPI).
The breakdown by super-sector for the BarCap is as follows:
US Government Debt = 43.93%
Mortgage = 31.51%
US Credit = 18.82%
Non US = 5.76%
The breakdown by super-sector for the Folio Metrix Fixed Income FolioModel is as follows:
US Government Debt = 4.18%
Mortgage = 49.69%
US Credit = 28.94%
Non US = 17.19%
The Fixed Income FolioModel is tremendously underweighted in US Government Debt and has been for quite a while. The Fixed Income FolioModel is over weighted in every other super sector as it pertains to the BarCap. A very large percentage of the performance from the BarCap is attributable to its large weighting in US Government Debt.
As of the end of August 2011, the Morningstar US Government Debt Index has actually returned 6.78% over the past 6 months. This is by far the best performing super-sector and makes up the biggest allocation in the BarCap.
To dig deeper, the Long-Term US Government Debt Index returned 14.57% compared to 2.13% for the Short-Term US Government Debt Index. A majority of the Fixed Income FolioModel’s allocation in Core is made up of these shorter term securities.
The Fixed Income FolioModel is structured to lean on the side of protection; thus when investors get frantic and Treasuries run up like they have, there is a big possibility that the Fixed Income FolioModel will miss out on those big gains. However, it also assures that the portfolio will not be exposed to big losses. The structure is designed to provide a steady return (very low volatility, especially on the down side).
We anticipate that the US Government Debt has over performed and should normalize to its mean and that the Fixed Income FolioModel is structured efficiently to avoid such losses. We have missed the opportunity for large recent gains to our underweighting in Treasuries and overweighting in non-US debt, however, we believe that this was prudent and consistent with our objective of avoid big losses in this portfolio and creating absolute returns for investors.
Important performance and disclaimer information about the Models and the Benchmarks is contained in the site’s Disclosures page and should be read in conjunction with the information presented above.
This article, written by Chase Weaver, Portfolio Analyst, was originally published at FolioMetrix LLC .