- Returns are benchmarked against 75% VT (Vanguard Total World Stock ETF) and 25% BND (Vanguard Total Bond Market ETF)
- Returns measure both income and capital appreciation and are calculated using ShareSight. For historical figures go to Model Portfolio Performance. Go to the following link for monthly portfolio reviews
- Transactions are shown below the table and done strictly on a month-end basis. Rebalancing between the themes is therefore also done on a monthly basis, and when making tactical adjustments I stick to maximum ranges for every theme (as described in each theme post)
Current model portfolio allocation
|Rising interest rates||2018-03||2018-03||10.0%|
|The next market crash||2018-03||2018-03||5.0%|
|Low volatility high yield||2018-03||2018-05||11.7%|
|Robotics / Automation||2018-03||2018-03||5.0%|
Model portfolio holdings remarks
- The benchmark is 75% stocks / 25% bonds, while the model portfolio currently has 32% in defensive themes and cash.
- Both the Core Bond and Core Equity themes contain international and emerging market exposure, unlike their benchmark counterparts. Within the defensive part of the portfolio there is a tilt towards a theme that copes with rising interest rates and high yield at low volatility (which is at the max of it’s allowed position size). Meanwhile in the risky part of the portfolio there is a tilt towards a theme positioned for the late business cycle.
- Structural theme allocations are relatively low at the moment as I foresee the market turning down at some point, and some of these are portfolios with a higher market beta. Nevertheless Water Scarcity, Healthcare Innovation, Robotics/Automation and Modern Agriculture are still high conviction holdings that I won’t mind holding on to throughout the next crash. In total these structural themes (defined as non-geographical, non-event driven themes that should play out over the longer run) form 38% of the portfolio, compared to 40% a month ago.
Historical model portfolio allocation
|Rising interest rates||10.0%||10.0%||10.0%|
|The next market crash||5.0%||5.0%||5.0%|
|Low volatility high yield||5.0%||5.0%||11.7%|
|Robotics / Automation||5.0%||5.0%||5.0%|
Trade notes 30 April 2018: Major changes. Reducing frontier markets and overvalued (in terms of constituents) themes like Healthcare Innovation, Global Tourism and Clean Energy. Partly replace them with the Low Vol High Yield portfolio. Close the Trade Wars theme as the issue seems close to being resolved. Reduce Core Equity and Frontier Markets as the strong dollar is likely to inflict more pain on emerging and frontier markets. Opportunistically add Cybersecurity and Blockchain in small portions, while the Late Cycle and Stagflation themes becomes a sizeable part of the portfolio. A cash balance exists for the first time. Defensive themes now form 31.7% of the portfolio.
- Buy 6.7% Low Volatility High Yield
- Buy 1.0% Modern Agriculture
- Buy 2.5% Stagflation
- Buy 2.5% Cybersecurity
- Buy 2.5% Blockchain
- Buy 7.5% Late Cycle
- Sell 0.5% Global Tourism
- Sell 2.5% Frontier Markets
- Sell 5.0% Healthcare Innovation
- Sell 10.0% Core Equity
- Sell 2.5% Clean Energy
- Sell 2.5% Trade Wars
- Balance 0.3% in cash
Trade notes 30 March 2018: Switch out of healthcare into the trade war theme by 2.5%.
Trade notes 28 Feb 2018: Establish the model portfolio along a 75% risky assets / 25% lower risk assets allocation. I keep 27.5% core equity and replace the remaining 47.5% of that bucket with themes that I have high conviction in. Given the rising interest rates environment we are in, I only keep 5.0% of the core bond portfolio and replace 20.0% with the rising rates, market crash and low vol high yield themes.