Moderate-Growth Strategy

"However beautiful the strategy, you should occasionally look at the results" -                                                                                

                                                                                      Winston Churchill

  

Historical Risk/Return for a Moderate-Growth Strategy over the last 20 years ending 31.12.2012:

 

Avg. Return p.a. 7% - 9%

Avg. Risk p.a. 10% - 12% 

 

Asset Allocation

Please contact us for the latest update

Current Tactical Asset Allocation        31.1..2016
Moderate-Growth Strategy Benchmark % TAA % Rec. Rel. to prev. AA
Stocks 65.0 55.0 - 75.0 U/W unchanged
Bonds 20.0 10.0 - 40.0 N unchanged
Alternative Asset Class 10.0 5.0 - 15.0 O/W changed
Cash 5.0 0.0 - 20.0 O/W unchanged
Allocation Within Asset Classes        
Domestic Stocks 40.0 41.0 O/W unchanged
Large Cap Stocks 32.0 33.0 O/W unchanged
  • Growth
16.0 16.5 O/W unchanged
  • Value
16.0 16.5 O/W unchanged

Mid-Cap Stocks

5.0 5.0 N unchanged
Small-Cap Stocks 3.0 3.0 N unchanged
Themes* (satellite) 0.0 0.0 - 15.0    
International Stocks 25.0 24.0 U/W unchanged
MSCI World ex domestic 20.0 19.0 U/W unchanged
  • Growth
10.0 7.5 U/W unchanged
  • Value
10.0 11.5 O/W unchanged
Emerging Market Stocks 5.0 5.0 N unchanged
Alternative Asset Classes 10.0 10.0 N unchanged
Domestic REITs** 2.0 2.0 N unchanged
International REITs** 2.0 2.0 N unchanged
Commodities ** 2.0 2.0 N unchanged
Hedge Funds 4.0 4.0 N unchanged
Bonds 25.0 25.0 N unchanged
Core Domestic Bonds 14.0 14.0 N unchanged
Global Bonds 4.0 4.0 N unchanged
High Yield Bonds 3.0 3.0 N unchanged
TIPS ** 4.0 4.0 N unchanged
Cash 0.0 10.0 O/W unchanged

Current tactical overlay:

 

Domestic stocks 50% hedged with Index Futures, remaining total net equity exposure 44.5%.

 

Foreign FX exposure 50% hedged, remaining net foreign FX exposure 15%. 

   

           
* Investment Themes   TAA %   Comment              
Agriculture   0.0 - 3.0   Inflation Hedge**  
Infrastructure   0.0 - 3.0   Inflation Hedge  
Energy   0.0 - 3.0   Inflation Hedge  
Natural Resources   0.0 - 3.0   Inflation Hedge  
Gold Bullion   0.0 - 5.0 O/W Inflation Hedge  
Renewables   0.0 - 3.0   Inflation Hedge  
Timber   0.0 - 3.0   Inflation Hedge  
Water   0.0 - 3.0      
Dividends   0.0 - 5.0 O/W            overweight  
Goldmining   0.0 - 5.0 O/W overweight   
Biotech   0.0 - 3.0      
Innovation   0.0 - 3.0      
Insurance-linked Bonds   0.0 - 5.0 O/W overweight  
Others   0.0 - 3.0      

Up to 85% of foreign currency exposure may be hedged against the reference currency as an overlay on a roll-over basis.

Rebalancing of the portfolio will be done, if necessary on a 3 month basis. Derivatives can be used for yield enhancement like writing (shorting) calls on long equity positions, where implied volatility is high. If a company is approaching fair value, it can be attractive to make a short call. It is almost like taking a second dividend from the firm before deciding to sell. We can also use a dynamic hedge using short index futures for an equity overlay hedge, increasing the hedge when companies look expensive and decreasing the hedge when markets are cheap. However, we do not short single stocks.

Approx. 75% of the equity holdings are long-term core holdings (clear undervaluation and quality companies) and < 25% are perhaps more opportunistic equity positions allowing exploitation of shorter-term opportunities that exist due to market volatility.

 

Our core holdings (no market capitalisation preference) require the following attributes:

Quality   

  • Management with a long-term strategy and a vision
  • Balance Sheet Strength (low leverage, high profitability, low earnings volatility)
  • Sustainable Competitive Advantage
  • Pricing power, Innovation and Research

Valuation

  • Value creation (ROIC>WACC) is underpriced by the market (EV/IC)

Growth

  • Companies targeting and with the ability to deliver consistent above avg. growth

Asset Allocator Simulation:

 

www.dinkytown.net/java/AssetAllocator.html

 

Asset Allocator Simulation for your retirement plans:

 

https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementNestEggCalc.jsf 

 

Looking for a diversified portfolio tailord to your needs:

 

http://kiplinger.com/tool/investing/T052-S001-investment-portfolio-finder/index.php

 

Semi-Annual Portfolio Check and Rebalancing

When did your portfolio get its last checkup?

 

Send us your portfolio and we will do the semi-annual risk/reward check for you.

 

Is your portfolio ready for rising interest rates?

 

 

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