Global Fund Manager’s All-Weather Portfolio Outperforms Benchmark
A global fund manager has achieved impressive results with their all-weather portfolio, outperforming the benchmark index by 2.55 percent on an annualized basis since its inception in March 2021. The portfolio has consistently delivered strong returns, including a 29.35 percent gain over the 12-month period ending June 30, compared to the benchmark’s 22.59 percent.
The strategy, which typically consists of 30 to 40 stocks, is available to Australian investors through a separately managed account (SMA) that was launched in December 2021 by Emanuel Whybourne. The SMA has also been added to the investment platform Praemium, providing wider accessibility for investors.
Managing risk and maintaining a balance have been key factors in the fund’s success. The fund manager has carefully controlled exposure to certain stocks, particularly what they refer to as the Magnificent Seven – Alphabet, Amazon, Nvidia, Tesla, Meta, Microsoft, and Apple. These stocks have had a significant impact on the performance of the US share market this year.
Though the fund manager is currently underweight in technology companies, the portfolio’s overweight position in the semiconductor space has been successful. The fund manager expects the semiconductor industry to grow alongside the tech giants of Wall Street, as they supply essential tools for their growth and expansion.
Artificial intelligence (AI) is a significant theme in the fund’s investment strategy. The fund manager has identified three stocks that cover every step of the semiconductor production process, ensuring exposure to this important sector. Dutch company ASML develops and manufactures photolithography machines, Advanced Micro Devices designs the chips, and Taiwan Semiconductor Manufacturing Company (TSMC) produces the chips.
Having captured the recent AI-driven rally that pushed the S&P 500 index into a bull market, the fund manager decided to take some profits in Advanced Micro Devices and ASML. Additionally, they made changes to their holdings, swapping Microsoft for investments in Meta and Amazon, although they remain open to reversing that trade in the future.
While remaining cautiously optimistic about the macroeconomic outlook, the fund manager believes the market may be pricing in overly positive news. As a result, they have reduced exposure to cyclical stocks and increased holdings in defensive sectors. The fund now holds an overweight position in healthcare, which had been underweight at the end of the previous year.
Another area of focus for the fund manager is the durability of the US housing market. They have invested in companies such as James Hardie Industries, Stanley Black & Decker, and Sherwin-Williams, which are involved in building materials, tools, and coatings.
The fund manager has chosen to be underweight in banks due to concerns about credit risk. They do not believe the potential upside offered by banks is sufficient to offset the downside risk of a significant credit event.
The fund manager’s experience in the financial markets dates back to their early investment success with Suiza Foods. This led to a career in the financial industry, including a role as portfolio manager at T. Rowe Price, where they gained valuable experience managing a global sector fund.
Beyond their professional life, the fund manager enjoys fishing and hiking as hobbies to help them relax and clear their mind from the daily fluctuations of the market. Spending time with family also provides a welcome distraction, offering a reminder of what truly matters in life.
In summary, a global fund manager has achieved impressive results with their all-weather portfolio, delivering consistent outperformance compared to the benchmark index. By focusing on risk management, carefully selecting stocks, and identifying emerging investment themes, the manager has navigated market fluctuations successfully. With a track record of delivering strong returns, this fund offers Australian investors an opportunity to participate in a well-balanced and resilient investment strategy.
