Diversification across regions and asset classes is key since there is no asset class that consistently outperforms over time.
Throughout history, academia and industry both confirm that asset class selection is the outmost contributor to overall portfolio performance. The following graph highlights Calendar year returns by asset class. It clearly illustrates how the top performers from 1997 until 2017 varied throughout the decades.
| 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 33% U.S. Stocks |
29% U.S. Stocks |
66% Emerging Market Bonds |
50% Commodities |
4% U.S. 10Y Treasury Bonds |
32% Commodities |
56% Emerging Market Stocks |
26% Emerging Market Stocks |
35% Emerging Market Stocks |
33% Emerging Market Stocks |
40% Emerging Market Stocks |
20% U.S. 10Y Treasury Bonds |
79% Emerging Market Stocks |
19% Emerging Market Stocks |
17% U.S. 10Y Treasury Bonds |
19% Emerging Market Stocks |
32% U.S. Stocks |
14% U.S. Stocks |
1% U.S. Stocks |
12% U.S. Stocks |
38% Emerging Market Stocks |
| 12% Emerging Market Bonds |
20% Developed Stocks ex-U.S. |
41% Commodities |
15% U.S. 10Y Treasury Bonds |
1% Emerging Market Bonds |
22% Developed Gov't Bonds ex-U.S. |
39% Developed Stocks ex-U.S. |
21% Developed Stocks ex-U.S. |
26% Commodities |
27% Developed Stocks ex-U.S. |
33% Commodities |
10% Developed Gov't Bonds ex-U.S. |
32% Developed Stocks ex-U.S. |
15% Emerging Market Stocks |
8% Emerging Market Bonds |
19% Emerging Market Bonds |
23% Developed Stocks ex-U.S. |
11% U.S. 10Y Treasury Bonds |
1% Emerging Market Bonds |
12% U.S. Stocks |
26% Developed Stocks ex-U.S. |
| 11% U.S. 10Y Treasury Bonds |
18% Developed Gov't Bonds ex-U.S. |
27% Developed Stocks ex-U.S. |
14% Emerging Market Bonds |
-2% Emerging Market Stocks |
15% U.S. 10Y Treasury Bonds |
29% U.S. Stocks |
17% Commodities |
14% Developed Stocks ex-U.S. |
16% U.S. Stocks |
12% Developed Stocks ex-U.S. |
-11% Emerging Market Bonds |
28% Emerging Market Bonds |
12% Emerging Market Bonds |
5% Developed Gov't Bonds ex-U.S. |
18% Developed Stocks ex-U.S. |
-1% Commodities |
6% Emerging Market Bonds |
1% U.S. 10Y Treasury Bonds |
11% Commodities |
22% U.S. Stocks |
| 2% Developed Stocks ex-U.S. |
13% U.S. 10Y Treasury Bonds |
24% Emerging Market Bonds |
-3% Developed Gov't Bonds ex-U.S. |
-4% Developed Gov't Bonds ex-U.S. |
13% Emerging Market Bonds |
26% Emerging Market Bonds |
12% Developed Gov't Bonds ex-U.S. |
11% Emerging Market Bonds |
10% Emerging Market Bonds |
11% Developed Gov't Bonds ex-U.S. |
-37% U.S. Stocks |
26% U.S. Stocks |
9% Commodities |
2% U.S. Stocks |
16% U.S. Stocks |
-2% Emerging Market Stocks |
-2% Emerging Market Stocks |
0% Developed Stocks ex-U.S. |
10% Emerging Market Bonds |
10% Developed Gov't Bonds ex-U.S. |
| -4% Developed Gov't Bonds ex-U.S. |
-12% Emerging Market Bonds |
21% U.S. Stocks |
-9% U.S. Stocks |
-12% U.S. Stocks |
-6% Emerging Market Stocks |
21% Commodities |
12% Emerging Market Bonds |
5% U.S. Stocks |
7% Developed Gov't Bonds ex-U.S. |
10% U.S. 10Y Treasury Bonds |
-43% Developed Stocks ex-U.S. |
13% Commodities |
8% Developed Stocks ex-U.S. |
-1% Commodities |
4% U.S. 10Y Treasury Bonds |
-5% Developed Gov't Bonds ex-U.S. |
-3% Developed Gov't Bonds ex-U.S. |
-6% Developed Gov't Bonds ex-U.S. |
2% Developed Gov't Bonds ex-U.S. |
9% Emerging Market Bonds |
| -12% Emerging Market Stocks |
-25% Emerging Market Stocks |
-5% Developed Gov't Bonds ex-U.S. |
-14% Developed Stocks ex-U.S. |
-21% Developed Stocks ex-U.S. |
-16% Developed Stocks ex-U.S. |
19% Developed Gov't Bonds ex-U.S. |
11% U.S. Stocks |
2% U.S. 10Y Treasury Bonds |
1% U.S. 10Y Treasury Bonds |
6% Emerging Market Bonds |
-46% Commodities |
4% Developed Gov't Bonds ex-U.S. |
8% U.S. 10Y Treasury Bonds |
-12% Developed Stocks ex-U.S. |
2% Developed Gov't Bonds ex-U.S. |
-7% Emerging Market Bonds |
-4% Developed Stocks ex-U.S. |
-15% Emerging Market Stocks |
2% Developed Stocks ex-U.S. |
6% Commodities |
| -14% Commodities |
-36% Commodities |
-8% U.S. 10Y Treasury Bonds |
-31% Emerging Market Stocks |
-32% Commodities |
-22% U.S. Stocks |
1% U.S. 10Y Treasury Bonds |
5% U.S. 10Y Treasury Bonds |
-9% Developed Gov't Bonds ex-U.S. |
-15% Commodities |
5% U.S. Stocks |
-53% Emerging Market Stocks |
-10% U.S. 10Y Treasury Bonds |
5% Developed Gov't Bonds ex-U.S. |
-18% Emerging Market Stocks |
0% Commodities |
-8% U.S. 10Y Treasury Bonds |
-33% Commodities |
-33% Commodities |
0% U.S. 10Y Treasury Bonds |
2% U.S. 10Y Treasury Bonds |
Scroll to see previous and nexts years.
In the previous years, sophisticated investing solutions were limited to the institutional level; now these are broadly available.
Globally, investors are moving away from products that offer limited investment opportunities and towards a model, or a “whole portfolio” approach.
Today, any person that wishes to invest has access to a diversified Model Portfolio Solution through our digital platform.
Our model portfolios are designed and managed in partnership with BlackRock’s Model Portfolio Solutions. The purpose of these model portfolios is to deliver efficiency, transparency, and cost effectiveness. The selected UCITS ETFs that are part of the Model Portfolios are designed to meet specific goals such as global diversification, tactical exposures, and tax efficiency. The implementation procedure guides each individual investor on how to invest in the most appropriate vehicle for their profile. The vehicle selection process is primarily driven by exposure, efficiency, and cost; leveraging more than 300 UCITS ETFs.
The variables in the systematic optimization process are Return-Risk-Efficiency.
The Model Portfolio Solutions (MPS) Construction is a simple four-step process that leverages the entirety of BlackRock’s technology and risk platform.
Risk Capacity
When you open your account, we ask you a few questions so we can determine your attitude towards risk and risk tolerance, investment knowledge and objectives, your net worth, time horizon and liquidity needs.
Investment Vehicles
In order to create globally diversified portfolios, the Model Portfolios use across-the-board uncorrelated asset-classes. In order to accomplish this, it only uses UCITS ETFs. Regularly, the universe of UCITS ETFs in the Model Portfolios is reviewed to identify the most appropriate ones to represent each of the asset classes. The Model Portfolios include the UCITS and ETFs that offer market liquidity, minimize tracking error and are tax efficient.
Asset Allocation
Based on the systematic investment process and after an in-depth analysis on each asset class, together with BlackRock we determine the optimal mix for your portfolio to generate a return at the lowest risk. The objective is to create an asset allocation that produces the maximum possible return while respecting your particular risk tolerance. Translating investor outcomes and restrictions into globally well-diversified allocations: Return – Risk – Cost.
Monitoring and Rebalancing
To keep portfolios in track with long-term goals, the Model Portfolios are monitored and regularly rebalanced back to its target mix in an effort to optimize returns for their intended level of risk.
A UCITS ETFs is a security that usually tracks a basket of stocks, bonds, or assets like an index fund, but trades like a stock on a stock exchange. They closely track their benchmarks, such as Dow Jones Industrial Average or the S&P500. They provide great diversification, offer ample liquidity, and are tax efficient for investors who do not reside in the U.S.
We only use UCITS ETFs that have a definite mandate to passively track benchmark indexes. This restricts the fund manager to simply replicate the performance of the benchmark they follow and ensures the same level of investment diversification as the benchmark itself.
