MIXED ASSET
Three-year sector performance
SECTOR ANALYSIS
The mixed asset international sector posted
a slight positive return and better than
that of mixed asset Asia-Pacific, which fell
marginally over the three-year period. Top
performers in the category generally showed
higher exposure in developed market equities
and in particular, exposure to the US, where
performance was strong. In addition, funds
taking a more aggressive asset allocation
stance typically performed better over the
period. Bottom performers were mainly
funds that showed structural biases toward
emerging markets and/or alternative assets.
MARKET REVIEW
Source: FE Analytics (31 Mar ’13 to 31 Mar ’16)
Three-year annualised return/volatility
Performance from global equities diverged
over the three-year period, with the MSCI
World and MSCI Emerging Markets indices
posting +10% and -10%, respectively. This was
driven by a stronger than expected recovery
in the developed markets and in particular
the US, as well as the accommodative stance
by the major central banks. On the other
hand, emerging market equities were hit
hard by multiple factors including China’s
economic slowdown, falling commodity
prices and capital outflows. For fixed income,
corporates and high yield generally posted
stronger gains in 2013 as macroeconomic
data continued to improve. However,
sovereign bonds subsequently performed
better as the central banks including the
ECB continued with its asset purchases and
increasing market uncertainties drove capital
into safer-assets. Spreads in global corporate
and high yield generally widened relative to
levels reached three years ago. Overall, the
Barclays Global Aggregate index gained 2.6%
in US dollar terms over the period.
MARKET OUTLOOK
With several European central banks and the
Bank of Japan approaching negative interest
rates, the yields on short-medium JGBs and
German bunds also went negative. Treasury
yields are also staying at a very low level
against their long-term historical average.
Against such a backdrop, the valuations of
global equities have stayed attractive relative
to sovereign bonds. Energy and commodity
prices have undergone a sharp correction
following concerns over structural changes in
supply and demand expectations. With prices
at such low levels, any positive news such as
weakness in the US dollar will provide tactical
trading opportunities.
Source: FE Analytics (31 Mar ’13 to 31 Mar ’16)
Provided by FE Advisory Asia as of 31 May ’16
www.fundselectorasia.com