Skip to main content

Global Min Volatility index: adding to equities, funded from commodities



Adding to equities
Results of our monthly rebalancing of the Elston Strategic Beta Global Min Volatility suggests adding to Equities and further reducing exposure to Commodities.

The strategy’s current allocation to equities is 31.18% which is +4.10ppt from last month, +3.59ppt from end 2015, and -28.02ppt lower than this time last year.  Allocation to commodities steadily increased from May 2015 and with a -12 month peak allocation of 19.04% in August 2015.

Over the last 12 months*, the effective return for the index is 4.14% and annualised volatility is 5.92%.

About the index
This Elston Strategic Beta Global Min Volatility Index (ticker ESBGMV) aims to provide a globally diversified multi-asset long-term growth strategy with minimised portfolio risk (minimum volatility). The index invests in ETFs which are transparent, cost-efficient, liquid vehicles that are publicly traded.

This index is weighted according to a proprietary methodology based on an optimisation strategy using an algorithm to minimise the ex-post combined volatility of the portfolio subject to various constraints, for example the maximum number of ETFs held within the index is 50.
Because risk/return characteristics of different asset classes change over time, the allocations to different ETFs of different asset classes is also dynamic, but at all times targeting the least volatile combination of asset classes.

Asset Allocation Snapshot
May-15
Dec-15
Apr-16
May-16*
Equities
59.20%
27.59%
27.08
31.18%
Alternatives
7.63%
7.31%
9.18%
9.53%
Commodities
1.39%
15.16%
14.12%
9.16%
Corporate Bonds
15.92%
30.20%
29.7%
30.04%
Government Bonds
15.85%
19.74%
19.10%
20.10%

Source: Elston Consulting, *as at close 5th May 2016.
Labels:

Comments

Post a Comment

Popular posts from this blog

UK votes for Brexit

UK public votes 52% to 48% to leave the EU: the exit process could take 2 to 4 years. Regional differences will create further constitutional strain on the UK Pound plunging, and expect UK Equities to follow suit. Expect flight to safety away from risk assets as the market digests the potential for structural change. Brexit it is The UK public has voted to leave the European Union after 43 years in yesterday’s referendum. Leave has 51.7% of votes so far with 71.8% turnout (higher than pervious general election) suggests a vote for Brexit by a narrow margin. The leaving process could take a minimum of two years, and even Leave campaigners don’t expect the process to complete until 2020. Opinion polls were too close to call Polling pointed to a closer result and recent momentum for the Remain campaign which had given markets an element of (false) security: the final poll put 45% Leave, 44% Remain, 11% Don’t Know.  While the binary nature of the debate suggested...
Post a Comment
Read more

UK equity "recovery" is a USD translation effect

Confidence that UK equities having "made up lost ground" post-Brexit is misplaced. The largest UK companies that make up the bulk of the FTSE 100 and the MSCI UK Index have high exposure to global earnings. Apparent "strength" in the largest UK equities is just a translation effect of that revenue exposure. So the apparent uptick in UK equities offers no real comfort for global USD-based investors. For GBP-denominated ETFs tracking MSCI UK Equity (e.g. LSE:CSUK) performance is +3.7% since the EU Referendum Day 23rd June 2016 before votes were counted. Over the same period, the USD version of the same ETF (e.g. NYSEARCA:EWU) performance is -9.3% while sterling has weakened -12.4% (FXB). Performance of MSCI UK (LSE:CSUK) in GBP since EU Referendum Performance of MSCI UK (EWU) in USD since EU Referendum Chart Source: Google Finance
Post a Comment
Read more

Investors in UK property ETFs not affected by £9bn property funds lock-in

Trading in UK property funds totalling £9bn AUM has been suspended, locking investors into an asset class exposure they may no longer wish to have. This is a stark reminder that the liquidity of any fund is only as good as its underlying holdings Investors using UK property ETFs are unaffected owing to the more liquid nature of the structure and of the underlying Post-Brexit fears around commercial property values has led to managers of three UK property funds locking investors in.  They fear a potential rush of investors to sell units following the Brexit result in the EU Referendum.  Decisions to suspend will typically reviewed every 28 days.  The funds affected are those managed by Standard Life, Aviva and M&G, totalling some £9bn of assets (see table). While the justification given – to “protect the interests of all investors in the fund” – is fair and reasonable, some investors may not be too happy to be locked in for potentially quite a s...
Post a Comment
Read more