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 5^th May 2016.

Comments

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