Friday, 5 May 2023
Written by MYTHEO
In this monthly report, we will review MYTHEO’s portfolio performances based on the financial market developments in April 2023.
1. Growth Portfolio
MYTHEO’s Growth Portfolio was up by 1.22% (2.33% in MYR) in April 2023.
For April, the portfolio’s algorithm remained constant with emphasis on US exposure given a stronger reduction of realised risk compared to Asia and emerging markets exposure. Global equities were positive on average coming into the quarterly earnings season, although China large caps retreated to the lower end of the 3-month price range.
The portfolio’s allocation to the UK-focused EWU (about 10%) was a key contributor to the overall portfolio performance during the period.
Top 3 ETFs (Growth portfolio)
ISHARES MSCI UNITED KINGDOM (EWU)
WISDOMTREE INDIA EARNINGS (EPI)
ISHARES MSCI BRAZIL (EWZ)
Bottom 3 ETFs (Growth portfolio)
ISHARES MSCI FRONTIER 100 (FM)
ISHARES RUSSELL 2000 VALUE (IWN)
ISHARES CHINA LARGE-CAP (FXI)
2. Income Portfolio
MYTHEO’s Income Portfolio recorded a return of +0.36% (+1.46% in MYR) in April 2023.
The portfolio underwent reallocation this month, adding floating rate bonds and longer-term bonds as their risk-adjusted yields climb while trimming down on shorter-termed exposures. The current weighted 30-day yield of the ETFs in the portfolio is around 5.4%.
The portfolio’s exposure to 3-7 Year Treasuries (about 20%) continued to be the key contributor to the overall portfolio performance during the period.
Top 3 ETFs (Income portfolio)
ISHARES FLOATING RATE BONDS (FLOT)
SPDR BLACKSTONE/GSO SENIOR LOAN (SRLN)
ISHARES 3-7 YEAR TREASURY BONDS (IEI)
Bottom 3 ETFs (Income portfolio)
ISHARES 20+YEAR TREASURY BONDS (TLT)
SPDR BARCLAYS SHORT-TERM HIGH YIELD (SJNK)
ISHARES IBOXX HIGH YIELD CORPS (HYG)
3. Inflation Hedge Portfolio
MYTHEO’s Inflation Hedge Portfolio saw a positive return in April 2023, increasing by 0.52% (+1.61% in MYR).
The current largest positions in this portfolio are U.S real estate and inflation linked bonds. The positions in US real estate, infrastructure and base metals positions are mostly driven by their ability to hedge long-run inflation. The positions in inflation-linked bonds and gold not only help to hedge against inflation but also provide a higher diversification benefit relative to other asset classes.
The portfolio’s allocation to US real estate (about 30%) was the key contributor to the overall portfolio performance during the period.
Top 3 ETFs (Inflation hedge portfolio)
SPDR DJ INTERNATIONAL REAL ESTATE (RWX)
ISHARES SILVER TRUST (SLV)
ISHARES GLOBAL INFRASTRUCTURE (IGF)
Bottom 3 ETFs (Inflation hedge portfolio)
ISHARES TIPS BOND (TIP)
INVESCO DB BASE METALS (DBB)
ISHARES S&P GLOBAL CLEAN ENERGY INDEX (ICLN)
4. Global ESG Portfolio
MYTHEO’s Global ESG portfolio is up by 0.69% (+1.79% in MYR).
Similar to the growth portfolio, the preference and exposure to the US is about 60%. The US occupies a significant fraction of Environmental, Social and Governance-focused (ESG) investments with a longer track record, therefore our portfolio follows this trend in terms of placing a higher weighting in US markets, in addition to better risk management compared to investment in newer and more volatile emerging markets.
The portfolio’s allocation to ex-US developed market stocks (about 25%) was the key contributor to the overall portfolio performance during the period.
Top 3 ETFs (Global ESG portfolio)
ISHARES ESG AWARE MSCI EAFE (ESGD)
ISHARES ESG AWARE MSCI USA (ESGU)
NUVEEN ESG LARGE-CAP VALUE (NULV)
Bottom 3 ETFs (Global ESG portfolio)
ISHARES MSCI USA ESG SELECT (SUSA)
NUVEEN ESG LARGE-CAP GROWTH (NULG)
ISHARES ESG AWARE MSCI EM (ESGE)
Chart 1: April 2023 - Portfolio Year-to-Date of Return in % (MYR)
Do you know how to calculate your actual monthly portfolio return?
As part of diversification, the actual portfolio returns to the investors are the combined weightage return from the allocation to each functional portfolio.
For example, if an investor allocates 33% of their investment in Growth, 32% in Income and 35% in Inflation Hedge, the actual portfolio return for April is 1.80% [(33% x 2.33%) + (32% x 1.46%) + (35% x 1.61%)]
The US Dollar strengthened against the Malaysian Ringgit in March by 1.09% to RM4.4580 as of the 30th of April 2023, compared to RM4.4100 as of the 31st of March 2023. This had a positive impact on the performance of the portfolio in Ringgit terms due to the appreciation of the US Dollar.
Global stocks continued to grow in April, with more than half of companies within the S&P 500 that have released their results by end-April reporting better than expected earnings and revenues for the first quarter. Global bond prices also climbed, with the US Federal Reserve being likely to raise rates slightly in the coming meeting in May before a potential pause. Real estate experienced a recovery alongside the continued growth of precious metals, but clean energy stocks and base metals fell sharply.
Inflation continued to moderate in the US with the figure dropping from 6% to 5% in March. This is in contrast to Europe, where countries like the UK (10.1%) and Germany (7.2%) continue to face price pressures. On the other side of the world, Australia is also fighting against rising prices with the last figure coming in at 7%. This would emphasise on the likely divergence of other central bank policies from the US’s efforts.
In Asia, Chinese manufacturing PMI showed factory activity contraction in April due to weaker exports, going against increasing consumer spending (that may contribute to neighboring countries) and suggesting the need for continued stimulus. Meanwhile, India surpassed China as the world’s most populous country, with the markets contemplating on whether India may be able to capitalise on it to create an economic boom.
As the world continues to normalise to its own bout of “long COVID”, the movement of global markets in relation to one another is still far from predictable. As such, we in MYTHEO continue to advocate proper diversification in your holdings, to prepare your portfolio for most eventualities and achieve your long-term financial goals.
Investors who are looking for a more defensive approach to investing may consider investing in MYTHEO USD Trust Portfolio. The current net interest rate for this portfolio is 4.08%p.a. and is subject to change depending on the Federal Reserve's monetary policy and the Federal Open Market Committee's (FOMC) decision on the federal funds rate. This portfolio will be a great place to park your investment funds while waiting for opportunities to emerge.
A digital investment platform like MYTHEO is here for you to achieve your long-term financial targets by having diversified investments in an easy and affordable way. Learn how MYTHEO can help you diversify your portfolio today, and how you can get started here.
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This material is subjected to MYTHEO's Notice and Disclaimer.