April has been a month of recovery for the portfolios. A lift of around 10% in the global markets has helped the portfolios come back. In addition, the rebalance we executed has put an extra punch into many of our clients’ individual plans. At first glance, it looks like the rebalance could have added another 1% to your April bounce back. This assumes that you roughly dropped one level of risk as the markets declined, which is typical of what we were seeing.
The sustainable portfolios continue to outperform over the year to date but we have seen a small catch up by the standard portfolios in the last month.
Table 1
One of he reasons for the underperformance of the standard portfolios lies with the tilts we have to smaller companies. This part of the portfolios dropped faster in the decline as you would expect intuitively. Looking at Table 2 you can see that the smaller companies were hit substantially more and the equities in the sustainable fund we use behaved like the general market.
Table 2
Given the rebalance in early April, clients in the standard portfolios would have been buying more of the tilted fund and picking up solid smaller companies at juicy prices. As these smaller companies bounce back faster that has benefitted the standard portfolios, as we can see in April.
The sustainable portfolios will also be benefitting from having the oil companies filtered out. That is something we will look at in more detail in the future.
The take-home message for this week is that we have had a month of recovery and that the rebalance has helped us to bag a “Brucie Bonus”.
As to the future? Well, perhaps when the engines of the economy fire up again, we will see a further recovery. Those engines may sound like an old lawnmower in the early days! It may take a few pulls on the starter cord! We will, however, get there.