As autumn is well and truly upon us, the worries about the second wave of the coronavirus and further lockdowns have started to come to fruition. Global economic, social, and political upheaval has continued. This has not escaped markets which are still being driven by uncertainty on one hand and government support and central bank intervention on the other. The issues of Brexit, the US election, and of course the implications of Covid-19 once more locking down economies have continued to increase unpredictability while the extra liquidity provided by central banks, government support, and the possibility of a future vaccine gives us hope.
In the midst of the increased market volatility, a variation in strategy can be useful. The Guardian portfolios have performed well over the insecurity of the past year. We were able to come out of all markets during the crash in March and in order to protect investments were cautious in re-investing. This led to some of our 6-month numbers to underperform slightly, but as can be shown in the graph, our early exit allowed us to still come out on top over longer periods.
Over the past quarter, performances across the market indices were varied with September posting negative returns for the month across most markets. With the unusually high amount of volatility these numbers can vary daily. Still, the majority of our shorter performance figures outperformed their benchmarks as shown in the cumulative performance chart.
Our portfolios show clear outperformances over 1 month, for the majority of the portfolios over 3 months, and large outperformances from 1 to 5 years compared to their relevant benchmarks.
This performance has been driven by our asset allocation while we have also continued to monitor the underlying funds and their trends to indicate when it would be prudent to come out of certain equity markets or individual funds.
At the beginning of August, we completed a fund review to replace funds which did not perform well and selected some funds which specifically followed developed indices. Since this time, we have reduced our UK allocation and increased our Japanese allocation. We have also reduced our bond duration risk by moving away from long duration government bonds into shorter duration bonds. A full update on our trade decisions and performance is available in the attached complete Crossing Point Guardian October 2020 Review.
The Crossing Point Guardian Portfolios were again able to reduce volatility and maximum drawdown compared to their benchmarks. The 3-year volatility for the Guardian portfolios ranged from 8.16% for the Adventurous portfolio to 3.85% for the Defensive portfolio compared to the benchmark volatilities of 10.81% to 5.75%.
The Guardian portfolios also experienced much smaller maximum drawdowns ranging from -10% for the Adventurous portfolio to -4.49% for the Defensive portfolio while the benchmarks had drawdowns ranging from -15.41% to -8.59%.
This can have long lasting implications for the returns for these investments as well as a reduction in sequence of returns risk for those income taking investors.
1/10/2019 – 30/09/2020
Source: FE Analytics.
The purpose of the Guardian portfolios is to reduce drawdowns and volatility while also capturing performance. We continue to monitor markets and aim to protect the investments with which we have been entrusted. We wish you and yours well during this time.