- Standard & Poor’s 500 was up 3.85% during the quarter and up 15.43% over the past 12 months.
- MSCI AC World ex US (international stocks) outperformed US stocks in the quarter by rising 5.43% but underperformed US stocks over the past 12 months by being up 12.60%.
- MSCI Emerging Markets Equities rose 9.15% for the quarter and increased by 17.21% over the past 12 months.
- Barclays US Aggregate Bond underperformed stocks by being up 0.46% during the quarter. The index rose 5.19% over the past 12 months.
- Rogers International Commodities decreased 1.45% for the quarter and was down 2.96% over the past 12 months.
- Gold outperformed the broad commodity market with a 1.36% increase in the quarter. It has risen 18.71% over the past 12 months.
iSectors Allocation Model Commentary
iSectors Post-MPT Allocations
- The Post-MPT Allocations underperformed their respective benchmarks in the quarter. The Post-MPT Growth Allocation had a 0.15% loss while the Post-MPT Moderate Allocation declined by 0.85% for the quarter.
- Over the past 12 months, Post-MPT Growth was up 14.94% and Post-MPT Moderate rose by 12.32%. Post-MPT Growth has underperformed its benchmark, the S&P 500, while Post-MPT Moderate has outperformed its benchmark, the 60/40 stock/bond index over that past 12 months. (60/40 = 60% S&P 500 + 40% Barclays US Aggregate Bond Index.)
- With more than eleven years of real-time performance, Post-MPT Growth has outperformed the S&P 500 by over 180 basis points annually since its 2005 inception with less drawdown. As demonstrated earlier in the year, Post-MPT Growth has outperformed equities during flat to negative markets due to the model’s ability to change its exposure within a universe of low correlated asset classes and flexibility to own more conservative asset classes when market conditions are unfavorable.
- During the quarter, Post-MPT Growth and Moderate were positively impacted by their technology holdings. Energy stocks significantly aided Post-MPT Growth, also. Gold stocks contributed negatively to Post-MPT Growth’s results while utility stocks hurt Post-MPT Moderate last quarter.
- Both models continue to be positioned conservatively. Long-Term Treasury Bonds and technology are large positions in both models. Post-MPT Growth is also overweighted in energy while Post-MPT Moderate has an above market utilities weighting. Technology has increased its holdings in both models while energy has become a higher percentage in Post-MPT Growth during the quarter. Gold stock holdings have declined in both models.
iSectors Liquid Alternatives Allocation
- The Liquid Alternatives Allocation rose 2.97% during the quarter and was up 9.97% over the past 12 months.
- The portfolio’s allocations to specialized equity and timber funds contributed the most to its positive returns while commodity funds hurt performance during the quarter.
- The Liquid Alternatives Allocation has outperformed its hedge fund benchmark over the last 1, 3 and 5 years.
iSectors Endowment Allocation
- The Endowment Allocation gained 3.31% during the quarter and rose 11.33% during the past 12 months.
- Emerging markets and small cap funds contributed significantly to the positive performance. As in the Liquid Alternatives Allocation, commodity funds hurt the Allocation’s returns.
- The Endowment Allocation, with over 50 ETFs, mutual funds, and stock holdings, can serve as a broadly diversified, long-term core holding for clients with a moderate risk tolerance.
iSectors Global Allocation
- Quarterly returns for the Global Allocations ranged from +1.24% for Global Fixed Income to +3.37% for Global Equity (the best performing iSectors model this quarter).
- Emerging market and US growth stocks were the greatest positive contributors in the quarter for the Global Equity Allocation.
- The Global Fixed Income Allocation was positively impacted by mortgage-backed and international corporate bonds.
- The Global Allocations are a series of diversified, risk-based models, with a fundamentally weighted, equity dividend focus that can serve as an ideal core-menu of default investment options for a 401(k) plan.
iSectors Domestic Equity Allocation
- The Domestic Equity Allocation was up 1.80% for the quarter, underperforming the S&P 500. Over the past 12 months, the Domestic Equity Allocation was up 17.47%.
- Growth funds outperformed during the quarter while dividend stocks detracted from performance.
- Companies with long histories of consistently increasing dividend payments and less volatile stock prices are seeing demand by investors in these uncertain times. The fundamentally weighted, Domestic Equity Allocation focuses on these types of investments.
iSectors Inflation Protection Allocation and iSectors Precious Metals Allocation
- The Inflation Protection Allocation gained 0.80% while the Precious Metals Allocation rose 1.70% during the quarter. For the past 12 months, Inflation Protection was up 14.02% while Precious Metals rose 22.50% (the best performing iSectors model in the last 12 months). Both significantly outperformed the Rogers Commodity Index benchmark during the past 12 months.
- Precious Metals’ palladium weighting was the primary contributor to its quarterly increase. Inflation Protection was helped by its timber and Treasury Inflation Protection Securities positions but was hurt by its commodity holdings.
- Easy money policies currently being promoted by Central Banks around the world will have serious long-term inflationary effects on our economy. We believe inflation and higher interest rates will be the greatest risk factors investors will face over the next 20 years. The recent recovery in oil prices may be an initial indication that this process has begun. Investors would be wise to place a portion of their portfolios in inflation-protected assets, particularly precious metals, to hedge against the possibility of inflation.
iSectors Capital Preservation Allocation
- The Capital Preservation Allocation was up 0.91% for the quarter and increased by 2.83% over the past 12 months. The model has outperformed the Barclays 1-3 Year Government Bond benchmark over the past 5 years.
- The Capital Preservation Allocation has a yield to maturity of 1.7% with an effective duration of 0.9 years and an average investment grade rating.
- The Capital Preservation Allocation offers a cash alternative with short durations to preserve investment principal in the case of an economic environment characterized by rising interest rates. It also provides the potential for enhanced returns while maintaining liquidity in the current low interest rate environment.
iSectors Tactical Global Balanced Allocation
- The Tactical Global Balanced Allocation rose 2.16% during the quarter.
- Emerging market equity and small cap stock holdings contributed positively to results in the quarter. Real estate and gold funds detracted from performance.
- The Allocation remains fully invested in domestic large cap stocks, domestic small cap stocks, developed international market equities, emerging markets equities, bonds, commodities, gold and real estate funds.
All model returns presented gross of fees. Index comparisons provided for information purposes. You cannot invest directly in an index, only in index funds that charge fees.
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