The Natixis Investment Managers Portfolio Barometer offers insights into Latin American & US Offshore advisors’ asset allocation preferences, based on in-depth analysis of model portfolios managed by financial advisors and wealth firms. This edition presents trends and observations based on 56 moderate risk-rated portfolios submitted for analysis during the six months ending June 30, 2019.1

Portfolio allocations tipped back toward equities
Confidence in stocks improved over the six-month period as portfolios recovered from drawdowns at the end of 2018 amid new market highs. Latin American & US Offshore advisors increased their average overall equity weighting from 37% to 43%, favoring North American equity and growth over value.

Fixed income allocations dipped as equities revived
Shifting interest rate policies and a recovering equity market drew assets from fixed income sectors perceived to have a higher risk profile. Allocations to global and emerging market bonds decreased, as advisors grew more skittish about currency risk. Financial advisors continue to prefer active management for fixed income, with 88% of fixed income allocations in actively managed funds.

Average allocations in Latin American & US Offshore moderate model portfolios (1H 2019)
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Source: Natixis Portfolio Clarity® data from January 1 to June 30, 2019. Asset classes are based on Morningstar categories. Real assets represents the sum of commodities, property and miscellaneous.

Advisors coming to terms with risk – and returns
The cautious positioning that started the year gave way to somewhat greater confidence, but advisors are still mindful of risk, with the average moderate model portfolio positioned slightly more conservatively than the Dow Jones Moderate benchmark. Even so, the overall trend is “risk on,” with 12-month rolling risk at its highest level in three years.

Advisors still wary about risk…

3-year risk/return of 1H 2019 Latin American & US Offshore moderate model portfolios
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Source: Natixis Portfolio Clarity® data from January 1 to June 30, 2019. Past performance is no guarantee of future results. Performance data from July 1, 2016 to June 30, 2019.

… but portfolio risk reached a 3-year high

12-Month Rolling Risk – 1H 2019 Latin American & US Offshore moderate model portfolios
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Source: Natixis Portfolio Clarity® data from January 1 to June 30, 2019. Risk data from July 1, 2016 to June 30, 2019.

Increasing exposure to equities and generally positive market conditions contributed to better returns as of June 30, 2019. Nearly every moderate model portfolio recovered from the fourth quarter 2018 downturn, with the average portfolio outpacing the Dow Jones Moderate model.

Average moderate portfolio recovered from the 4Q18 downturn

12-Month Rolling Performance – 1H 2019 Latin American & US Offshore moderate model portfolios
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Source: Natixis Portfolio Clarity® data from January 1 to June 30, 2019. Past performance is no guarantee of future results. Performance data from July 1, 2016 to June 30, 2019.

Positioned for continued growth
While advisors entered 2019 with their guard up, market conditions were more favorable than anticipated. Investors who took on the most equity risk earned the best returns, in sharp contrast to the previous six months. All broad asset classes except currencies and volatility delivered positive results, a welcome relief after the bruising conditions of late 2018.

However, it’s important to remember that every market environment offers its own lessons. The human tendency to extrapolate the recent past into the immediate future can be difficult to recognize and overcome. For these reasons, most financial advisors can benefit from a periodic review of their model portfolios that identifies sources of risk, return, and diversification.

For a more detailed look at Latin American & US Offshore advisors’ portfolio characteristics, please read the full report.

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1 The model portfolios under review were defined as Moderate Risk by the firms themselves. Please refer to the report for full methodology.

Natixis Portfolio Clarity® is a registered trademark of Natixis Advisors, L.P., in the United States.

Statistics in this report are based on simulated returns for the model portfolios from January 1 to June 30, 2019. These statistics are therefore representative, rather than actual historical figures.

The analyses and opinions referenced herein are as of August 8, 2019. These, as well as the portfolio holdings and characteristics shown, are subject to change. There can be no assurance that developments will transpire as may be forecasted in this material. Past performance information presented is not indicative of future performance.

The provision of this material and/or reference to specific securities, sectors, or markets within this material does not constitute investment advice, or a recommendation or an offer to buy or to sell any security, or an offer of services. Investing involves risk including the risk of loss. Investors should consider the investment objectives, risks and expenses of any investment carefully before investing. This document is provided for informational purposes only and should not be construed as investment advice.

This document may contain references to copyrights, indexes, and trademarks, each of which is the property of its respective owner and may not be registered in all jurisdictions. Such owners are not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis”), and does not sponsor, endorse or participate in the provision of any Natixis services, funds or other financial products.

The index information contained herein is derived from third parties and is provided on an “as is” basis. The user of this information assumes the entire risk of use of this information. Each of the third party entities involved in compiling, computing or creating index information disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to such information.

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