The Natixis Investment Managers Solutions Portfolio Barometer offers trends and observations derived from in-depth analysis of 42 moderate model portfolios submitted for analysis by Latin American & US Offshore financial advisors and wealth firms in the first half of 2021.1

Portfolios favored equities as economy improved
Equity exposure during the first half of 2021 reached its highest level since 2017 and remained the largest allocation in the average Latin American & US Offshore moderate model. The average model had a 45.1% total allocation to equities, boosted by market action and growing confidence in the recovering economy. This was an increase of 5.6% from six months earlier.

With vaccination efforts getting under way in many of the developed markets – and Covid case counts declining – advisors reduced exposure to emerging market equities to 4.9% and increased global, US and European allocations (Figure 1). These moves appear to have been related to advisor concerns about the UK and Japan. Within the Other Equity bucket, Sector Equities accounted for just 2.7% of allocations (primarily Healthcare) and individual stock holdings were less than 1%. Allocations to fixed income, multi-asset and alternatives all declined compared to the previous 6-month period.

Figure 1: Detailed asset allocation of moderate model portfolios (1H2021)

Equity   Global Equity 13.4%
  North America Equity 17.4%
  Europe Equity 3.6%
  EM Equity 4.9%
  Other Equity 5.8%
Fixed Income   Global Fixed Income 11.7%
  North American Fixed Income 14.2%
  Europe Fixed Income 0.0%
  EM Fixed Income 4.7%
  High Yield Fixed Income 4.0%
  Inflation Linked 0.0%
  Other Fixed Income 1.1%
Multi-Asset   Cautious Multi-asset 1.1%
  Moderate Multi-asset 2.8%
  Other Multi-asset 3.4%
Alternatives   Long/Short Equity 0.2%
  Market Neutral 0.7%
  Multialternative 1.0%
  Other Alternative 0.9%
Real Assets     1.4%
Money Market     4.5%
Grand Total     100%

Source: Natixis Investment Managers Solutions data from January 1 to June 30, 2021. Asset classes are based on Morningstar categories. Real assets represents the sum of commodities, property and miscellaneous.

Stay-at-home vs. reopening
Although some advisors adjusted their equity positioning for reopening markets, the majority stuck with the strategies that had worked in 2020, favoring the stay-at-home economy. This preference played out as advisors favored large growth and blend, on hopes that the larger companies would be more stable, and growth names were better aligned with consumer behaviors acquired during the lockdown period (Figure 2). Consistent with this outlook, North American equities saw the largest allocation increase, growing to 17.4% of the average portfolio (Figure 1), an increase from 14.5% in 2H2020.

Figure 2: Stay-at-home economy boosted allocations to large core and growth equity styles (1H 2021)

Equity Style Analysis
 Large  14.44%  26.87%  34.42%
 Mid  4.27%  8.52%  5.76%
 Small  1.19%  3.13%  1.41%
   Value Core  Growth 

Source: Natixis Investment Managers Solutions, Morningstar.

Advisors grew more comfortable with risk
While the moderate model portfolios varied considerably in the level of risk they were willing to take, the 3-year average annualized risk nearly doubled in 18 months, from 5.7% at year-end 2019 to 11.0% for the current period (Figure 3). Despite a somewhat more aggressive stance, however, the average model was still positioned more cautiously than the risk profile of the Dow Jones Moderate Total Return USD benchmark. Even so, the average Latin American & US Offshore model outperformed the benchmark index over the three-year period, averaging 11.8% for the first half of 2021.

Figure 3: 3-year risk/return of Latin American & US Offshore moderate model portfolios
Scatter plot maps risk and return statistics for the 42 model portfolios used in the analysis.
Source: Natixis Investment Managers Solutions from January 1 to June 30, 2021. Past performance is no guarantee of future results. Risk data from July 1, 2018 to June 30, 2021.

Data spotlight: New guidelines for ESG investing
ESG (environmental, social and governance) investing is taking center stage with adoption of the Sustainable Finance Disclosure Regulation (SFDR) by the European Union. While this has been in process since the end of 2019, the majority of disclosure requirements were enacted on March 10, 2021. The SFDR sets a standard for transparency and accountability for investment managers with the hope of avoiding “greenwashing” of financial products.

The SFDR sets a standard for transparency and accountability for investment managers – with the hope to avoid “greenwashing” of financial products by introducing the concept of Principal Adverse Impacts (PAIs).

  • Article 9 products have sustainable investment as an objective, and must show how this objective is achieved as well as provide additional disclosures.
  • Article 8 products promote “Environmental” or “Social” characteristics, and must provide additional information on how these are met.
But to date, very few strategies meet these strict requirements. In total, 468 strategies were used to create the 42 models analyzed in this report. But only 18 strategies (3.85%) were rated Article 9, and 69 strategies (14.7%) rated Article 8 (Figure 4).

Figure 4: Very few strategies meet the requirements for Articles 8 and 9
Pie chart shows 3.85% of strategies rated Article 9, 14.74% rated Article 8 and 81.4% unrated.
Source: Natixis Investment Managers Solutions data from January 1 to June 30, 2021.

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 submitting them. Please refer to the report for full methodology.

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