The US Offshore & Latin American Advisors Portfolio Barometer highlights asset allocation trends by analyzing 35 moderate-risk model portfolios over the six months ending December 31, 2018. This analysis from the Portfolio Research & Consulting Group at Natixis Investment Managers focuses on risk, return and correlation characteristics, and compares the allocation and performance of US Offshore and Latin American moderate-risk portfolios with their global peers.

Uptick in portfolio risk
The return of volatility toward the end of the year prompted a shift in advisors’ average moderate model allocations. At 42%, fixed income became the largest allocation for US Offshore and LatAm moderate portfolios, slightly more than equity at 37%. Despite advisors’ efforts to reduce overall risk exposure, the uptick in market volatility raised the average portfolio’s risk by 25% (see Figure 1).

Barometer graph 1
Source: Natixis Portfolio Clarity® data from July 1 – Dec. 31, 2018.

Poor overall performance driven by equities
As risk surged back into the market, advisors showed a clear trend toward de-risking their moderate model portfolios. They increased fixed income and alternatives exposure, funded by decreases in equity and multi-asset products. Advisors generally favored US/North American equities and fixed income, and this bias increased during the second half of 2018. While these moves may have helped somewhat, lackluster fixed income performance couldn’t offset equity losses, resulting in negative overall portfolio returns for the year.

Barometer graph 2
Source: Natixis Portfolio Clarity® data from July 1 – Dec. 31, 2018. Past performance is no guarantee of future results.

Comparison with global portfolios
The average moderate model portfolios from all regions lost ground in 2018. But, in a year where equities led losses, US Offshore and LatAm portfolios fared comparatively well. They started 2018 with the fourth highest allocation to equities, but advisors were nimble in their re-allocations. They actively sought to de-risk, increasing fixed income exposure and reducing equity weightings. For calendar year 2018, US Offshore and LatAm portfolios lost an average of 4.4%, falling between top-performing Italy at -3.2% and worst-performing Spain, with estimated losses of 5.9%.

For a more detailed look at US Offshore and LatAm advisors’ portfolio characteristics and how they compare with global allocation trends, please read the full report.

Read the full Report

Statistics in this report are based on simulated returns for the model portfolios over the twelve months ending December 2018. These statistics are therefore representative, rather than actual historical figures.

Investing involves risk, including the risk of loss. Investors should consider the investment objectives, risks and expenses of any investment carefully before investing.

The analyses and opinions referenced herein are as of February 7, 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.