{"id":2928,"date":"2021-03-17T11:34:59","date_gmt":"2021-03-17T03:34:59","guid":{"rendered":"https:\/\/www.syfe.com\/magazine\/?p=2928"},"modified":"2024-04-02T14:04:10","modified_gmt":"2024-04-02T06:04:10","slug":"syfe-core-portfolios-for-your-different-goals","status":"publish","type":"post","link":"https:\/\/www.syfe.com\/magazine\/syfe-core-portfolios-for-your-different-goals\/","title":{"rendered":"Syfe Core: Portfolios For Your Different Goals"},"content":{"rendered":"\n
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All Syfe portfolios are designed with a unique objective in mind. For REIT+, that\u2019s providing you with passive income. For Cash+, that\u2019s providing you with a smarter home for your savings. <\/p>\n\n\n\n

The new Syfe Core<\/a> portfolios are no different. Core Defensive, Core Balanced, and Core Growth are each designed to maximise risk-adjusted returns, as measured by the portfolio\u2019s Sharpe Ratio.<\/p>\n\n\n\n

To further optimise returns, we\u2019ve also applied a Smart Beta methodology to the equity component of Syfe Core portfolios, and added a greater exposure to Chinese and Chinese technology stocks.<\/p>\n\n\n\n

Let\u2019s delve into the details below.<\/p>\n\n\n\n

Asset class selection <\/strong><\/h2>\n\n\n\n

One key aspect of portfolio construction is asset class selection. We selected equities, bonds and commodities as our main investable asset classes, and used exchange-traded funds (ETFs) to represent each asset class. <\/p>\n\n\n\n

As such, each Core portfolio is a complete portfolio of stocks, bonds and gold that\u2019s represented by 18 ETFs in all. These 18 ETFs give investors the opportunity to invest in US stocks, China stocks and more<\/a>! <\/p>\n\n\n\n

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Snapshot of the underlying Core ETFs<\/em><\/figcaption><\/figure>\n\n\n\n

Having determined our universe of investable assets, we then apply an Asset Class Risk Budgeting process for portfolio allocation.<\/p>\n\n\n\n

Simply put, Asset Class Risk Budgeting is a risk-based method of portfolio allocation whereby the overall risk of the portfolio is distributed among various asset classes. <\/p>\n\n\n\n

As a simple illustration, based on historical data, the Core Balance strategy has an overall portfolio risk (as measured in standard deviation of returns) of 6.5% p.a. How should this risk be \u201cspent\u201d across the portfolio components \u2013 stocks, bonds, and gold \u2013 given that each asset class has its own level of risk? <\/p>\n\n\n\n

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This is where Syfe\u2019s investment team will optimize the portfolio weights of each asset class to meet the overall risk budget of the portfolio while seeking to achieve the maximum Sharpe Ratio possible.<\/p>\n\n\n\n

Using Smart Beta to add robustness <\/strong><\/h2>\n\n\n\n

The value-add of our Core portfolio strategy lies in our use of Smart Beta factors, which we introduced for our popular Core Equity100 portfolio<\/a> last year.<\/p>\n\n\n\n

Simply put, our Smart Beta strategy optimises our Core equity selection based on three factors. The portfolio has a geographical tilt towards China, a moderated tilt towards growth, and a low-volatility tilt. These factors have been selected to generate better risk-adjusted returns.<\/p>\n\n\n\n

Exposure to China <\/strong><\/h2>\n\n\n\n

Core portfolios are also the first amongst Syfe portfolios to include an enhanced exposure to Chinese and Chinese tech stocks. They represent broader sector and geographical factors that we selected by decomposing the trends and cycles of a slate of candidate factor portfolios using econometric and graphical screens. To validate their selection, these factors were then back-tested using our point-in-time algorithms.<\/p>\n\n\n\n

What we found was that the Chinese market has been outperforming since last year. Beyond providing additional diversification benefits, we believe the China and Chinese tech factors will come into play going forward.<\/p>\n\n\n\n

Read more: Investment Outlook 2021: A Chinese Bull Run<\/em><\/a><\/p>\n\n\n\n

According to Goldman Sachs, China is poised to deliver \u201cone of the strongest and fastest macro recoveries in 2021 among major economies globally\u201d. Investors are increasingly seeking greater exposure to China. <\/p>\n\n\n\n

This is a key reason why Core portfolios include the iShares MSCI China ETF (MCHI) and KraneShares CSI China Internet ETF (KWEB). These ETFs are well placed to perform over the long term and provide investors with solid exposure to China\u2019s growth.<\/p>\n\n\n\n

In line with the enhanced exposure to Chinese stocks, Core portfolios have a greater geographical allocation to China.<\/p>\n\n\n\n

For instance, Core Growth holds a 14% allocation to China while Core Balanced has a 7% allocation. <\/p>\n\n\n\n

Choosing your ideal Core <\/strong><\/h2>\n\n\n\n

Depending on your investment goals, time horizon, and risk appetite, you can choose between the following Core portfolios.<\/p>\n\n\n\n