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Tactical portfolio tilts for 2020

Following a good year for our tactical portfolios, what could be profitable themes next year?
Tactical portfolio tilts for 2020

There’s being wrong and there’s being wrong. Sitting on decent 2019 gains from our Christmas tactical asset allocation (TAA) portfolios, the bad calls from last year are easier to swallow. With hindsight, the portfolios’ exposure to European blue-chip shares should have been greater, with less of a weighting towards Japan. Overall, 2019 was another year to favour shares over bonds and we could have been braver and invested more in the former. Themes we got right were including listed infrastructure as an equity sub-asset class and our global real estate investment made double-digit returns. Gold had a good 2019, too.

Our two portfolios – one (General TAA) using market cap-weighted regional indices and the other (Multi-factor TAA) using factor-tilted indices for equities – both had a high allocation to cash. This was to give a margin of safety should securities markets sell off. Like any insurance policy that wasn’t called upon, the cost to overall performance of cash drag now seems poor value, but both portfolios achieved over 9 per cent, which is a good result. When it comes to the factor portfolio (see the online version of this article for full performance data), the strategy has achieved a 7.3 per cent rate of return over three years, but it’s more expensive, so from now on our focus is on the General TAA.

 

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