Tag Archives: Model portfolios

The results of the T-Advisor model portfolios in 2016

T-Advisor, as wealth management solution for individuals and professionals, has not only tools for own investments, but also proposals to follow or even copy. That’s why our system has its own model portfolios. They are nine: five related to risk profile (from aggressive to very conservative) and five related to countries (Germany, UK, Spain in Europe and Mexico and Nasdaq 100 in the Americas).

How do they work? We select between four and six ETFs for the risk-profiled portfolios and up to ten stocks for the country portfolios. The main point for us is capital preservation. That’s why our results, when they are negative, are better than the markets. To obtain those results, we rebalance the portfolios every two months. These rebalances let us improve the results, as we exclude the positions more affected by market negative waves and substitute them for better stocks or ETFs. Diversification is also part of the strategy. We select the securities with the best score and relevant figures to obtain the best results.

These are the results for 2016 for our risk-profiled model portfolios:

1-Y-return 2016 1-Y-return 2015 Volatility Sharpe ratio
Aggressive

5.85%

-2.53%

12.51%

1.51

Dynamic

5.29%

1.47%

11.14%

1.52

Balanced

1.79%

3.53%

6.18%

1.42

Conservative

2.68%

1.52%

2.82%

1.35

Very conservative

0.90%

0.80%

2.07%

0.55

The figures were collected on January, 2nd, and we compare the results of 2015 and 2016. There is a general improvement (except the balanced strategy, although it is positive anyway). We have to remember that the year was quite unstable in the markets, as there have been several surprises that affected negatively. Despite this instability, none of our strategies closed with negative returns.

And now the results of our country portfolios:

1-Y-return 2016 1-Y-return 2015 Volatility Sharpe ratio Index
Germany

41.37%

44.70%

14.01%

6.98

6.87% (DAX)

Spain

1.31%

5.74%

16.17%

2.13

-2.01% (Ibex)

México

14.58%

23.96%

13.98%

5.61

+6.20% (IPC)

Nasdaq 100

24.68%

2.97%

9.58%

4.71

+7.50% (Nasdaq)

UK

9.03%

18.32%

15.99%

4.69

+14.43% (FTSE)

Except the UK portfolio, our strategies outperformed their benchmarks, but even the British one obtained a quite good return. The best performer was the German strategy again and the worst was the Spanish, but in this last case, the benchmark Ibex finished with a negative result.

Learn more about our portfolios and the assets included in our platform. Aren’t you tempted to clone them? We have a tool to let our users do it. Let’s try it and compare the results with your investments!

Model portfolios, the fashion product in investments

Model portfolios in T-Advisor

Model portfolio is one of the main fashion concepts in investments. They are mentioned everywhere and the roboadvisor trend has underlined them as a standard solution to offer easy and cheaper investment products with interesting returns.

In T-Advisor, model portfolios are far from being something new. We saw it clear since the beginning three years ago. One of our modules is specific to provide two different kind of them: ETF portfolios divided in different risk profiles and share portfolios divided in different markets.

Our modeling strategy is based on quantitative calculations. These are complex mathematical models that help detect investment opportunities mixing several indicators, as historical returns, volatility, trend, alpha, VaR, correlations… the data cocktail depends on the developer and the strategist, who work together to find the appropriate composition of this data mix in order to obtain the most interesting assets and the best performance.

In our case, our model portfolios play with two criteria: best performance and capital preservation. We look for good returns to overperform the market, but we also reduce losses compared with the reference indexes in bearish periods. To keep these goals, we review every second month the model portfolios to rebalance the assets that are not working as we wish.

Model portfolios are easy for customers: the structure is clear, they are based on a disciplined strategy and changes are seldom, in order to make adjustments in certain periods. However, they are not easy products for the companies that offer them, because they need strong calculation systems, as we have developed in T-Advisor. In addition, we cannot say that the machine work alone, but wealth managers monitor also the process, creating the strategy and analyzing possible changes. Although model portfolios are linked to roboadvisor, they are not totally robotic and they are used by traditional investment houses.

Model portfolios are flexible, because the wealth manager can design them taking into account different diversification, risk, assets, currencies or geographical areas. They are also easy to explain to investors, because they look like bespoke boxes.

Take a look at one example in T-Advisor: our Mexico portfolio, composed by 10 local shares. The 1-year performance was 22.69%.

Mexico model portfolio in T-Advisor

The Mexican IPC index had a 1-year performance of… 0,46%.

Mexican IPC index performance

This is a clear example of how a model portfolio works. Individual investors choose them because they are easy to understand and wealth managers, because they are easy to explain. Communication plays a very important role in finance and easy products provide more trustworthiness.

Roboadvisors: the word that is changing finances

Roboadvisors : T-Advisor mobile app picture

Roboadvisors or roboadvisers, with an O or with an E: the name began as derogatory, but it has been finally adopted by the different providers that operate in this field. This is the trendy word in financial technologies (or fintech, as it is also known).

The concept is simple: with the technological evolution, algorithms have been developed to create portfolios and manage them automatically or with a very low human intervention. Traditionally, a financial adviser has met the customer, listened their needs and creates a personal portfolio linked to a financial plan. In the case of roboadvisors, the customer register, fill in a investment risk profile questionnaire and the system proposes a model portfolio. This portfolio changes (what is known as rebalances), through algorithms, in order to improve the results when markets are negative. Easy: you invest and the machine works.

The immediate and clearer effect is about the price: fees are very low. Technology has opened a wide door for low-cost services with a very high quality and finances are not absent of this trend. Roboadvisors are the solution for little investors that have not enough funds to be worthwhile for advisers but look for better returns that traditional banking products, as deposits. In addition, investors feel the control of their investments, as they have a 24/7 platform with attractive web interfaces or mobile apps. The have also more advantages, as we have already explained.

Why are the fees so cheap?

  • The staff is very short.
  • The portfolios are composed by ETF, which are a kind of funds simple, transparent and with low fees.
  • The products are massive portfolios. There is no personal portfolio, as traditional advisers make, but one for different risk profiles.

The list of players is long and the assets under management (AuM) are growing quickly: an AT Kearney report mentioned that AuM managed by roboadvisors would reach $2.2 trillion in 2020. Currently, the largest roboadvisors manage $3 billion. That´s why the biggest players in the financial branch, that initially rejected them, are developing or event buying roboadvisors: Schwab and Vanguard have developed its own solutions, BlackRock and Invesco bought roboadvisor companies.

In the case of T-Advisor, there is a mixture of self-directed tools for investors that prefer to manage their full investments on their own and a model portfolio module as the existing portfolios in the roboadvisors. And all for free.

The map is changing: investors look for more technological, autonomous and cheaper solutions for them. Roboadvisors were criticised, because customer wouldn´t have anybody on the other side of the phone in the case of a crisis. We are living currently hard times in the markets. Let’s see what the financial landscape brings just at the end of the year: more or less roboadvisors? More or less AuM managed by them? Positive or negative returns for the customers?

Crisis in August and the role of China in the current markets

This summer was especially stormy in the financial markets. The cocktail joined two ingredients:

  • First of all, the unending Greek crisis, which played its last show in July after the failed referendum. It is still doubtful if the last bailout will solve the problem or just delay it.
  • Secondly, the Chinese crisis. This is more important, as it showed that China has already a big influence in the world economy and finances. As it is explained by The Economist, the world became nervous. China is already a very relevant benchmark for investors.

The Chinese crisis has shown that the development in the world second (for a short term) largest economy is still weak, as it needs the strength of several institutions and mechanisms, besides its own model. The surprising devaluation was the signal that investors had to flee. However, as the T-Report chart shows, the performance of the Shanghai market is 41% higher compared with August 2014.

1-year chart of Shanghai Exchange

The problem is not limited to China, because the country is one of the main debt holders, commodity consumer and investor in emerging markets. As the dominoes, the pieces begun to fall:

  • The price of commodities is in the lowest point for years.
  • The emerging countries set the alert, as the outlook is that the Chinese commodity demand fall. Then, market evolution and economic forecasts began to be quite negative.

In the middle of this storm, the Federal Reserve showed doubts about the anticipated decision of hiking the rates. Under the current market conditions, the monetary institution thinks that this decision could be worse for future economic developments.

But the question for a common investor is: what can I do? Debt from developed countries offer low interests, developed exchanges drop and emerging exchanges, which formerly could help as an alternative, are even worse. Even China, which sailed in the middle of the Great Crisis with some success, shows its feet of clay. Then, what?

Comparative T-Advisor chart with 4 main exchanges

An investor strategy should be focused on capital preservation. These were our results in the T-Advisor European model portfolios, following this strategy:

Exchange

Loss in the last 30 days

Model portfolio loss in the last 30 days

DAX

-12.47%

-6.22%

IBEX 35

-11.3%

-7.42%

FTSE 100

-9.34%

-0.94%

The only solution in the current market turmoil is clear: good information about assets, tools to select the best ones, rebalancings and a strategy centred in capital preservation to reduce possible losses.

T-Advisor model portfolios: these are our results

T-Advisor, as wealth management solution for individuals and professionals, has not only tools for own investments, but also proposals to follow or even copy. That’s why our system has its own model portfolios. They are nine: five related to risk profile (from aggressive to very conservative) and four related to countries (Germany, UK, Spain and Nasdaq 100 from US).

How do they work? We select between four and six ETFs for the risk-profiled portfolios and up to ten stocks for the country portfolios. They are not static, but we rebalance them every two months. These rebalances let us improve the results, as we exclude the positions more affected by market negative waves and substitute them for better stocks or ETFs. Diversification is also part of the strategy. We select the securities with the best score and relevant figures to obtain the best results.

These are the results for 2014 for our risk-profiled model portfolios:

1-year-return

Volatility

Sharpe ratio

Aggressive

17.77%

10.94%

1.84

Dynamic

20.03%

9.91%

1.99

Balanced

19.50%

5.57%

2.84

Conservative

17.84%

2.06%

4.89

Very conservative

14.02%

0.62%

5.81

Who said that very conservative strategies have very low returns? And now the results of our country portfolios:

1-year-return

Volatility

Sharpe ratio

Index

Germany

20.84%

10.94%

1.84

2.65% (DAX)

Spain

9.31%

9.91%

1.99

3.66% (Ibex)

Nasdaq 100

1.91%

5.57%

2.84

18.8% (Nasdaq)

UK

-0.59%

2.06%

1.89

-2.71% (FTSE)

Our strategies outperformed the reference indexes (with the exception of Nasdaq 100), but even in a negative environment, as in UK, our portfolio reduced the losses.

Aren’t you tempted to clone them? We have a tool to let our users do it. Let’s try it and compare the results with your investments!