Portfolio Analyzer: Matching Asset Mix to Your Risk Preference

Explore how tactical high yield strategies have improved portfolio performance and Sharpe ratio based on an investor’s risk preference.

The above portfolios are composed by blending three indexes in various combinations, showing different scenarios over the period of August 30th, 2007 (inception of the HYTREND index) to December, 31, 2019. These returns are to indexes, and do not include management fees of products that would follow such indexes. The 2007 annual returns reflect the partial period of August 30th, 2007 to the end of the year.

  • Mitigator moves 20% of the base scenario equity allocation to HYTREND, seeking meaningful reduction of portfolio drawdown. (i.e. 60/40 stocks and bonds becomes 40/40/20 stocks, bonds, and high yield trend following)
  • Diversifier takes 10% out of both equity and fixed income to allocate to HYTREND (i.e. 60/40 stocks and bonds becomes 50/30/20 stocks, bonds, and high yield trend following).
  • Booster seeks improvement of fixed income by moving 20% out of fixed income, instead allocating to HYTREND (i.e. 60/40 stocks and bonds becomes 60/20/20 stocks, bonds, and high yield trend following).

Scenario Overview:

HYTREND is a trend following high yield ETF index, with more information available from the index disseminator, Solactive AG.

Equity allocation is represented by the Morningstar US Core Index, which tracks the total return performance of stocks that exhibit average ‘growth’ and ‘value’ characteristics as determined by Morningstar’s proprietary index methodology.

FI (Fixed Income) allocation is represented by the Bloomberg Barclays US Treasury 7-10 Year Index, which measures total return of US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury with 7-9.9999 years to maturity.

Sharpe Ratio (noun) The average return minus the risk-free return divided by the standard deviation of return on an investment.

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