In our latest white paper, the Abbey Capital Markets team assesses the possible implications of low bond yields for the 60/40 portfolio *, why now might be the time to reassess allocation plans and the merits of including managed futures as a possible alternative to government bonds.
With an annualised return of just under 10%* in the last decade and a little more than half the volatility of equities, the 60/40 portfolio has been a simple yet effective asset allocation plan for investors.
Lower government bond yields, interest rate cuts and signs of change in the macroeconomic environment mean now might be the time to reassess the 60/40 portfolio and consider other assets and strategies.
Historically low to negative correlation with equities, a tendency to offer a convex return profile during crisis periods for equities and the potential to benefit from higher inflation all make managed futures a compelling alternative worth considering when constructing more diversified alternatives to the 60/40 portfolio.
*The 60-40 portfolio is a common industry benchmark portfolio representing a portfolio of 60% equities and 40% bonds. In this paper equities are represented by the S&P 500 TR Index while bonds are represented by the JP Morgan US Government Bond Index. Performance figures that combine S&P 500 TR Index and the JP Morgan US Government Bond Index are hypothetical. While based on the actual historical data of each, results are purely the product of simulation and there was no actual trading or actual profits for these scenarios. Information about the inherent limitations of hypothetical performance results is included below. Actual historical returns of the S&P TR Index and JP Morgan US Government Bond Index can be found at the end of the paper together with a detailed explanation of indices referenced. Past results are not indicative of future results. Trading in futures is not suitable for all investors given its speculative nature and the high level of risk involved.
Important Information, Risk Factors & Disclosures
This presentation contains information provided by or about Abbey Capital Limited (“Abbey Capital”). It is for the purpose of providing general information and does not purport to be full or complete or to constitute advice.
Abbey Capital: Abbey Capital is a private company limited by shares incorporated in Ireland (registration number 327102). Abbey Capital is authorised and regulated by the Central Bank of Ireland as an Alternative Investment Fund Manager under Regulation 9 of the European Union (Alternative Investment Fund Managers) Regulations 2013 ("AIFMD"). Abbey Capital is registered as a Commodity Pool Operator and Commodity Trading Advisor with the U.S. Commodity Futures Trading Commission (“CFTC”) and is a member of the U.S. National Futures Association (“NFA”). Abbey Capital is also registered as an Investment Advisor with the Securities Exchange Commission (“SEC”) in the United States of America. Abbey Capital (US) LLC is a wholly owned subsidiary of Abbey Capital. None of the regulators listed herein endorse, indemnify or guarantee the member’s business practices, selling methods, the class or type of securities offered, or any specific security.
While Abbey Capital has taken reasonable care to ensure that the sources of information herein are reliable, Abbey Capital does not guarantee the accuracy or completeness of such data (and same may not be independently verified or audited) and accepts no liability for any inaccuracy or omission. Opinions, estimates, projections and information are current as on the date indicated on this document and are subject to change without notice. Abbey Capital undertakes no obligation to update such information as of a more recent date.
Pursuant to an exemption from the CFTC in connection with accounts of qualified eligible persons, this report is not required to be, and has not been, filed with the CFTC. The CFTC, the SEC, the Central Bank of Ireland or any other regulator have not passed upon the merits of participating in any trading programs or funds promoted by Abbey Capital, nor have they reviewed or passed on the adequacy or accuracy of this report.
Risk Factors: Trading in derivatives contracts is not suitable for all investors given its speculative nature and the high level of risk involved, including the risk of loss. This brief statement cannot disclose all of the risks and other factors necessary to evaluate a participation in a fund managed by Abbey Capital. It does not take into account the investment objectives, financial position or particular needs of any particular investor. Trading in futures is not suitable for all investors given its speculative nature and the high level of risk involved. Prospective investors should take appropriate investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in the countries of their citizenship, residence or domicile. Investors must make their own investment decision, having reviewed the applicable fund offering material carefully and consider whether trading is appropriate for them in light of their experience, specific investment objectives and financial position, and using such independent advisors as they believe necessary. The attention of prospective investors in any fund managed by Abbey Capital is drawn to the potential risks set out in the offering material of that fund under the heading ‘Risk Factors’.
Where an investment is denominated in a currency other than the investor’s currency, changes in the rates of exchange may have an adverse effect on the value, price of, or income derived from the investment. Past performance is not a guide to future performance. Income from investments may fluctuate. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors and can result in a total loss of initial investment. Certain assumptions may have been made in this analysis, that have resulted in the returns detailed herein. No representation is made that any returns indicated herein will actually be achieved.
Certain assumptions may have been made in this analysis, that have resulted in the returns detailed herein. No representation is made that any returns indicated herein will actually be achieved.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT.
IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL
PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. HENCE NO REPRESENTATION IS BEING MADE THAT ACTUAL PROFITS OR LOSSES WILL BE SIMILAR TO THOSE SHOWN IN THIS REPORT.
Customised Solutions: Funds structured and managed by Abbey Capital are structured as collective investment undertakings that fall within the AIFMD definition of “alternative investment fund”. Abbey Capital provides investment management services to these funds and not to any individual entities that invest in the funds.
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The information herein is not intended to and shall not in any way constitute an invitation to invest in any of the funds managed by Abbey Capital. Any offer, solicitation or subscription for interests in any of the funds managed by Abbey Capital shall only be made pursuant to the terms of the relevant offering material, including the subscription agreement and no reliance shall be placed on the information contained herein.
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► Information for investors in the European Economic Area:
This document is not for general circulation to the public in the European Economic Area (“EEA”). The funds managed by Abbey Capital may only be marketed in the EEA in accordance with the Alternative Investment Fund Managers Directive (Directive (2011/61/EU)) (“AIFMD”) to Professional Investors, as defined in AIFMD, unless otherwise permitted by applicable law or regulation.
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This document is not for general circulation to the public in Kuwait. None of the funds managed by Abbey Capital have been licensed for offering in Kuwait by the Kuwait Capital Markets Authority or any other relevant Kuwaiti government agency. The offering of any funds managed by Abbey Capital in Kuwait on the basis of a private placement or public offering is, therefore, restricted in accordance with Law No. 7 of 2010 and the bylaws thereto (as amended). No private or public offering of any funds managed by Abbey Capital is being made in Kuwait, and no agreement relating to the sale of any funds managed by Abbey Capital will be concluded in Kuwait. No marketing or solicitation or inducement activities are being used to offer or market any funds managed by Abbey Capital in Kuwait.
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This document may only be issued, circulated or distributed so as not to constitute an offering to the general public in Switzerland. Certain funds managed by Abbey Capital are compliant with Swiss law for distribution to qualified investors in or from Switzerland. Investors in Switzerland can obtain the documents of these particular funds, such as the Confidential Private Placement Memorandum, the Bye-laws and the financial reports free of charge from the Swiss representative. The Swiss representative is Carnegie Fund Services S.A., 11, rue du General-Dufour, 1204 Geneva. The Swiss paying agent is Banque Cantonale de Geneve, 17, quai de l’Ile, 1204 Geneva, Switzerland. Recipients of this document in Switzerland should not pass it on to anyone without first consulting their legal or other appropriate professional adviser, or the Swiss representative.