FFG offers a diverse selection of managed portfolios for the different objectives or our clients. In our quarterly investment update, we focus on 3 of our core portfolios; the On Deck Portfolio, the Dividend Portfolio, and our tactically managed portfolio, Survive & Thrive™. The FFG Investment Update is intended to give some insight into our thoughts about recent adjustments in the portfolios and our outlook as we plan ahead.
The On Deck Portfolio
The On Deck Portfolio seeks low volatility while earning a strong income yield.
After a strong performance in 2019, we are looking forward to continuing the trend this year in the On Deck Portfolio. It continues to be challenging to find investments with lower volatility and strong yield in this market environment, but the private credit and private real estate interval funds in the portfolio exceeded our expectations this past year. We don’t see any indicators that 2020 should be very different for these asset classes, therefore we are continuing to overweight these funds. However, 2020 is shaping up to be another unpredictable year in the markets, and we are adjusting the portfolio to be more nimble and diversified. With this in mind, we are adding 4 new holdings to the portfolio. The Blackstone Enhanced Income Fund (BGFLX) is private credit investment focusing on middle market credit and has monthly liquidity. The other 3 additions to the portfolio are bond ETFs with daily liquidity. We are adding exposure to short term high yield bonds and the government agency bond market. Plus, we are utilizing a tax efficient municipal bond fund for taxable accounts to enhance the portfolio’s after-tax return. These adjustments should better position the portfolio to maintain it’s consistent income and low sensitivity to the movements of the stock market. So, bring on 2020 – we’re ready for you.
The Dividend Portfolio
The Dividend Portfolio seeks long term growth primarily using stocks paying strong dividends.
We are maintaining our existing overweight allocation in the US relative to international stocks. However, we moved away from our position in the First Trust Enhanced Equity Fund (FFA) as it performed better than 40% for the year and is trading at a premium relative to NAV. We redeployed those proceeds into the Vanguard Consumer Staples Fund (VDC) in a move to reduce volatility due to the coronavirus selloff and as we head into an election year. There will be good opportunities in international stocks as prices react to the coronavirus, but we remain underweighted internationally as we look for more promising results later in 2020. Additionally, we moved our international exposure into a currency hedged stock fund to protect performance if the dollar weakens. Finally, we kept our position in US energy infrastructure as tensions in the middle east are rising and reduced oil supplies may help US energy. With all of these adjustments, the overall objective remains the same for the portfolio as we continue to focus on an income producing stock portfolio that is positioned to capitalize on our ever-changing world.
Survive & Thrive™ Portfolio
The Survive & Thrive Portfolio seeks long term growth using tactical movements of cash in a diversified stock portfolio.
Performance was strong in the portfolio last quarter, and clients with more sensitive harvesting triggers were able to take some gains off the table and move proceeds to cash. Over the past quarter we saw the strongest results in large US companies, particularly in the technology sector. We are harvesting sector specific gains by moving out of communications stocks and consumer discretionary tech stocks. Our international exposure is now more focused in emerging markets as the forward earnings outlook is favorable and stocks will be attractively priced now that markets are responding to the coronavirus. Additionally, in an effort to better position the portfolio, we are utilizing more funds that screen for Environmental, Social, and Governance (ESG) criteria. We believe the ESG screen can help isolate companies that have positioned themselves to better navigate an increasingly onerous global regulatory environment. While this year is shaping up to be another volatile ride, the Survive & Thrive Portfolio will continue to systematically take advantage of those ups and downs by using cash to smooth out the bumps.
As always, please do not hesitate to reach out with any questions as we would be happy to discuss any of your investments in further detail.