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.
Despite the overall bond market producing negative returns so far this year, the On Deck Portfolio has out-performed year-to-date with positive returns. The fixed-income market remains challenging, but our allocations to high yield bonds and short-term corporate bonds have allowed the fixed-income portion of the portfolio to beat the overall bond market. In addition, the portfolio’s use of private credit and real estate interval funds have exceeded performance expectations and are on track to have a great year. We are particularly pleased with the performance of our Griffin and Bluerock real estate funds as they have taken advantage of the strong appreciation in warehouse and multi-tenant residential real estate. Therefore, we are only making minor adjustments to the portfolio this quarter. We are happy with our current mix of real estate and private credit, but within the bond funds we will be adding to our allocation of Fallen Angels and Short-term Corporate bonds. These small adjustments should help the portfolio continue its trajectory this year. However, we are still in an extremely low interest rate environment, and returns for any income focused portfolio will be a challenge for the foreseeable future. We will continue to evaluate investment options for possible opportunities, but we are always mindful of maintaining lower risk and volatility in this important strategy.
The Dividend Portfolio
The Dividend Portfolio seeks long term growth primarily using stocks paying strong dividends.
These days it seems like we are inching our way back to normality. The stock market continued its optimism last quarter and some of the companies hit hardest in 2020 showed us some of the largest gains so far in 2021. The Dividend Portfolio certainly benefited. In particular, our investment in energy and financials provided the strongest returns as oil demand increased and Fed stimulus policies remained steady. Value and small cap stocks whose prices were hit especially hard last year generally outperformed growth stocks during last quarter. This reflects an economy slowly coming back to life and gaining momentum as we navigate the tail-end of this pandemic. We believe the recovery is just beginning, and though the road will have its ups and downs, we remain optimistic as we head to the middle of 2021. Our adjustments to the portfolio at the beginning of the year are still in line with our current thinking. Therefore, we are only making small adjustments to the portfolio as we continue to increase exposure in Small Cap, Financials, and Energy while we reduce our investment in consumer staples. The Dividend Portfolio is well positioned to capitalize on a world returning to life without a pandemic, and we are both excited and hopeful that it will be here soon.
Survive & Thrive™ Portfolio
The Survive & Thrive Portfolio seeks long term growth using tactical movements of cash in a diversified stock portfolio.
Survive & Thrive continued its strong performance for the year as investor sentiment remains focused on a reboot of the economy as it emerges from the pandemic. As expected, the best performers this quarter were Value Stocks whose prices rebounded significantly after struggling in 2020. The strong portfolio performance allowed nearly all clients to harvest gains to cash for the second time this year. This quarter we are only making small adjustments to the stock portfolio. We believe that value stocks continue to be underpriced, so we are continuing to increase our allocation as the country reopens. Additionally, a new position in the Energy Sector was included in the portfolio. The Energy Select Sector Fund should benefit from the increased demand anticipated this year. While we are optimistic for continued economic growth, this quarter’s harvest to cash helps to better position Survive & Thrive in the event of a downturn if the current 13 month run in the stock market slows. Finally, you may notice that we are beginning to invest cash again into a money market fund to increase the interest it is earning. Additional money market options with JP Morgan have recently become available with a (slightly) higher rate, but more importantly the money market interest will rise as rates begin to tick up.
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.