Netwealth Portfolio Performance: Our Three-Year Euro and USD Track Record

In addition to our core sterling denominated portfolios, we also run seven risk levels denominated in both euro and US dollars. These are usually held by clients who either see their domestic currency as something other than sterling, or who specifically prefer to diversify their exposure more clearly to international assets.

This breadth is part of our comprehensive offering of traditional wealth management solutions at a fraction of the historic cost.

A consistent approach

We take the same investment approach to managing all Netwealth portfolios. However, we design the portfolio construction of each range from the perspective of a domestic investor within that region. This leads to higher allocations to domestic assets and currencies, while our views on the global economy and markets naturally translate across the total set of portfolios.

December 31st 2019 marks the three-year anniversary of the international currency portfolios. Our sterling portfolios reached the same milestone seven months earlier, at the end of May, which we reported here.

We are very pleased with both sets of results. The holdings range from conservative exposures via cash and short-dated bonds to diversified allocations to global equity markets in accordance with their profiles of risk.

Key messages we’d like to highlight

All portfolios have made positive returns over this three-year period after fees, with asset prices having generally risen. Portfolios with more ambitious risk profiles have been rewarded for the risks taken, outperforming more cautious strategies.
Portfolios have also mostly had success relative to their inflation yardsticks and have outperformed their wealth management peers for all portfolios bar three, as measured by the Asset Risk Consultants Private Client Indices (ARC PCI).
The portfolio management effort has been enhanced by low fees.
Investing in passive funds has been a strong tailwind, as most active funds struggled to beat their benchmark indices.

Since Inception Performance

Euro Portfolios

Source: Netwealth, with data as of 31st December 2019. Portfolio returns are shown net of all charges associated with the underlying fund investments, and a Netwealth fee of 0.35% per annum which covers management, trading, custody and administration charges. Netwealth’s fees range from 0.65% – 0.35% pa depending on account size.
Past performance is not a reliable guide to future performance.

US Dollar Portfolios

Euro portfolios – Total Return by Calendar Year

Source: Netwealth, with data as of 31st Dec 2019. Returns shown net of fees in EUR.
Past performance is not a reliable guide to future performance.

USD portfolios – Total Return by Calendar Year

Source: Netwealth, with data as of 31st Dec 2019. Returns shown net of fees in USD.
Past performance is not a reliable guide to future performance.

Three year relative performance versus peer group

Source: Asset Risk Consultants and Netwealth, with data as of 31st Dec 2019. Returns shown net of fees in the currency labelled. ARC data contains estimates for Oct, Nov and Dec 2019.
N.B. there is no suitable peer group comparator for risk level 1 and 2, since they exhibit much lower risk than the lowest risk ARC PCI.
Past performance is not a reliable guide to future performance.

Market environment

Looking back at the return profiles in calendar year terms, portfolio performance has been determined by three distinct market environments.

The first year (2017) was defined as a period of synchronized global growth, which bolstered equity market returns on a global scale, with emerging market equities in particular delivering substantial gains. European elections were also perceived to bring a period of political stability to the region, while monetary policy stimulus in Europe and Japan more than offset the fact that the US Federal Reserve hiked interest rates three times in the year, resulting in fixed income generating solid returns.
Volatility returned to markets in 2018, which was defined by a period of US ‘exceptionalism.’ Boosted by President Trump’s tax cuts, the US economy grew 3.1% for the year. However, recoveries stalled elsewhere, particularly in the eurozone. Eventually, a combination of global growth concerns, fears of tighter monetary policy and the potential for the escalation of trade tensions between the US and China took its toll on investor sentiment in the fourth quarter. Equity markets suffered substantial drawdowns, resulting in negative portfolio returns.
2019 saw a much more favourable return for asset markets again as many of the growth concerns from 2018 dissipated, and fears of recession faded. Major central banks made policy ‘U-turns’, with the US Federal Reserve and the European Central Bank both easing. This was supported by news of progress in Sino-US trade talks, although the situation is constantly changing.

The Netwealth investment approach

By sticking to sensible, calculated combinations of diversified, liquid assets, we believe our investors are protected from many of the behavioural pitfalls that can meaningfully impact long-term investment performance targets.

The benefits of this strategy have been reflected in our performance. Coupled with a rigorous adherence to lower costs and our focus on compounding incremental gains for portfolio returns, we consider our portfolios to be well positioned to help clients continue to achieve their investment goals.

To find out more about our investment approach, please click here.

This article was edited on 5th February to reflect the final performance of the Asset Risk Consultants (ARC) Private Client Indices.

Important information

When investing your capital is at risk. The value of investments may go down as well as up, so you could get back less than you invested.

Netwealth offers advice restricted to the services provided, and does not provide independent advice across the market.

Netwealth Investments Limited is authorised and regulated by the Financial Conduct Authority with firm reference number 706988.

Netwealth is covered by the Financial Services Compensation Scheme (FSCS).