Source: MSCI Barra. Based on MSCI Barra’s GEMLT average active factor exposures from December 1998 to June 2017
- For our international small-caps, we are using the WisdomTree Europe SmallCap Dividend Fund (DFE), the SPDR S&P Emerging Markets Small Cap ETF (EWX), the Schwab International Small-Cap Equity ETF (SCHC) and the iShares MSCI EAFE Small-Cap ETF (SCZ).
We have a smaller-cap value/cyclical bias for our U.S. equity exposures.
- While we are underweight the U.S. given our global macroeconomic framework, we own the Vanguard Total Stock Market (VTI) for our U.S. large-cap exposure.
- We own the Schwab U.S. Small-Cap ETF (SCHA), as the disconnect between small-caps and the broader market got too stretched this summer.
- We are also using the PowerShares KBW Bank Portfolio (KBWB) and the Energy Select Sector SPDR Fund (XLE) given our constructive view on U.S. cyclicals and value stocks.
We value income strategies as they help reduce our portfolio risk.
- Astoria’s Multi-Asset Risk Allocation portfolio contains an income sleeve. The total current dividend yield for our model is approximately 3.0%.
- Can there be any value in fixed income after seeing $2 trillion of inflows since 2007? It’s not easy to find value, but we would note the following:
- When factoring in the yield relative to the risk you are taking, preferreds are attractive. The iShares U.S. Preferred Stock (PFF) yields 5.67%, and its median 30-day realized volatility over the past five years is 4.5%.
- PFF fits our constructive view on U.S. large-cap banks, which make up 40% of the ETF. PFF yields 5.67%, and 33% of its bonds are rated AAA. It has a duration of 3.6.
- The iShares JP Morgan USD Emerging Markets Bond (EMB), the VanEck Vectors High Yield Municipal Index (HYD), the PowerShares Senior Loan Portfolio (BKLN), the SPDR Blackstone / GSO Senior Loan ETF (SRLN) and the Alerian MLP (AMLP) are other income components of our model.
At the time of writing, Astoria Portfolio Advisors owned positions in IEMG, EPI, ACWX, DBEF, DXJ, JHDG, DFE, EWX, SCHC, SCZ, VTI, SCHA, KBWB, XLE, PFF, EMB, HYD, BKLN, SRLN, AMLP. You can reach John Davi at [email protected]. For a list of relevant disclosures, please click here.