For the month of June, 2018 the Strategic Corporate Income Strategy returned +.24% and we continue to remain in a defensive mode since February 9th. As a strategy we target less than 5% Standard Deviation while maintaining the ability to capture Alpha from both the Momentum and Low Volatility anomalies. Over the past 5 years the strategy has captured over +30% of Alpha as compared to the benchmark of the Barclays Corporate Bond Index while maintaining consistent returns.
Obviously, the prospect of tighter monetary policy has the markets on edge as the performance of major U.S. stock indices, the Russell 2000 and the NASDAQ Composite indices were able to move to new all-time highs, but the S&P 500, Dow Jones Industrials and Dow Jones Transports weren’t able to move higher. The credit markets have remained soft with high-yield bonds starting to show particular weakness. Prices have continued to drift lower down approximately 5% from the high set back at the beginning of 2018. Emerging market debt has been leading the way lower as it continues a precipitous decline that began last October.
We continue to closely monitor our algorithms for any potential changes that may develop. Now the focus is on capital preservation. Should the markets begin to accelerate to the downside, our stance since February will be confirmed as it has been over the past years and present us with an opportunity to buy at lower prices, enabling us to benefit from the next period of market strength.
Thank you for your interest.
Kensington Wealth Advisors
KWAL is a registered investment adviser. Information presented herein is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULT. Gains or losses can occur depending on material market or economic conditions or changes in either. Depending upon market or economic conditions the firm may position portfolios in a defensive position which can be 100% invested in cash, money market or short-term treasury ETF’s for an extended period. Management fees are charged when positions are in defensive mode or when portfolios are positioned within the market. Gains or losses can occur during either of these timeframes depending on market and or economic conditions. As interest rates rise, the prices of bonds fall, and vice versa. Investing in bond funds and ETF’s carries risks including; credit risk, which is the risk that the issuers of the bonds owned by a fund may default (fail to pay the debt that they owe on the bonds that they have issued), prepayment risk, which is the risk that the issuers of the bonds owned by a fund will prepay them at a time when interest rates have declined, and interest rate risk, which is the risk that the market value of the bonds owned by a fund will fluctuate as interest rates go up and down. Lower-quality bonds known as “high yield” or “junk” bonds, present greater risk than bonds of higher quality, including an increased risk of default. Treasury Bills, or T-Bills, have a risk that the U.S. Government may choose not to provide financial support to U.S. Government sponsored agencies or instrumentalities causing a default. You should carefully consider the investment objectives, risks, and charges and expenses of each investment company included as part of the strategy before investing. The instruments prospectuses utilized contain this and other information. You should carefully read the prospectus of each investment company, which are available from your financial representative upon request. Investments in funds are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve their value at $1.00 per share, it is possible to lose money by investing in money market funds.
Actual Performance Disclosure: Any performance shown for the relevant time periods are based upon actual trading in accounts of the KWAL Composite. The portfolio performance is shown net of the advisory fee of 2% the highest fee charged by Kensington and trading costs based on our Custodian’s with Kensington’s composite accounts trading costs. Performance does reflect the deduction of all other fees or expenses, including but not limited to brokerage fees, custodial fees and fees and expenses charged by ETF’s, mutual funds and other investment companies. Performance results shown do not include the reinvestment of dividends and interest on cash balances where applicable. Returns may vary depending on the reinvestment of dividends and may show gains or losses depending on market and or economic conditions. KWAL does subscribe to additional outside research from several sources. KWAL does not utilize any soft dollar arrangements. When executing a trade client accounts pay no “sales load”, charge when entering mutual funds. In some cases, depending on custodians, a transaction charge may apply. KWAL does not receive any 12b-1 fees, transactions charges, rebates or soft dollar credits derived from any client accounts. Depending on custodians some clients may incur transactions fees, where other clients at other custodians will not which may result in lower or higher returns or losses depending on market and economic conditions. April 2013 through December 2017 performance verified by ACA Performance Services. Regarding best execution we focus on mutual fund performance with regards to our models signals and the internal mutual fund management fees when selecting an instrument for a client. On occasion other share classes may be available with lower costs and thus a client may pay higher charges depending on a particular mutual fund, or mutual fund family and or share classes which can result in losses or gains depending on market and economic conditions. The most recent years performance calculations have not been verified by any third party, past performance has as denoted. Performance of client portfolios may differ materially due to the timing related to additional client deposits or withdrawals and the actual deployment and investment of a client portfolio, or the reinvestment of dividends, the length of time various positions are held, the client’s objectives and restrictions, and fees and expenses incurred by any specific individual portfolio.
Benchmarks: The performance results shown are compared to the performance of the Bank of America HY Index, S&P 500, Federated HY Mutual Fund, MSCI World Index minus the US, Barclays AGG Bond Index with all applicable dividends reinvested. The index results do not reflect fees and expenses and you typically cannot invest in an index. Return Comparison: Bank of America HY Index, Federated HY Mutual Fund and the Barclays AGG Bond Index were chosen for comparison as they are generally well recognized as an indicator or representation of the High Yield and Corporate Bond markets in general and includes a cross section of holdings. The MSCI World Index minus the US and the S&P 500 were chosen for comparison as they are generally well recognized as an indicator or representation of the Equity markets in general and includes a cross section of holdings which represents the broad equity indexes performance.