Update on model growth portfolios

David gives an update on his ETF portfolios. Read his previous update here.

As 2021 draws to a (dismal) end, besieged yet again by Covid, I thought I’d share a quick update on my two model ETF based portfolios. To recap both were aimed at investors who want a low cost ETF model portfolio bult around growth and specifically the multiple disruptions emerging from the world of technology as well as proper international diversification between different stock markets. The common thread between both portfolios is to have a manageable number of ETFs for diversification purposes .i.e not too many individual funds to make managing the stocks difficult but enough to achieve a real range of ideas and strategies.

Overall, I’d have to say that performance to date – just under 18 months – has been satisfactory but not especially thrilling. Both portfolios have made decent progress but if I was honest, you’d have made more money investing a boring old MSCI World ETF tracker or an actively managed portfolio over the near 18 months since August 2020. That said, these portfolios are not meant for short term trading – they are for the long term, and I imagine that the average lifespan of these portfolios would be 10 years or more.

Adventurous Portfolio

Headline return : Up 11.7% since inception in August 2020

This portfolio is designed to give investors maximum diversification. It targets a wide series of geographies ranging from an index that equal weights US stocks through to an index that invests in Japan. The model portfolio also looks to invest in different themes, ranging from tech all the way through to gold mining stocks.

Overall performance to date would have been very impressive was it not for very significant detractors: the Emerging markets internet ETF ticker EMQQ, down 26% in absolute terms and the VanEck Gold Miners ETF, down 25.7% in absolute terms.

The logic behind these precipitous declines is obvious in both cases. EMQQ is invested heavily in Chinese tech stocks and unless you’ve been living in a cave, you’ll know what’s happened to these big names. I may think they are cheap at the moment, but the wider global markets have taken fright.

As for the gold miners ETF from VanEck – this invests in large cap gold mining equities – the explanation is a bit more complex. The price of gold has not reacted in quite the way investors expected in an era of higher inflation. My hunch is that most investors are spooked by the prospect of higher US interest rates and the possibility of a strengthening US dollar. That’s massively undermined positive sentiment towards gold and this has, in turn, kicked gold mining equities.

The biggest stand out success in the model portfolio has been the ETF which tracks an equal weighted version of the US S&P 500 benchmark. This is up 40% since inception. Remember that equal weight indices tend to over deliver in more bullish equity markets, largely because they favour smaller cap, riskier equities.

NO CHANGES TO THE PORTFOLIO AT THIS STAGE

Comparative returns

Benchmark	3 mths	6 mths	1 year
MSCI World £	5.56%	9.62%	19.2%
Scottish Mortgage	-2.7%	8.57%	12.7%
Adventurous	-1.5%	-1.35%	5.69%

The Adventurous Portfolio

Global Trends Portfolio

Headline return: Up 11.1% since inception in August 2020

The Global Trends portfolio is an avowedly growth and technology-oriented portfolio which aims to capture a number of key disruptions underway in the modern global economy – ranging from the internet and e-commerce through to the genomics revolution and the rise of e gaming.

So, in simple terms, this a kind of multi fund tech disruption portfolio, but internationally diversified. The one exception to this technology theme is two iShares ETFs – the first in water, the second for commodity equities. Ironically these latter two funds have produced by far the best results, and are both up just under 40% since launch. The commodity equities returns are easier to understand – rising oil prices – but the success of the water ETF is perhaps most surprising.

In terms of losers, EMQQ and its gaggle of Chinese tech stocks stands out while the VanEck Gaming and e0sports ETF has only advanced by just 7% since inception – my guess is that China’s assault on children’s and gaming explains much of this underperformance.

NO CHANGES TO THE PORTFOLIO AT THIS STAGE

In both model portfolios, I would emphasise that the aim is to build a diversified long term portfolio and at the moment I see no reason to make any changes despite the underperformance when compared to other peers and benchmarks.

Benchmark	3 mths	6 mths	1 year
MSCI World £	5.56%	9.62%	19.2%
Scottish Mortgage	-2.7%	8.57%	12.7%
Global Trends	-1.35	-1.5%	1.2%

David Stevenson