We have been investing KH Global Growth (KHGG) portfolios since May and are happy to present performance of our accounts from 5/31 – 10/31/2014. This is only a five month period, but it presented us with no shortage of market volatility: global stocks¹ rose and fell five distinct times, with each gyration between 3% and 9%, and moving on average 5.5% each time. Those are what we call “big swings”. Performance reports traditionally end on quarter ends, 9/30 in this case. But the markets were much more interesting through the month of October.
Measured from 5/31 to 10/31, a composite of KHGG accounts² was modestly ahead of an index of global stocks. But more importantly it did so with the less volatility. At 10/31 KHGG held about 7.5% in cash, 71% in stocks and 21.5% in bonds. Why does that matter? Because it works like an insurance policy when markets go down.
While beating an index is nice, it’s not necessarily our overarching goal for KHGG. Growth-oriented returns with less volatility are the goal. To that end, let’s dig a little deeper.
The chart below shows two things: the blue line represents growth in a portfolio invested in global stocks, and the dotted red line shows an investment in KHGG over the same time period³. We have marked the ‘top’ and ‘bottom’ of each of the market gyrations with a circle. When the market moved up, KHGG participated well, even outperforming. In the downturns, KHGG did not move down as much. The net result is that we ended up in a better place.
While the outperformance is small, and the measurement period is short, the effect of compounding small positive differences over time adds up.
During this time we executed one trade in our Global Tactical model (a sub-strategy within KHGG). We will rebalance accounts at year-end, and continue to work diligently with our managers to ensure that we have what we believe is a good mix of risk and return for our clients at the lowest possible fee.
As always, we are very grateful for our clients’ trust and business. We take our work at KilterHowling very seriously and put forth much effort to align our interests with those of our clients.
We are invested right alongside our clients, we take no commissions, and we adhere to a fiduciary standard.
Disclaimer: Past performance is not an indication of future performance or results. The information presented here is relevant only to these disclaimers and covers only the accounts in the composites noted and shall not be construed as indicating future results or outcomes.
¹ Global stocks are represented by the MSCI All-Country World Index, or “ACWI”. This is an investible index of stocks around the world. The index does not include any fees or trading costs; KHGG is shown net of all fees and expenses associated with the portfolio, including the maximum management fee charged by KH.
² The composite includes fee and non-fee paying accounts. The return is adjusted to account for an annual fee of 1% levied on the returns.
³ We cannot calculate these ‘intra-month’ returns on our composite, but we can on individual accounts. This demonstration shows our longest invested GG account, adjusted for our maximum fee of 1%.