DBLTX Commentary – Q4 2019
Thesis
DBLTX utilizes a top down-bottom up process that focuses on MBS and Agency bonds. When compared to the benchmark (Barclays U.S. AGG), the holdings have lower duration and exposure to corporate bonds, reducing their sensitivity to interest rate movements and credit spreads. We expect attractive risk-adjusted return characteristics over the long term from DBLTX, especially during periods when corporate bonds’ spread increase.
Thesis
JPIN invests in international equities in developed markets. We expect JPIN to add value over the benchmark (MSCI EAFE) by two ways: 1) enhanced returns through a multi-factor security selection approach combining value, quality, and momentum factors; 2) enhanced risk control through more balanced country and sector allocations. We expect attractive risk-adjusted return characteristics over the long term from JPIN.
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Overview
Year to date, JPIN has underperformed the benchmark (MSCI EAFE) by 6.37%, largely due to poor stock selection in Japan and overweight country selection in South Korea. While both heavily weighted on underperformance, JPIN showed promise through successful stock selection and allocation in the UK, Finland, and Spain.
YTD Summary
[Category Mutual Fund Commentary]
BEXIX – Q3 2019 Commentary
Overview:
The Baron Emerging Markets Strategy Portfolio outperformed its benchmark during the quarter and YTD. Outperformance was mostly driven by stock selection, and also driven by allocation in the financials sector.
HLMEX – Q3 2019 Commentary
Overview:
The Harding Loevner Emerging Markets Equity Portfolio outperformed its benchmark during the quarter and YTD. Outperformance can be mostly attributed to strong performance of high-quality stocks, as well as weighting, where HLMEX was underweight materials and overweight IT. Stock selection was also strong in IT and healthcare which helped returns.
LISIX – Q3 2019 Commentary
Overview:
The Lazard International Strategic Equity Portfolio underperformed its benchmark during the quarter, yet outperformed YTD. Quarterly underperformance can be partially attributed to disappointing earnings from companies located in Europe, Hong Kong, and China.
HILIX – Q3 2019 Commentary
Overview:
The Hartford International Value Fund performed in line with its benchmark during the quarter, but underperformed YTD. Slow global growth, geopolitical tensions, and monetary stimulus by central banks are key factors that have led to negative returns during the quarter.
DBLTX – Q3 2019 Commentary
Overview:
The DoubleLine Total Return Bond Fund underperformed its benchmark during the quarter, as well as YTD. This underperformance was heavily driven by the shorter duration of the Fund compared to its benchmark, as we saw 2-year and 10-year rates decline 13bps and 34bps, respectively.
MWTIX – Q3 2019 Commentary
Overview:
The MetWest Total Return Bond Fund was approximately in line (slightly under) with its benchmark during the quarter, but has slightly outperformed during the year. The slight underperformance was heavily driven by the shorter duration positions during August, as well as the Treasury futures allocation. While falling rates and exceeding financial rates compared to yields created a lag for some of MWTIX’s holdings, other allocations in corporate credit brought positive returns.
TCPNX – Q3 2019 Commentary
Overview:
The Touchstone Impact Bond Fund slightly outperformed its benchmark during the quarter, yet underperformed YTD. This underperformance for the year has been heavily driven by the funds allocation to mortgages, including the funds’ underweight on agency single-family MBS, which underperformed agency multi-family MBS (fund is overweight here).
WATFX – Q3 2019 Commentary
Overview:
The Western Asset Core Bond Fund slightly outperformed its benchmark during the quarter, while outperforming at a greater scale YTD. This outperformance was heavily driven by the tactical duration positioning and yield curve positioning as rates moved lower and the yield curve began to flatten out during the quarter.
