Saxo Bank, the multi-asset online trading and investment specialist, has launched Balanced Portfolio, an asset allocation strategy that allows traders to follow its progress on Tradingfloor.com and duplicate the strategy themselves.
The Balanced Portfolio is an ETF portfolio designed to collect risk premiums across liquid assets in various economic environments. Balancing the portfolio across different economies and asset classes and allocating equal risk to each creates a stable performance with less volatility over time when compared to traditional equity-concentrated portfolios.
Saxo Bank built the framework for the new portfolio on the idea of four economic environments: prosperity, inflation, deflation and recession. The asset target weights are calculated by multiplying the economic environment weight with the assets’ weights, which are all set to equal.
Peter Garnry, head of equity strategy, Saxo Bank, says: "We have created the Balanced Portfolio strategy to engage traders, and in addition ETFs have become a cost effective investment option to gain broad market exposure. By implementing the strategy themselves, the costs incurred are minimal and only related to executing the trades and the total expense ratio annualised on the ETFs. We have designed this new approach to address the demands of our more long-term oriented clients, and to protect investors from unpredictable events in the market of which we have seen so many of late."
The Balanced Portfolio consists of seven asset classes: large cap equities, emerging market bonds, commodities, gold, corporate bonds, long-term government bonds and inflation-linked government bonds.
These are tracked by seven liquid ETFs traded on US exchanges, and asset allocation will be published on a monthly basis on Tradingfloor.com.
The Balanced Portfolio is based on USD denominated ETFs, but due to large demand from European clients, a Balanced Portfolio based on EUR denominated ETFs will be published in June.