Market Commentary as of 12/31/09
The Fund slightly underperformed its custom benchmark (35% Russell 3000 Index/35% MSCI World ex-US Index/30% Barclay's Aggregate Bond Index) during the fourth quarter, but outperformed for the full calendar year 2009. All areas of the market represented in the Fund's investment universe, except for fixed-income, showed good returns during the quarter. Real estate (roughly 7% of assets during the period), commodity-related (6%), and foreign ETFs (22%), in that order, stood out in contributing to returns. The Fund's largest holding (about 35% of assets) was a short-maturity Treasury ETF, which lost about one-eighth of 1% during the period.
The Fund remained defensive during the quarter, with about 36% of assets in cash and the short-term Treasury ETF noted above. For the year, defensive holdings averaged about 55% of assets. One benefit of this defensive posture was to help reduce the Fund's downside volatility. While the S&P 500 index, for instance, three times had daily losses of more than 2% during the fourth quarter, and 29 such instances during the year, there were no days during the quarter and only one day during the year when the Fund lost that much. As we've stated before, it's not just returns, but better risk-adjusted returns than the market, that is a major goal of the Fund.
The Fund's management team and its strategy reflect decisions about the optimal balance of risk and reward in three ways. First, through the selection of a universe of ETFs which represent an attractive market opportunity when looked at in isolation. Second, through an evaluation of total risk in the ETF universe as viewed through current market conditions, that determines the degree of defensiveness expressed in the strategy's allocations. Third, by optimizing the selection, combination, and relative weighting of ETFs in the portfolio for a given point in time.
As we begin 2010, we are in the process of adding to the size and diversity of the ETFs in the Fund's universe of potential investments. Changes to the universe reflect the continuing broadening and maturing of ETF choices available and some modifications made to improve liquidity. We think that these changes will allow the strategy to participate more fully in profitable market opportunities while seeking to dampen volatility and overall risk.
Smart Portfolios
Seattle, WA
Note: The Fund invests in exchange-traded funds (ETFs) which are securities of other investment companies. An ETF seeks to track the performance of an index by holding all, or a sampling, of the securities of that index. An ETF may not be able to replicate an index exactly since returns may be reduced by transaction costs, expenses and other factors while the index has none. The Fund invests in many different areas of the market, each of which may involve its own element of risk.
Before investing, carefully consider the fund’s investment objectives, risks, charges and expenses. Contact 800 992-8151 for a prospectus containing this and other information. Read it carefully. Aston Funds are distributed by PFPC Distributors, Inc.
The views expressed above are for informational purposes only and is not intended as investment advice. Since the date of the commentary, economic, market conditions and the portfolio manager's views may have changed. Holdings and weightings are subject to change daily. Holdings are provided for informational purposes only and should not be construed as a recommendation to buy or sell the securities mentioned.
Past performance does not guarantee future results. Investment return and principal value of mutual funds will vary with market conditions, so that shares, when redeemed, may be worth more or less than their original cost.
Before investing, carefully consider the fund’s investment objectives, risks, charges and expenses. Contact 800 992-8151 for a prospectus containing this and other information. Read it carefully. Aston Funds are distributed by PFPC Distributors, Inc.