Our Funds - Fund Commentary
Market Commentary as of 6/30/08
The Fund posted a slight gain during the second quarter as the overall market, as measured by the S&P 500 Index or the portfolio's blended benchmark comprised of the Russell 3000 Index, MSCI World ex-US Index, and the Lehman Aggregate Bond Index, lost ground.
Our first priority in managing the Fund is to assess and limit risk. The size of the quantitative investment model's defensive position in short-term Treasury Bonds gives an approximate reading of its assessment of that risk. The allocation to short-term Treasuries was lower, but still significant, during the second quarter—at one point dipping down to 31.5% of assets from a high of 70% during the first quarter. The reduction in the defensive position helped performance, though by the end of the period the stake in Treasuries was back up to 53.5% of assets—higher than the 47% to start the quarter.
About half of the assets from the redeployment out of Treasuries went to increase allocations to domestic equities and commodities, which performed significantly better during the second quarter than the previous period. The other half went to increase positions in foreign equities, Real Estate, and Corporate bonds, all of which did a bit worse than during the first three months of the year. On balance, the reallocation proved beneficial, however, helping to explain the Fund's outperformance relative to its benchmark.
At Smart Portfolios, we believe that the most efficient blend of assets changes continuously, thus the fund adjusts its allocations to current market conditions approximately six times per quarter based on modern mathematical risk analysis. The fund diversified its investments among thirty different Exchange-Traded Funds (ETFs) during the quarter, with only two—representing investments in short-term Treasuries and Corporate bonds—having been held throughout the entire period.
Smart Portfolios
Seattle, WA
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.