The model portfolios performed well despite the volatile environment throughout the year. The equities component outperformed our ACWI benchmark at +6.97% vs. +6.00%.
The US, Canada and Brazil were the best performing markets, while our allocations to Mexico, China and Italy were the biggest detractors.
Given the upheaval in the interest rate outlook, developed market bonds had a difficult year. The bond component underperformed our benchmark slightly at -0.54% vs. +0.26%. Unsurprisingly, emerging markets, which the model portfolios tend to overweight and which had relatively high yields going into the shift in rate trends, were the best performers, with Brazil, Russia and India at the top. However, a couple of EM countries—Nigeria and China –where the model portfolios had an overweight, were hurt by significant currency depreciation. While the US is underweighted compared to its global bond benchmark weight, it is still the biggest market in the fixed income portfolio. US 10-year yields increased in absolute terms by almost a third, dragging the portfolio down as the biggest detractor.
Our other additions to our baseline portfolio—global real estate and Prism Income Fund—had mixed results. Real estate was impacted by the turn in the interest rate cycle, falling 7.8%. Prism Income Fund continued to churn out its steady positive performance, ending the year up 7.5%.