Tuesday, October 4, 2011

Q3 Results for GSPY

Near the beginning of the year, CCI was looking for ways to more globally diversify the portfolio.  I described a portfolio of four ETFs that I felt would diversify away from the US markets but have less risk than choosing an emerging market ETF such as  VWO .   The portfolio consisted of country etfs from Brazil ewz, Canada ewc, South Korea ewy, and Switzerland ewl.  I called that portfolio globalized SPY (S&P500) or GSPY and rationale for those specific countries and how they might work together is described at the original article here.

Let's start with the bad news...ok really bad news.   Diversifying away from the US markets to almost anywhere else in the world as of the beginning of the year was a bad idea.   Seems like the US is viewed as a safe-haven...imagine that.

The following data includes dividends. While the S&P 500 is down around  8.7% for the first three quarters, the emerging market etf VWO is down about 25.6% .  OUCH.   The "good" news is that GSPY is down only 21.2%.  OK that's not really good news.  However,  if the objective was to move away from the US and perform better than the emerging markets then the portfolio has met its goal .  Additionally the monthly standard deviation for GSPY is 6.3 vs. 7.3 for VWO (still volatile, but less volatile). Correlation of GSPY with VWO is .98. (real high).

GSPY performance was hurt badly by its acknowledge overweight in the materials sectors of the market, and the pegging of the Swiss Franc by the Swiss government.  CCI is sticking with the portfolio for now, but will be considering adjustments and/or  tax loss selling in the fourth quarter.  

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