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Real Volatility Arrives - How Did Advisor Models Perform?

Mar. 09, 2018 1:44 PM ET
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By Patrick Nolan, CFA Portfolio Strategist, BlackRock Portfolio Solutions

Over the past several years, it had been easy to forget that markets actually can and do go down. But how did portfolios hold up amid recent turmoil?

The markets gave us something from January 29th to February 8th that we haven't seen in a long time-real volatility and real downside. Over the past several years, it had been easy to forget that markets actually can and do go down.

But how did portfolios hold up? We analyzed 6,500 advisor models to see how they fared relative to their benchmarks during this time period. The short answer: "pretty well," but there is a cautionary tale to be told.

Advisor models outperformed their benchmarks

Seventy percent of all models outperformed their category benchmark. When comparing categories, there was a greater percentage of outperformers in the more aggressive categories, while the more conservative ones were a bit more of an even fight. The Moderate and Moderate Aggressive categories fared the best, where at least four out of every five models we collected in those categories outperformed (see % of Advisor Models That Beat Benchmark chart below).

Both individual equity and bond sleeves for the average model typically outperformed the index used for each.

In equities, it was the presence of foreign stocks that helped out. U.S. large cap stocks took a harder hit than developed international markets, and thus, those models that held foreign stocks benefited. We intentionally used a U.S. stock benchmark for this analysis, as investors tend to focus on the U.S. (see Equity Sleeve Performance from 1/29/18-2/8/18 chart below). We also tested versus a set of benchmarks that included foreign stocks, and the average model still outperformed.

The return benefit provided by foreign equities is good to see, as it's been

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