How our Model Portfolios performed in 2020

by Kyle Caldwell from interactive investor |

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Four of the five ii Model Portfolios beat their benchmarks in 2020, with the top performer up 26%. 

It was a roller coaster of a year for investors, which highlighted the importance of keeping a cool head and investing for the long term.

This is reflected in the performances of our three growth model portfolios, which for 2020 as a whole delivered benchmark-beating returns. All three portfolios benefited from the big stock-market recovery that has taken place since the end of March.

Out in front was ii Ethical Growth, gaining 25.7% in 2020 against a return of 4.5% for the growth benchmark. The model has been a strong performer since launch (1 October 2019), returning 27.4%. On 1 November, a number of changes were made to the portfolio, with four funds added and four funds ejected. 

Closely behind was ii Active Growth, which gained 22.7% in 2020. The star of the show, accounting for a 15% weighting in the model, was Scottish Mortgage (LSE:SMT), which gained 110.5% in 2020.

Both ii Ethical Growth and ii Active Growth outperformed the MSCI World index, which returned 12.3%.

Our passive ii Low-Cost Growth model lagged the two active models. The portfolio returned 6.9%, but this was ahead of the growth benchmark.  

There was less cheer for our two income portfolios, with both recording a loss. But in the wider context it was a very tough year for income-seeking funds and trusts, as well as for income-focused tracker funds and ETFs that follow the up and down movements of dividend-paying companies.

In the UK, around 500 companies listed on the London Stock Exchange cancelled, cut, or suspended dividend payments to shore up balance sheets in response to the Covid-19 pandemic.

The ii Active Income portfolio declined by 4.2% in 2020, while ii Low-Cost Income lost 7.3%. The income benchmark was also in the red, losing 6.1%.

How the Model Portfolios invest 

The Active Income, Active Growth and Ethical Growth portfolios are each comprised of 10 constituents, with actively managed investment funds and trusts favoured over “passive” index-tracking options.

The Low-cost Income and Low-cost Growth models are each comprised of nine index-tracking funds or exchange-traded funds.

In each portfolio, whether passive, active or ethical, the constituents are all picked from the ACE 40 and Super 60 fund lists, except where more specialist funds are required to fit the optimal asset allocation.

What do we mean by this? As we explain in the methodology, the optimal mix of asset classes – such as bonds, emerging markets and developed markets equities – for any Model Portfolio constitutes its strategic benchmark. Interactive investor optimises this annually to take into account any changes to institutional long-term assumptions about the return or risk expectations for each of these asset classes. The asset allocation that is the result of this process is common to all five Model Portfolios.

 

These articles are provided for information purposes only. The information we provide in respect of the ii Model Portfoliosii Super60 or ACE30 is an opinion provided by ii or one of its partners on whether to buy a specific investment or portfolio. Please note that none of the opinions we provide are a “personal recommendation”, which means that we have not assessed your investing knowledge and experience, your financial situation or your investment objectives. Therefore, you should ensure that any investment decisions you make are suitable for your personal circumstances. If you are unsure about the suitability of a particular investment or think that you need a personal recommendation, you should speak to a suitably qualified financial advisor.

The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Any changes to the ii Model Portfolio constituents and the rationale behind those decisions will be communicated through the Quarterly Investment Outlook.

ii adheres to a strict code of conduct. Members of ii staff may hold shares or units in investments which make up the ii Model Portfolios, which could create a conflict of interest. Any member of staff intending to complete some research about any financial instrument in which they have an interest are required to disclose such interest to ii. We will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, staff involved in the production of the ii Model Portfolios are subject to a personal account dealing restriction. This prevents them from placing a transaction in these portfolios or the underlying specified constituents of each portfolio for five working days before and after an investment is included or amended and made public within the list. This is to avoid personal interests conflicting with the interests of the recipients of the ii Model Portfolio options.

 

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