With investments in energy, infrastructure, robotics, commodities and emerging markets, the Global ETF Rotation Strategy aims to beat the world index over the long term.
On May 13, the Global ETF Rotation Strategy was launched. The past few weeks have been mainly about building the portfolio and taking the first positions. The current return of 0.23% therefore still says little about the strategy's potential. The build-up phase is now largely behind us and from now on the period begins in which the portfolio must actually prove itself against the world index.
The philosophy behind this strategy is simple. Instead of automatically investing in a world index, it actively looks for regions, sectors and themes that are expected to outperform the broad market in the coming years.
One notable choice is that the portfolio currently has almost no exposure to major U.S. technology companies. This is a conscious decision. The U.S. stock market is currently dominated by a small number of technology companies that have performed exceptionally well in recent years. Although companies like Nvidia, Microsoft, Apple and Amazon are fundamentally strong companies, I expect valuations in this segment to be vulnerable to a correction. Should such a correction occur, it may create a more attractive entry point. At that time, the portfolio could still gain more exposure to this sector.
Instead, we chose sectors and regions that, in my opinion, offer a more attractive risk/return ratio. The portfolio is currently invested in emerging markets, Hong Kong and Europe, combined with a number of sectors that benefit from long-term trends such as industrialization, energy transition and global infrastructure investment.
In addition, there is exposure to energy companies, utilities, infrastructure, robotics and automation. Strategic metals and commodities also play an important role within the portfolio. These sectors are the building blocks of the economy and benefit from global demand for energy, raw materials, digitalization and economic growth.
Whereas many investors have become almost entirely dependent on a handful of U.S. technology companies in recent years, this strategy deliberately takes a broader approach. That does not mean avoiding technology, but rather focusing currently on markets and sectors where valuations are more attractive and where I believe the upside potential is greater.
The ultimate goal remains unchanged: to outperform the world index over the long term. This will not happen every quarter or every year, but actively rotating between regions, sectors and themes creates a portfolio that can respond flexibly to changing market conditions.
The first positions have been taken, the portfolio is in place and the strategy is ready for the next phase. The coming months will show whether this approach can indeed provide structural outperformance of the traditional world index.
Would you like to follow this strategy and see what changes and rotations are made? Then I cordially invite you to follow the Global ETF Rotation Strategy on Systems2Follow.
Kind regards,
Ruud Hoefnagels