Monday, 9 October 2023
Written by MYTHEO
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In this monthly report, we will review MYTHEO’s portfolio performances based on the financial market developments in September 2023.

1. Growth Portfolio

‍MYTHEO’s Growth Portfolio was down by 3.26% (down 2.08% in MYR) in September 2023.

‍For September, the portfolio did not shift by much whereby the US market remains as our largest investment exposure. Despite the current weakness in this equity market brought upon by potential economic overheating, we believe that the US provides a robust foundation to the portfolio due to it being home to multinationals with significant contributions and linkages to the global economy as well as a relatively efficient free market economy.

‍The portfolio’s allocation to the WisdomTree India Earning ETF (about 6%) was a key contributor to the overall portfolio performance during the period.
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Top 3 ETFs (Growth portfolio)

Bottom 3 ETFs (Growth portfolio)

Source: GAX MD Sdn Bhd, data in USD term for the month of September 2023.

2. Income Portfolio

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‍MYTHEO’s Income Portfolio recorded a loss of 1.78% (down by 0.58% in MYR) in September 2023.

For the month of September 2023, there was no repositioning performed for this month. The income portfolio maintained its preferences towards short-term duration corporate bonds and investment grade bonds which maintains relatively attractive yields which are more insensitive to interest rate risk and are above current US inflation levels, in addition to having decent credit quality. The current yield-to-maturity of the ETFs in the portfolio is around 6.06%.

The portfolio’s exposure to floating rate notes (about 6%) was the key contributor to the overall portfolio performance during the period.
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Top 3 ETFs (Income portfolio)

Bottom 3 ETFs (Income portfolio)

Source: GAX MD Sdn Bhd, data in USD term for the month of September 2023.

3. Inflation Hedge Portfolio

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‍MYTHEO’s Inflation Hedge Portfolio recorded a negative USD return in September 2023, down by 4.24% (-3.07% in MYR).

The current largest positions in this portfolio are U.S real estate and inflation linked bonds. The positions in US real estate, infrastructure and base metals positions are mostly driven by their ability to hedge long-run inflation. The positions in inflation-linked bonds and gold not only help to hedge against inflation but also provide a higher diversification benefit relative to other asset classes.

‍The portfolio’s allocation to base metals (about 5%) was the key contributor to the overall portfolio performance during the period.
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Top 3 ETFs (Inflation hedge portfolio)

Bottom 3 ETFs (Inflation hedge portfolio)

Source: GAX MD Sdn Bhd, data in USD term for the month of September 2023.

4. Global ESG Portfolio

MYTHEO’s Global ESG portfolio is down by 4.41% (-3.24% in MYR) in September.

Similar to the growth portfolio, the preference and exposure to the US is about 60%. The US occupies a significant fraction of Environmental, Social and Governance-focused (ESG) investments with a longer track record, therefore our portfolio follows this trend in terms of placing a higher weighting in US markets, in addition to better risk management compared to investment in newer and more volatile emerging markets.
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Top 3 ETFs (Global ESG portfolio)

Bottom 3 ETFs (Global ESG portfolio)

Source: GAX MD Sdn Bhd, data in USD term for the month of September 2023.

Chart 1: September 2023 - Portfolio Year-to-Date of Return in % (MYR)

Balanced allocation consists of 32% Growth, 36% Income and 32% Inflation Hedge
Source: GAX MD Sdn Bhd, October 2023
‍Note: Past performance is not an indication of future performance

Do you know how to calculate your actual monthly portfolio return?

As part of diversification, the actual portfolio returns to the investors are the combined weightage return from the allocation to each functional portfolio.

 For example, if an investor allocates 32% of their investment in Growth, 36% in Income and 32% in Inflation Hedge, the actual portfolio return in MYR for September is -1.86% [(32% x -2.08%) + (36% x -0.58%) + (32% x -3.07%)]‍

Our Thoughts
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The US Dollar (USD) strengthened against the Malaysian Ringgit (MYR) in September by 1.2% to MYR 4.6935 as of the 29^th of September 2023, compared to MYR4.6370 as of the 31^st of August 2023. This has had a minor positive impact on the performance of the portfolio in Ringgit.

‍Global equity markets experienced a rough month in September. The inflation rate in the US continued to climb, reaching 3.7% in August on the back of climbing energy prices, leading to higher expectations of rate hiking by the US Federal Reserve as they work towards their 2% target despite the pause for this month. Some improvement was seen in China’s economic health, but investments continued to be weighed down by fears that include and stem from property sector woes. One major economy that managed to go against the grain was India, for which the WisdomTree India Earnings ETF (EPI) has returned about 1.6% this month and 13% on a year-to-date basis, in USD terms.

‍Bond markets were similarly rattled by the danger of rate hikes in the West and defaults in the East, pushing longer duration bonds and emerging market debt prices down to compensate for the higher risk. The effect on rising rates affected US real estate, with US mortgage rates climbing to 7.31%, the highest level in almost 23 years, thus discouraging purchases, while precious metals were similarly hammered due to its current investment unattractiveness. However, oil continued to surge forward as supply dwindled, to the point where stocks in Cushing, Oklahoma have begun approaching critical depletion levels.

‍Given the high-interest rate levels within the US with the potential occurrence of further rate hikes, investors who are looking for a safe haven with attractive yield may consider MYTHEO USD Trust Portfolio. The current net interest rate for this portfolio is 4.33% p.a. and is subject to change based on the Federal Reserve's monetary policy and the Federal Open Market Committee's (FOMC) decision on the federal funds rate.

‍A digital investment platform like MYTHEO is here for you to achieve your long-term financial targets by having diversified investments in an easy and affordable way. Learn how MYTHEO can help you diversify your portfolio today, and how you can get started here.

This material is subjected to MYTHEO's Notice and Disclaimer.

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