Global Balanced Portfolio Positioning Intra-Quarter Update as of 10/01/2018

Increased Asian Equity Exposure; Adjusted U.S. Equity Exposures to Account for Sector Classification Changes

We have made several adjustments in the Global Balanced portfolio. First, we increased our allocation to Asian equities (becoming less underweight). The additional Asian equity exposure was offset by a modest reduction of our U.S. large-cap equity overweight. Our U.S. outlook remains very positive, and the Global Balanced portfolio remains significantly overweight to U.S. equities relative to its benchmark. Concurrently, within the U.S. equity allocation of the strategy, we made adjustments to account for the creation of the new Communication Services Sector. In conjunction with these adjustments, we also conducted a full rebalance of portfolios.

Increased Asian equity exposure: We currently see opportunities in Asian equities and have increased portfolio exposure to the region. Fundamentals in Asia, for both developed and emerging economies, are relatively stable and have recently shown signs of improvement. Yet, Asian equities, particularly in emerging markets, had materially underperformed the U.S. in recent months. This pushed some Asian equity valuations to near all-time lows relative to the U.S. To fund the increase of our Asian exposure, we modestly reduced our significant overweight to U.S. equities. Our outlook for the U.S. remains very positive, and the equity allocations of our global strategies remain approximately 10 percentage points overweight to the U.S. relative to the benchmark for the strategy’s equity allocation.

Adjusted U.S. equity exposures to account for sector classification changes: We made several adjustments within the U.S. equity allocation of the Global Balanced strategy to maintain our desired U.S. equity sector exposures as the underlying holdings of several sector-based ETFs in the portfolio changed. As previously announced, Standard & Poor’s and MSCI decided to reorganize their Global Industry Classification Standard (GICS) at the end of September 2018 to create a new “Communication Services Sector.” This new sector combined the former Telecommunication Services Sector with media, advertising, and entertainment companies taken from the Consumer Discretionary Sector, and with certain internet and entertainment software companies taken from the Information Technology Sector. Correspondingly, various ETF sponsors adjusted the underlying holdings within ETFs that are based on the affected sectors.

To account for changes in sector classifications and sector-based ETF composition, we modestly reduced exposure to the U.S. Consumer Discretionary and Information Technology equity sectors and added exposure to the new U.S. Communication Services equity sector. These adjustments did not reflect any change in our economic outlook or our desired fundamental exposures for the portfolio. Instead, they were intended to keep portfolio exposures in line with our existing outlook as the underlying holdings within certain ETFs changed.

The most recent complete presentation can be viewed here.
Any portfolio characteristics, including position sizes and sector allocations among others, are generally averages and are for illustrative purposes only and do not reflect the investments of an actual portfolio unless otherwise noted. The investment guidelines of an actual portfolio may permit or restrict investments that are materially different in size, nature and risk from those shown. The investment processes, research processes or risk processes shown herein are for informational purposes to demonstrate an overview of the process. Such processes may differ by product, client mandate or market conditions. Portfolios that are concentrated in a specific sector or industry may be subject to a higher degree of market risk than a portfolio whose investments are more diversified.
Holdings, Sector Weightings and Portfolio Characteristics were current as of the date specified in this presentation. The listing of particular securities should not be considered a recommendation to purchase or sell these securities. While these securities were among WestEnd Advisors’ Global Balanced holdings at the time this material was assembled, holdings will change over time. There can be no assurance that the securities remain in the portfolio or that other securities have not been purchased. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities presently in the portfolio. Individual clients’ portfolios may vary.