LCI Annual Strategy Review December 2016
Performance Overview
2016 was the strategies’ first year since the January 2016 launch, and a choppy one. A China-growth and oil-price scare drove a sharp risk-off start, the UK’s June Brexit vote delivered a second shock, and the year then turned on a strong second-half recovery — commodities and emerging markets rebounded, and the November US election lit a reflation/“Trump trade” rally into year-end. All 18 LCI strategies finished solidly positive, from +4.3% (Yield CHF S) to +8.3% (Growth EUR SE). The standout feature was relative performance: 16 of 18 strategies beat their benchmark (the other two essentially matched), by as much as +460 bps, as a diversified mix of equity, a strongly recovering high-yield/EM-bond book, gold and real estate all contributed in a year when the fund and peer benchmarks captured less of the rebound.
Performance - 2016
Semi-Passive (S) | Active-Enhanced (SE)
| Semi-Passive (S) | Active-Enhanced (SE) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Strategy | 12M | vs Bench | p.a. SI | vs Bench SI | Strategy | 12M | vs Bench | p.a. SI | vs Bench SI | |
| LCI Yield CHF S | +4.3% | +250 bps | +4.3% | +250 bps | LCI Yield CHF SE | +5.3% | +352 bps | +5.3% | +352 bps | |
| LCI Balanced CHF S | +5.1% | +367 bps | +5.1% | +367 bps | LCI Balanced CHF SE | +6.0% | +457 bps | +6.0% | +457 bps | |
| LCI Growth CHF S | +5.9% | +360 bps | +5.9% | +360 bps | LCI Growth CHF SE | +6.7% | +440 bps | +6.7% | +440 bps | |
| LCI Yield EUR S | +4.4% | +112 bps | +4.4% | +112 bps | LCI Yield EUR SE | +5.4% | +211 bps | +5.4% | +211 bps | |
| LCI Balanced EUR S | +6.2% | +391 bps | +6.2% | +391 bps | LCI Balanced EUR SE | +6.8% | +459 bps | +6.8% | +459 bps | |
| LCI Growth EUR S | +7.9% | +357 bps | +7.9% | +357 bps | LCI Growth EUR SE | +8.3% | +395 bps | +8.3% | +395 bps | |
| LCI Yield USD S | +4.6% | -7 bps | +4.6% | -7 bps | LCI Yield USD SE | +5.3% | +60 bps | +5.3% | +60 bps | |
| LCI Balanced USD S | +5.6% | +195 bps | +5.6% | +195 bps | LCI Balanced USD SE | +6.1% | +247 bps | +6.1% | +247 bps | |
| LCI Growth USD S | +6.5% | -8 bps | +6.5% | -8 bps | LCI Growth USD SE | +6.9% | +31 bps | +6.9% | +31 bps | |
Returns in reference currency; SI = since inception (annualised). Positive figures in green, negative in red. Source: La Côte Invest.
Since-Inception Cushions
Because the window opens at the January 2016 inception, the since-inception figures are identical to the 2016 returns: annualised returns of +4.3% to +8.3%, all ahead of benchmark except the two USD sleeves that essentially matched. The strongest launch-year cushions were built in the CHF and EUR Balanced/Growth sleeves (+3.6% to +4.6% p.a. ahead). This is the base from which the multi-year track record is measured.
Best and Worst Contributors
(Sub-asset-class level, direction averaged across strategies; contribution varies widely by sleeve, so no single averaged figure is shown.)
Best contributors: the breadth of contribution was the story of the year. North American Equities was the single largest contributor across virtually every strategy. Crucially for the income-tilted sleeves, the recovering credit complex — High Yield Bonds and Emerging Market Bonds — was a major positive after the early-year selloff reversed. In the SE sleeves, gold was a strong contributor (its H1 rally) alongside Real Estate.
Worst contributors: detractors were rare. Swiss Equities was a mild drag in most sleeves, and Government Bonds gave back a little as yields rose into year-end. UK Equities were marginally negative in reference-currency terms, reflecting the post-Brexit sterling fall.
Best and Worst Performers
Best performers: commodity- and EM-linked equity led the rebound. iShares MSCI Canada returned roughly +24% to +28% by reference currency, with Amundi MSCI Indonesia (+16% to +20%) and the US equity ETFs (+11% to +15%) also strong.
Worst performers: the laggards were modest. UBS MSCI Switzerland 20/35 was the weakest (about -3.6% to -4.9%), with Amundi MSCI India and the SPDR FTSE UK All Share slightly negative — the UK position reflecting Brexit-driven sterling weakness. No positions were excluded: there were no matured/expired structured products or zero-weight bad prints in the 2016 window.
FX Impact
Currency effects were modest overall, with a clear Brexit signature:
CHF sleeves: FX was roughly neutral (-0.3% to +0.1%).
EUR sleeves: FX was a small tailwind (+0.5% to +0.9%), as USD holdings gained.
USD sleeves: FX was a small headwind (-0.3% to -1.2%), driven mainly by a sharply weaker sterling (the GBP line was the largest single FX detractor across every strategy after the June referendum).
Portfolio Changes
As the launch year, 2016 saw the SE (active-enhanced) sleeves build out their alternatives allocation: in September, Real Estate was trimmed by 500 bps and Private Equity (Partners Group Global Value) was introduced at 500 bps — a one-for-one rotation within alternatives that left the overall risk profile unchanged. The S (semi-passive) sleeves, which hold no alternatives, were unchanged through the year.
Editorial Note
For a launch year that began with a China/oil scare and absorbed the Brexit shock, 2016 was an encouraging start: every strategy ended positive and almost all beat their benchmark, with the outperformance coming from genuine diversification — equity, recovered credit, gold and real estate all pulling their weight rather than a single bet. The September build-out of the Private Equity sleeve marks the point the SE strategies reached their intended shape. The launch-year cushion established here is the foundation for the multi-year relative record that follows.
