2nd Quarter 2011 Commentary
The second quarter of 2011 can be summarized as a period of moderate to high volatility in a relatively narrow range. While the Fund sought to control volatility, it also fell prey to the market’s swings during the quarter and underperformed the benchmark (35% Russell 3000 Index/35% MSCI World ex-US Index/30% the Barclays Capital Aggregate Bond Index).
The Fund seeks the best risk adjusted returns currently available. It is noteworthy that we started the quarter with a moderately conservative allocation posture; the subsequent allocations consistently tended to reduce riskier asset class exposures. This was reflected, for example, in commodity allocations being taken from 13.5% on April 1st down to an 8% weight by June 30. Domestic small capitalization stocks started the quarter with a 12% weight, only to become a zero weight by quarter end. Correspondingly, short term, high credit quality instruments were a 15% weight on April 1st, while by June 30 they were allocated 43% of the portfolio mix.
It is obvious to many that the global conditions are not optimal for sustained, robust economic growth. After witnessing the greatest monetary stimulus of modern times many market indices are only near the levels seen just prior to the 2007-08 financial panic. One could argue that a conditioned complacency has developed with many investors, hoping that someone with bigger, deeper pockets will save the day. We are reminded that “Hope” is not a viable investment vehicle.
The Fund’s proprietary investment model encompasses the range of factors that affect security prices. We believe security prices are moved by the sum of these factors, such as: fundamental, technical, and behavioral, and econometrics. It is this more holistic view that currently has us in a more conservative position than traditional asset allocation models with a focus upon preserving investor assets.
As of June 30, 2011, commodity weighting was 8.02% and domestic fixed income was 46.75%.
Note: The Fund invests in exchange-traded funds (ETFs) which are securities of other investment companies. An ETF seeks to track the performance of an index by holding all or a sampling of the securities on that index. An ETF may not be able to replicate an index exactly since returns may be reduced by transaction costs, expenses and other factors while the index has none. The Fund invests in many different areas of the market, each of which may involve its own element of risk. Use of aggressive ETF investment techniques such as futures contracts, options on futures contracts and forward contracts may expose an underlying fund to potentially dramatic changes (losses) in the value of its portfolio. Credit risk or default risk could negatively affect the Fund’s share price. Inverse or ‘short’ ETFs seek to profit from falling market prices and will lose money if the market benchmark index goes up in value. Leveraged ETFs seek to provide returns that are a multiple of a benchmark and can increase risk exposure relative to the amount invested and can lead to significantly greater losses than a comparable unleveraged portfolio.
Before investing, carefully consider the fund’s investment objectives, risks, charges and expenses. Contact 800 992-8151 for a prospectus containing this and other information. Read it carefully. Aston Funds are distributed by BNY Mellon Distributors Inc.