Concerns about Greece exiting from the European Union, China’s economic slowdown and volatility in its financial markets, and Puerto Rico’s debt “death spiral” permeated financial markets throughout 2015. These concerns clouded what turned out to be a relatively mild result in 2015 with the MSCI All Country World Index Net Return USD returning -2.36% for the year (but returning 1.27% when quoted in local currencies).
While the concerns reported throughout the year felt more serious than what was reflected in market performance, we can turn to various market premiums to help put 2015 portfolio performance into context.
The table below presents the premiums for 2015 which we review in the Loring Ward Investment Committee Performance Report. Reviewing these premiums can help us evaluate what contributed and detracted from portfolio performance.

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  • Exposure to International Small Cap stocks would have contributed to the performance of the International allocation due to the positive International Small premium
  • U.S. REITs outperformed the broader U.S. market in 2015 by 4.00% which would have contributed to U.S. allocations
  • Exposure to U.S. investment grade credit slightly outperformed U.S. treasuries in 2015 and would have contributed to fixed income allocations


  • U.S. Small Cap stocks underperformed U.S. Large Cap stocks; greater exposure to U.S. Small Cap stocks would have detracted from performance in 2015
  • U.S. Value stocks underperformed U.S. Growth stocks in 2015; this would have lowered performance of portfolios with greater exposure to U.S. Value stocks in 2015
  • International Value stocks underperformed International Growth stocks in 2015 so added emphasis in International Value stocks would have also detracted from performance
  • International allocations were not helped by Emerging Markets which underperformed International Developed Markets by 11.88% during the year
  • Fixed income allocations were not helped by added term risk with Long-term U.S. Treasuries underperforming Short-term U.S. Treasuries by 2.26%
  • As mentioned in the opening paragraph, the strong U.S. dollar detracted from the performance of International allocations in 2015. The return difference between the MSCI All Country World Index quoted in its constituent countries’ local currencies and the index quoted in U.S. dollars of -3.63% reflects the aggregate impact the U.S. dollar had on International performance

The information contained in market performance for 2015 showed that the doom and gloom we heard throughout the year may not have been as serious as originally reported. Reviewing various premiums not only gives us context for evaluating portfolio performance, it also makes a strong case for maintaining diversified exposure to many asset classes, as these premiums pay off at different times.
In a series of blog posts on the market, Small and Value premiums coming out over the next two months, we will soon see the current performance of the Small and Value premiums over short and longer time periods is not unexpected or unprecedented.

Diversification neither assures a profit nor guarantees against loss in a declining market.
Past performance does not guarantee future results.
Indexes are unmanaged baskets of securities in which investors cannot directly invest; they do not reflect the payment of advisory fees or other expenses associated with specific investments or the management of an actual portfolio.
Stock investing involves risk including loss of principal. Securities of small companies are often less liquid than those of large companies. As a result, small company stocks may fluctuate relatively more in price. International and emerging market investing involves special risks such as currency fluctuation and political instability, and may not be suitable for all investors. Bonds (fixed income) are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rises, issuer’s creditworthiness declines, and are subject to availability and changes in price. REIT investments are subject to changes in economic conditions and real estate values, and credit and interest rate risks.