Doubleline 2013 Year In Review: White paper

DoubleLine Multi-Asset Growth Strategy: 2013 Review and 2014 Outlook

By Ryan Kimmel, Investment Analyst

Fixed Income Asset Allocation, Multi-Asset Growth

By Samuel Garza, Portfolio Manager

Fixed Income Asset Allocation, Multi-Asset Growth

January 27, 2014

2013 Year in Review

In 2013, financial markets continued to be driven by central bank policy. The Federal Reserve (the “Fed”) was a main market driver with the announcement of its intent to “taper” monthly asset purchases by the end of the year, data permitting. For the majority of the year, investors were left wondering when the Fed would eventually dial down its Large Scale Asset Purchase Program and by how much. As a result, U.S. Treasuries (UST) sold off as investors tried to reduce interest rate risk with yields on the U.S. 10-year Treasury rising 140 basis points (bps), finishing the year at 3.02%.

Emerging Markets (EM), which have become somewhat dependent on cheap funding, sold off precipitously as investors unwound their “search-for-yield” trades. EM countries with current account deficits were hit the hardest including Indonesia, Brazil, Turkey, and South Africa. See Exhibit 1.


During the year, investors substituted interest rate risk with credit risk, as spreads on
high yield bonds tightened to pre-crisis lows. With default rates near an all-time low, high yield bonds, floating rate debt, and convertible bonds were some of the top performing fixed income assets in 2013. Global government bonds, as measured by the Citigroup World Government Bond Index (USD) posted a total return of -4.00%. EM fixed income, as measured by the JPMorgan Emerging Markets Bond Index (EMBI) Core, posted a total return of -6.45% in 2013.

Developed Market (DM) equities performed extremely well over the course of the year as improving economic data and accommodative monetary policy helped to buoy equity prices. U.S. equities, as measured by the S&P 500 Index, rallied +29.6% (the largest annual return since 1997). Japanese equities, as measured by the Nikkei, rallied 56.72% (the largest rally since 1972). Japanese equities were supported by unprecedented quantitative easing (QE) from the Bank of Japan (BOJ) and promising developments from Prime Minister Abe’s “Abenomics.” EM equities, as measured by the Morgan Stanley Capital International Emerging Markets Index (MSCI EM), underperformed developed markets in 2013, posting a total return of -4.98%.

Although it is often inaccurate to group all commodities together, they performed poorly as a basket in 2013. The S&P Goldman Sachs Commodity Excess Return Index (SPGSCI ER) posted a total return of -1.28%. Of the five sectors represented by the SPGSCI, only Energy had positive returns for the year. The Precious Metals sector was the worst performing sector returning -29.8% for 2013. It was the first calendar year that gold suffered a negative return since 2000. Industrial metals and agriculture were also negative, as measured by the SPGSCI Industrial Metals and Agricultural Indices1, down 12.92% and 18.05%, respectively. In currencies and against the U.S. Dollar (USD), the Japanese Yen, Australian Dollar, and Norwegian Kroner were the weakest performers in G10, while the Euro and British Pound strengthened as data improved across the eurozone. In EM currencies, current account deficit countries (Indonesian Rupiah, Turkish Lira, South African Rand, and Brazilian Real)

See Full PDF here MAG-2013-Review-and-2014-Outlook-Investment-Letter

MAG 2013 Review and 2014 Outlook Investment Letter (1)

Get our newsletter and our in-depth investor case studies all for free!