Model Portfolio Service

The Saxo Model Portfolios are a robust investment solution, allowing you to invest in an attractive and well diversified portfolio universe. The portfolios are built around Exchange Traded Funds (ETFs), ensuring daily liquidity and low transaction costs.

We have created four different model portfolios with attractive risk-reward characteristics, and we monitor the portfolio content as well as the ETF providers on an ongoing basis.

The portfolios are constructed as global, multi-asset portfolios, selecting government bonds, corporate bonds and global equities. We may select alternatives such as real estate and commodities for a small part of the portfolio. The portfolios have equity allocations ranging from 15% to 70%, and are optimised subject to a maximum risk constraint.

The portfolios are designed with a European investor in mind. We have mainly chosen EUR-denominated fixed income instruments, and most of the funds will be issued in EUR. All the ETF’s will be domiciled in Europe and compliant with UCITS regulation. Finally, the ETF’s will be using a physical, or direct, replication method, so that you own the underlying securities. By and large, the ETF’s will be comparable to a normal mutual fund.

The Saxo Model Portfolios are diversified portfolios that can guide you to a robust, long-term allocation strategy.

Select & Invest

With the ETF Model Portfolio selector above, you can easily gain insight into the Model Portfolios and see which ETFs they consist of, and how much is allocated to each ETF.

To get started, simply slide the top bar to any Model Portfolio. You will get a short description of the portfolio, and a pie chart that illustrates how the portfolio is allocated.

Click on the instrument name to access Key Investor Information on the particular ETF in terms of costs, returns, risk and more.

When you have found the portfolio you’d like to invest in, enter the amount you wish to invest and click on the button marked “Estimate trade ticket”. The Widget will estimate how many units you need to buy in each ETF to replicate the Model Portfolio in your own Saxo account.

Whenever Saxo Bank updates the Model Portfolios, this will be described under the “Updates” tab in the top navigation bar. Changes will also be reflected in the selector, and you can return anytime to generate an updated portfolio.

Why invest in model portfolios?

Diversification is the key to a well-balanced long-term investment portfolio. That’s why Saxo Model Portfolios use ETFs which provide a cost-effective and straightforward way to invest in traditional asset classes, including fixed income and equities, from around the globe.

No one knows your risk level better than you. Whether you’re an aggressive investor, or prefer a conservative investing style, there’s a Saxo Model Portfolio that matches your needs. Annual volatilities for our Portfolios range from 2% to 16% (over a 5 year period).

Of course, market conditions change over time – so it’s important to keep your portfolio up to date. We make this process easy by posting updates on our Model Portfolio page, and reminding you to rebalance when market movements affect the portfolios.

Asset allocation and business cycles

Asset allocation (AA) is an important part of constructing a model portfolio. AA deals with the allocation of assets or asset classes in a portfolio. Individual asset classes can be expected to have a positive return in the long run, but returns are rarely a continuous process, and a simple

buy-and-hold strategy may result in steep and prolonged losses. No asset class is found to dominate all other asset classes at all times, nor can one expect that they rise and fall in unison. These are strong arguments in favour of diversifying investments over several asset classes.

Our model portfolios consist of traditional asset classes such as government bonds, corporate bonds and equities. Government bonds are mainly exposed to interest rate (duration) risk, and will gain (lose) if interest rates fall (rise).

We select nominal government and index-linked bonds, where investors in the latter category receive a direct compensation for inflation.

Corporate bonds are exposed to interest rate risk just as with government bonds, but also to the credit risk of the underlying corporates. Corporate bonds are typically split between investment grade and high yield (junk bonds), reflecting the rating quality of the investments. We also include Emerging Market government bonds, issued in local currency.

The return on equities is the product of corporate earnings and what multiple investors are willing to pay for future earnings. Equities represent a nominal cash flow that compensates for economic growth as well as inflation.

Typically, the return on equities is more risky (volatile) than investments in government bonds, leading investors to demand a higher return. In the long run, the return on equities has been well above that of government bonds, but periods as long as 10-20 years with lower returns than for bonds have occurred in the past.

A common distinction is between strategic asset allocation (SAA) and tactical asset allocation (TAA). On the strategic level, we work with the overall investment strategy, including the long-term selection of asset classes. You can think of this as the ideal portfolio for time periods of more than one year. Tactical asset allocation, on the other hand, is about either raising the expected return or reducing portfolio risk through active bets.

Understanding the business cycle

At Saxo Bank, TAA is closely tied to our understanding of the global business cycle, which we combine with insights into how the different asset classes perform across the business cycle. The horizon here is often shorter than a year, reflecting the typical length of each of the four main parts of the business cycle.

We split the economic business cycle into four parts: recovery, expansion, slowdown and downturn. We use the composite leading indicator (CLI) from OECD to define the specific regimes. The CLI indicator is published monthly and is constructed to predict economic activity six months in advance.