Revisiting “Disruptive Growth”

Thus, when interest rates began rising late last year and through roughly mid-March of this year, many of those stocks fell fairly hard. The Nasdaq-100 Index holds many similarly valued companies, and here is a YTD comparison of the rise in the 10-Year Treasury rate and the performance of that Index.  

Note (a) the sharp decline in the Nasdaq-100 commensurate with the sharp increase in rates beginning in February, but also (b) the stabilization of the Nasdaq-100 over the past few weeks (it is once again positive for the year) as rates have also stabilized. 

Figure 1_10 Yr Treasury

It’s not that growth stocks have performed badly in 2021. They simply have not kept up with the cyclical rotation trades (small cap and value)—a phenomenon advisors and investors have not seen for most of the past 10 years. 

Figure 2_Index performance

The disruptive growth model shows similar performance characteristics as the Nasdaq-100 Index. It actually holds more highly valued positions and so fell faster when rates rose, but it is recovering and has been outperforming the Nasdaq-100 since inception on July 31, 2020.

(Click on image to enlarge)

Figure 3and4_Disruptive Growth Performance-v2

 In addition, although three of our current six ETF allocations have generated slightly negative performance YTD (NAV) over their common investment period dating back to October 2019, each of those individual six strategies has shown high double-digit returns (NAV).2  

The portfolio also continues to show a distinct lack of security overlap between the different allocations. As of March 31, 2021, no two of the current six ETF positions have had more than 18% of securities overlap each other, and most had less than 10%. (Holdings and weightings are subject to change.) There likewise is a nice diversification of sector exposures. 

This portfolio carries high valuations corresponding to its high growth rates, and its performance will likely continue to be influenced by changing interest rates and may be volatile (and has been YTD), but we believe the level of diversification provided by the current lack of sector and securities overlap will help to generate a more consistent performance while still taking advantage of each individual strategy’s potential future growth. 

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Disclaimer: Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. U.S. investors only: To obtain a prospectus containing this ...

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