Tuesday, 27 May 2025
Written by MYTHEO
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Key Takeaways
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• In addition to monthly rebalancing, MYTHEO performs a deeper, algorithm-driven portfolio re-allocation process that optimizes ETF selection and positioning to adapt to evolving market conditions.
• During the latest re-allocation in early May, exposure to US-listed ETFs increased from 51.4% to 72.7%, funded by reductions in Asia Pacific and Europe. This shift was driven by our algorithm’s assessment of risk reduction potential and attractive valuations in US markets.
• All allocation changes are executed automatically by MYTHEO’s algorithm, based on quantitative analysis of valuation, volatility, and expected returns—ensuring a disciplined and objective investment strategy free from human bias.

Did you know that MYTHEO doesn’t just rebalance its portfolios every month? In addition to this routine process, we also carry out a more strategic, behind-the-scenes process known as portfolio re-allocation.
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While monthly rebalancing ensures each portfolio maintains its intended risk level, portfolio re-allocation goes a step further. It’s a deeper, algorithm-driven optimization process that evaluates the individual ETFs within each portfolio — determining whether to add, remove, or adjust allocations based on changing market dynamics and relative valuation.

This automated re-allocation is conducted quarterly for the Growth and Income portfolios, and monthly for the Inflation Hedge portfolio.

What Changed in May?
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In early May, MYTHEO carried out its scheduled re-allocation for the Growth portfolio — but this round came with larger-than-usual adjustments.

Five ETFs were removed and two new ones added, reducing the total number of holdings from ten to seven. One of the most striking changes was the substantial increase in exposure to US-listed ETFs — rising from 51.4% in April to 72.7% in May.

‍This shift was primarily funded by reducing exposure to Asia Pacific and Europe. Specifically, the portfolio trimmed its position in the Vanguard FTSE Pacific ETF (VPL) and fully exited the SPDR Euro Stoxx 50 ETF (FEZ). These changes were driven by our algorithm’s assessment of the risk and valuation of each ETF within our investment universe.

Why Were These Changes Made?
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The algorithm behind the MYTHEO Growth portfolio is designed with two key objectives: to deliver long-term capital growth by minimizing risk, and to pursue excess return through tactical asset allocation by increasing exposure to ETFs that appear undervalued relative to their historical valuations

In simple terms, our algorithm reduces exposure to ETFs that carry more risk than potential reward and instead reallocates toward those that contribute to lowering the overall risk of the portfolio. At the same time, it tactically seeks opportunities to generate excess return by increasing exposure to ETFs trading below their historical valuations.

‍The recent increase in US exposure is a direct result of this disciplined process. Our algorithm identified that increasing allocation to US-listed ETFs would not only reduce the overall portfolio risk but also offer potential for excess return, as current US market valuations appear attractive compared to historical averages.

All of these adjustments were made automatically, without human intervention. This ensures our investment decisions remain objective, data-driven, and free from emotional bias.

Geographical Exposure: Before (April) and After (May) the Latest Reallocation.

Source: Gax MD, May 2025

Is the Portfolio Now Less Diversified?
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‍‍At first glance, allocating over 70% of the Growth portfolio to US-listed companies may appear to reduce geographic diversification. However, it’s essential to look beyond a company’s listing location and consider where it actually does business.

Many of the US-listed companies in the portfolio are large multinationals with global operations. These firms generate a significant portion of their revenues from international markets, including Asia, Europe, and Latin America. For example, major US technology, healthcare, and industrial firms often earn more than half their income from outside the United States.

This means that while the portfolio's allocation to US-listed ETFs has increased, the underlying business exposure remains globally diversified. Investors continue to benefit from broad participation in global economic growth through US-listed vehicles

Furthermore, the decision to increase exposure to the US market was not based on short-term trends or market timing. It was a tactical, algorithm-driven adjustment, reflecting an analysis that US equities currently offer a better balance of risk and return based on historical valuation.

Snapshot of the Top 30 Portfolio Underlying Exposures

Source: Gax MD, May 2025

‍‍At MYTHEO, our portfolios are designed with a clear purpose: to maximize long-term returns while minimizing risk. Achieving this balance requires more than just a one-time setup — it involves continuous monitoring and intelligent, data-driven adjustments.

That’s where our re-allocation process comes in. Unlike static strategies, our portfolios evolve with the market. By regularly reassessing ETF holdings, MYTHEO’s algorithm ensures your investment remains dynamic, resilient, and positioned to perform across different market environments — whether conditions are rising, falling, or flat.

Ultimately, this process reflects MYTHEO’s commitment to delivering long-term sustainable return through innovation, discipline, and a deep understanding of how to manage both opportunity and risk in the global market.

This material is subject to MYTHEO’s Notice and Disclaimer.