Principal Strategic Asset Management (SAM) Portfolios

Focused on Managing Overall Risk Levels

A series of five actively managed asset allocation funds, the SAM Portfolios provide investors with a highly diversified investment solution that is simple to understand.

Each Portfolio is managed with a rigorous investment discipline that examines dozens of domestic and global economic forces to develop risk-adjusted investment strategies. With this in mind, the Portfolios are continually reallocated to benefit from evolving investment conditions.

Additionally, the multi-manager SAM Portfolios provide financial professionals with a robust practice management solution to help strengthen client acquisition and retention efforts.

SAM News

The following is an economic and market outlook and overview of the strategies implemented this quarter.

More Record Highs Across U.S. Equity Market Indices

Early Year Market Advances Amid the Still-Low Interest Rate Environment

Domestic stock markets have rallied in early 2015, supported by very low interest rates and relatively strong fourth quarter earnings announcements. In fact, both the Dow Jones Industrial Average (DJIA) and S&P 500 set multiple all-time highs throughout the first quarter, and the more tech-heavy NASDAQ Index closed above 5,000 for the first time since 2000. Although long-term interest rates have bounced around somewhat this quarter, yields remain very close to the levels at which they opened the year. U.S. Federal Reserve (Fed) Chair Janet Yellen recently announced that economic strength, evidenced by continued improvements in the labor market, could signal a change in interest rate policy if inflation picks up at the Fed's goal of 2%—which many analysts speculate could occur mid-year. This environment has been positive for equities, yet we continue to watch valuations closely while prudently managing risk through widespread diversification.

Domestic Indices At or Near Record Highs:


Domestic Indices At or Near Record Highs


Data for each of the indices as of the market close on March 3, 2015. The NASDAQ Stock Market, commonly known as the NASDAQ, is an America stock exchange. The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. U.S. Stocks are represented by the S&P 500, a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. International Stocks are represented by the MSCI EAFE Index, measuring stock returns in developed economies outside North America.

Positioning Strategic Asset Management (SAM) Portfolios to Help Manage Risk

The Strategic Asset Management Portfolios' Management team reduced overall risk levels given richer equity valuations and the potential for interest rate increases on the horizon. Seeing continued improvement in the consumer segment, we remain optimistic about the U.S. economy and continue to favor domestic equities, which have added to relative results as U.S. markets in recent periods have outpaced both developed and emerging market performance. Positions in emerging markets have been somewhat of a drag on results in recent months as the dip in oil prices impacted emerging markets more than developed economies. Europe continues to have some political and economic difficulties, and the rising U.S. dollar puts an additional drag on foreign investment results. While we have looked at ways to reduce overall equity risk, overweight positions have boosted relative results, and far-reaching diversification across multiple equity asset classes and investment categories in the SAM Portfolios should help manage any short-term periods of volatility.

Within fixed income, our overweight in high yield issues was a slight drag on overall results at the end of 2014 as higher-rated and investment-grade issues outperformed, a trend that reversed in 2015 as high yield issues resumed market leadership. We maintained this overweight as we feel that healthy corporate profits could boost these positions over a longer-term period. We have been allocating fixed-income assets with an eye on risk management given the potential for rising rates, and are favoring issues less sensitive to rate increases. We are taking a balanced approach to these fixed-income positions, offsetting some of the high yield allocation risk with very short-duration corporate issues. This strategy could lessen the impact of rate increases on both equity and fixed-income markets and help to manage overall Portfolio risk levels.

An overview of the positioning of the SAM Portfolios is as follows:

  • Continue to favor equities over fixed income while closely watching valuations.
  • Overweight U.S. positions relative to international holdings as strength of the U.S. dollar and a favorable relative earnings environment support this outlook.
  • Within U.S. equities we favor mid-cap positions given valuations, but we are relatively style-agnostic, looking for positions in good quality equities with attractive yields.
  • Looking for opportunities to add to alternative classes such as international real estate, given attractive risk/reward potential.
  • Favor fixed-income positions with lower duration or less sensitivity to rising rates as we anticipate slowly rising rates on the horizon.
  • Overweight higher yielding issues given strength of balance sheets and strong interest coverage.

For additional information, including allocation changes and performance, click on your Portfolio to the right.

Hear from Portfolio Manager Todd Jablonski.