February 01, 2011

Saxo Asset Allocation for February 2011

Still moderately bullish

David Karsbøl Our Asset Allocation Model maintains its “Moderately Bullish” stance even though the
Global Business Cycle Momentum Indicator decelerated in January. The model suggests
Chief Economist
big positions in equities and bonds.
dka@saxobank.com
+45 3977 4330 Asset Allocation Weights

Scenario MSCI World MSCI EM Commodities Bonds

Moderate Bullish 43% 6% 11% 40%

Note to clients: This will

be the last publication of Portfolio
the Saxo Bank Asset
In order to directly or synthetically create the suggested exposure in the present
Allocation model.
scenario, an investor should allocate capital as follows:

Position Exposure Name (ticker)

Long 43% iShares MSCI World (IQQW:xetr)

Long 6% iShares MSCI IM (IEMM:xams)

Long 11% Lyxor CRB ETF (CRB:xpar)

Long 20% iShares 1-3 Year US Treasuries (SHY)

Long 20% iShares 1-3 Year EUR Treasuries (IBCA)

* A EUR-denominated investor should get rid of the implicit currency exposure in the portfolio by buying EURUSD worth
20% of the capital allocated to the portfolio.

Performance
Our benchmark (the grey line in the table below) is a constant weight index consisting of
returns from 33% EFFA +10 year Treasuries, 33% MSCI World and 33% CS Tremont
Long/Short Equities. The model return for January was -1.14%* (EUR) before costs and
taxes.

Performance (EUR)
Accumulative capital
6.0

5.0

4.0

3.0

2.0

1.0

0.0
1994

1996

1998

2000

2002

2004

2006

2008

2010

Model Benchmark
Backtesting performance: July 1994 - November 2008. Realised performance: December 2008 -

Source: Bloomberg and Saxo Bank Strategy & Research

*Past performance disclaimer

This publication refers to past performance. Past performance is not a reliable indicator of future performance. Indications of past performance
displayed on this publication will not necessarily be repeated in the future. No representation is being made that any investment will or is
likely to achieve profits or losses similar to those achieved in the past or that significant losses will be avoided.

Statements contained on this publication that are not historical facts and which may be simulated past performance or future performance
data are based on current expectations, estimates, projections, opinions and beliefs of the Saxo Bank Group. Such statements involve known
and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Additionally, this publication may
contain 'forward-looking statements'. Actual events or results or actual performance may differ materially from those reflected or
contemplated in such forward-looking statements.
 February 01, 2011

Global Business Cycle Indicator

Our proprietary global business cycle indicator in an expression of how much global
economic activity is accelerating or decelerating. We now have acceleration, but the
momentum is fading out.

Saxo Bank Global Business Cycle Indicator

1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
-3.0
-3.5
1987

1989

1997

1999

2007

2009
1991

1993

1995

2001

2003

2005
Source: Bloomberg and Saxo Bank Strategy & Research

Saxo Bank Global Business Cycle Momentum Indicator

4.0

3.0

2.0

1.0

0.0

-1.0

-2.0

-3.0

-4.0

-5.0
1989

1991

1999

2001

2003
1987

1993

1995

1997

2005

2007

2009
Source: Bloomberg and Saxo Bank Strategy & Research

Methodology
The Saxo Asset Allocation is based on the proprietary Saxo Global Business Cycle
Indicator, which is based on country indicators for the following ten (10)
countries/currencies: NZD, AUD, CAD, JPY, EUR, GBP, USD, CHF, SEK, and NOK. These
country indicators, which are designed to reflect the macroeconomic strength of each
economy, are based on 22 individual economic time series for each country. The Saxo
Global Business Cycle Indicator takes the country indicators and weighs them by the size
of their Gross Domestic Product (GDP).
The Saxo Global Business Cycle Indicator is constructed to show the activity in the global
economy, as represented by the ten (10) countries. The interpretation behind the scale
is that zero (0) reflects a global economy, which is growing at trend. A positive value
(>0) means that the global economy is growing above trend while a negative value (<0)
indicates that the global economy is growing below trend. Therefore a value below zero
(0) does not necessarily reflect a shrinking global economy.
The Saxo Global Business Cycle Momentum Indicator is simply the smoothed change in
the Saxo Global Business Cycle Indicator and is therefore an indication of whether the
global economy is gaining or losing momentum.
The allocation weights have been designed to reflect four (4) underlying economic
scenarios ranging from „Outright Bearish‟ over „Moderately Bearish‟ and „Moderately
Bullish‟ to „Outright Bullish‟. The Saxo Bank Global Business Cycle Momentum Indicator

2
 February 01, 2011

captures the strength of the changes in the economy and selects the appropriate
scenario accordingly.
Asset Allocation Weights

Scenario MSCI World MSCI EM Commodities Bonds

Outright Bullish 30% 5% 45% 20%

Moderate Bullish 43% 6% 11% 40%

Moderate Bearish 12% 8% 0% 80%

Outright Bearish -20% -5% -5% 70%

Backtesting
The model has been back-tested from July 1994 to November 2008 and has in this
period yielded 285% or 0.79% per month before costs and taxes*. Transaction costs,
slippage and taxes will obviously result in variations in an individual‟s performance
against the model‟s output. Costs and taxes have not been included in the model
because they will vary by client and by the client‟s broker. Performance in this
publication is based on end-of-month prices from Bloomberg.

Model rebalancing
The model is rebalanced once a month on the first Danish business day before 12:00
CET. The model is rebalanced according to the scenario indicated by the Saxo Global
Business Cycle Momentum Indicator.

*Past performance disclaimer

This publication refers to past performance. Past performance is not a reliable indicator of future performance. Indications of past performance
displayed on this publication will not necessarily be repeated in the future. No representation is being made that any investment will or is
likely to achieve profits or losses similar to those achieved in the past or that significant losses will be avoided.

Statements contained on this publication that are not historical facts and which may be simulated past performance or future performance
data are based on current expectations, estimates, projections, opinions and beliefs of the Saxo Bank Group. Such statements involve known
and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Additionally, this publication may
contain 'forward-looking statements'. Actual events or results or actual performance may differ materially from those reflected or
contemplated in such forward-looking statements.

3
 February 01, 2011

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performance displayed on this publication will not necessarily be repeated in the future. No representation is being made that any
investment will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be
avoided.

Statements contained on this publication that are not historical facts and which may be simulated past performance or future
performance data are based on current expectations, estimates, projections, opinions and beliefs of the Saxo Bank Group. Such
statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon.
Additionally, this publication may contain 'forward-looking statements'. Actual events or results or actual performance may differ
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