Kensington Asset Management

Strategy Review – JULY 2025


MIXED MARKET SIGNALS AS RATE CUT EXPECTATIONS BUILD

July brought a more uneven backdrop across global markets. Bond yields climbed steadily through the first half of the month before reversing lower at month end, leaving core fixed income modestly weaker overall. In contrast, high yield bonds maintained positive momentum, supported by continued US economic growth. Equities advanced further, with growth stocks leading as corporate earnings largely exceeded expectations. Investors balanced optimism over resilient fundamentals with caution around seasonal volatility and the timing of potential Federal Reserve policy shifts.

Below is a summary of how each Kensington strategy navigated these conditions.

MANAGED INCOME STRATEGY

Author: Kensington Asset Management PM Team

The Strategy remained in a Risk-On stance throughout July, allocated predominately to US high yield with satellite exposure to multisector fixed income. High yield positioning continued to provide stability and income generation as spreads remained supportive. The Federal Reserve held rates steady at its July meeting, and markets continue to anticipate a potential cut later this year. For now, the portfolio remains positioned to benefit from high yield carry, while monitoring inflation and interest rate risks closely.

DYNAMIC ALLOCATION STRATEGY

Author: Kensington Asset Management PM Team

US equities extended gains in July, led by growth stocks and supported by strong second-quarter earnings results. Dynamic Allocation remained fully invested in a Risk-On posture, with positioning across large-cap growth and core equities. While the S&P 500 registered multiple new highs during the month, the team remains mindful of historical seasonal volatility patterns that often emerge in late summer. The Strategy is positioned to remain opportunistic while maintaining flexibility should market dynamics shift.

ACTIVE ADVANTAGE STRATEGY

Author: Kensington Asset Management PM Team

Active Advantage maintained a fully invested allocation in July, with the portfolio balanced evenly between fixed income and equities. The fixed income allocation was tilted toward US high yield, supported by emerging market and multisector bonds, while equity exposure spanned core, growth, and dividend-focused holdings. The diversified positioning provided participation in both equity strength and income-oriented assets. The Strategy remains focused on managing volatility through disciplined diversification and a multi-model approach, with the flexibility to adjust if conditions change.

DEFENDER STRATEGY

Author: Elio Chiarelli, PhD, AIF – Lead Portfolio Manager, Liquid Strategies

The Defender Strategy delivered positive results in July despite uneven market signals. Allocations remained balanced across global equities, Treasuries, and gold, emphasizing capital preservation alongside participation in stronger equity markets. International equities contributed positively, while Treasuries provided ballast amid shifting yields. Tactical gold exposure further diversified the portfolio. The Strategy continues to emphasize disciplined risk management, dynamically adjusting exposures based on momentum trends to help reduce volatility and avoid concentration risks. Entering August, the portfolio remains prepared for heightened crosscurrents tied to inflation data and Fed policy expectations.

HEDGED PREMIUM INCOME STRATEGY

Author: Shawn Gibson – CIO, Lead Portfolio Manager, Liquid Strategies

The Hedged Premium Income Strategy participated in the continued equity market advance during July, supported by its long call positions while generating steady income from call spread overlays. Downside protection remains in place through put spreads, though the strong upward move in equities widened the distance between the protective strikes and current market levels. Looking ahead, the team is monitoring opportunities to potentially adjust downside buffers as markets enter a seasonally more volatile period. The Strategy remains positioned to generate consistent income while retaining partial upside participation and defined downside protection.


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