DISCRETIONARY INVESTMENT MANAGEMENT SERVICE
QUARTERLY FOCUS
A discretionary managed investment solution, using a multi asset approach, designed to cover a number of different risk profiles to meet a range of client needs and goals.
First Quarter 2016
The first quarter was challenging for our portfolios, with sharp market volatility stemming from concerns about global growth and a US recession. Bond-orientated mandates proved more resilient in this risk-averse environment, and were helped further by revised expectations for interest-rate rises, delivering positive returns for the three months overall. Weakness in equity markets during the period proved difficult for our more equity-heavy portfolios, though performance improved in late February and through March as investor sentiment brightened and stock markets rallied.
Our preference for Japanese and European stock markets – which had stood us in good stead in 2015 when these markets outperformed – dampened portfolio performance as these markets lagged over the quarter. Investors appeared to be taking profits and there were worries over the potential consequences of negative interest rates, as well as stronger currencies.
The inherent home (UK) bias of the portfolios also capped returns given the challenge presented to UK stocks by the uncertainties of the upcoming EU referendum. However, sterling weakness served to flatter returns from overseas, highlighting the benefits of global diversification.
| Portfolio returns, after fees | Wealth Preservation | Wealth Enhancement (Medium Term) | Wealth Enhancement (Long Term) | Wealth Generation | Diversified Bond |
|---|---|---|---|---|---|
| Last Quarter | 1.84% | 1.09% | -0.01% | 0.33% | 3.13% |
| Rolling 12 Months: | |||||
| End Mar 15 to end Mar 16 | -1.70% | -3.47% | -4.40% | -4.48% | -0.72% |
| End Mar 14 to end Mar 15 | 9.38% | 9.12% | 8.98% | 9.20% | 3.89% |
| End Mar 13 to end Mar 14 | -0.74% | 1.71% | 4.00% | 3.80% | -1.01% |
| End Mar 12 to end Mar 13 | 5.80% | 8.46% | 10.66% | 12.22% | 9.38% |
| End Mar 11 to end Mar 12 | 2.03% | -0.95% | -3.61% | -5.98% | 6.36% |
| Source: Coutts/Thomson Datastream | |||||
Past performance should not be taken as a guide to future performance.
The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment.
Individual portfolio returns may vary.
| Charity and Trust Portfolio Returns, after fees | Charity Reserve Preservation | Charity Reserve Wealth Enhancement (Medium Term) | Charity Reserve Wealth Enhancement (Long term) | Charity Reserve Wealth Generation | Trust |
|---|---|---|---|---|---|
| Last Quarter | 1.54% | 0.79% | -0.11% | 0.00% | 1.62% |
| Rolling 12 Months: | |||||
| End Mar 15 to end Mar 16 | -2.21% | -3.65% | -4.80% | -6.26% | -3.04% |
| End Mar 14 to end Mar 15 | 9.97% | 9.34% | 8.73% | 8.71% | 1.36% |
| End Mar 13 to end Mar 14 | -0.21% | 2.20% | 4.36% | 3.60% | -3.14% |
| End Mar 12 to end Mar 13 | 6.45% | 9.51% | 11.25% | 10.80% | -1.48% |
| End Mar 11 to end Mar 12 | 2.23% | -0.65% | -3.22% | -6.94% | -0.05% |
| Source: Coutts/Thomson Datastream | |||||
The value of investments and any income from them can go down as well as up, and you may not recover the amount of your original investment. Past performance should not be taken as a guide to future performance, please note the performance of individual portfolios may vary.
Holdings and
Portfolio Update
Intense selling during the past quarter led to an opportunity to increase our exposure to global financial credit and general investment-grade (higher credit quality) corporate bonds, which we believe were overly discounting recession risks.
Given our view that a global recession is unlikely, the rise in yields for corporate bonds in general means that investors are being well compensated for the risk of defaults. And potential returns from bank debt look particularly attractive given their additional yield and strong balance sheets. Furthermore, growth in bank earnings is currently being driven by the stronger sections of the economy, namely housing and the consumer.
The increase in investment-grade and financial credit was largely funded by trimming exposure to major government bonds, which we see as expensive and with limited upside in anything but a very gloomy outlook for the global economy. They are also vulnerable to a gradual return of inflation and interest-rate rises in the US and UK over the next couple of years.
In a separate move, we shifted some of our exposure to Japanese equities from an active to a passive fund in order to gain more exposure to larger Japanese companies which had experienced some heavy selling during the steep market falls. We shifted some of our holdings in the Polar Capital Japan Fund into the Lyxor JPX Nikkei 400 exchange traded fund, which has broad sector exposure and a quality bias which aligns with our investment principles.
Spotlight on
Holdings
For a full breakdown of all the underlying funds within the strategies, please refer to our monthly factsheets, available from your private banker or wealth manager.
The value of investments and any income from them can go down as well as up, and you may not recover the amount of your original investment. Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it, to go up or down.
In the case of some investments, they may be illiquid and there may be no recognised market for them and it may therefore be difficult for you to deal in them or obtain reliable information about their value or the extent of the risks to which they are exposed.
Investments in emerging markets are subject to certain special risks, which include, for example, a certain degree of political instability, relatively unpredictable financial market trends and economic growth patterns, a financial market that is still in the development stage and a weak economy.
Important information
Wealth division of NatWest Group.
Coutts & Co. Registered in England No. 36695. Registered office 440 Strand, London WC2R 0QS. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority
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