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.
Second Quarter 2017
PORTFOLIO
PERFORMANCE
Performance slowed somewhat in the second quarter of 2017, but remained positive across mandates and remains solid over the year to date. Our positive position in equities continued to add to returns, in particular thematic holdings in healthcare and financials. Europe was another positive contributor, although being underweight US equity was negative as US equities continued to perform well across the quarter.
On the bond side, our positioning benefitted performance, especially our low allocation to government bonds as developed market government bonds sold off. Being overweight global corporates added to performance, and our allocations to commercial property and alternative investment strategies were also positive.
Applying our disciplined investment process and core investment principles has continued to underpin our decision making:
- Patience – We have added to our healthcare equity theme as we believe it has strong long-term prospects, characterised by an above average earnings/revenue growth outlook. This is supported by long-term demographic trends in both developed and emerging markets which will support the expansion of healthcare companies.
- Macro-driven – Inflation is returning to developed economies, with central banks beginning to raise interest rates and tighten monetary policy. We have reduced the duration in our government bond holdings to reduce interest rate risk, and remain underweight in favour of corporate debt and alternative diversifiers.
- Quality – Our holdings in financial credit are focused on larger national banks where risks of default are very low and which have the backing of their governments. Our UK equity holdings are focused on quality FTSE 100 companies and larger companies in the FTSE 250.
| Portfolio returns, after fees | Wealth Preservation | Wealth Enhancement (Medium Term) | Wealth Enhancement (Long Term) | Wealth Generation | Diversified Bond |
|---|---|---|---|---|---|
| Last Quarter | 1.1% | 1.5% | 1.7% | 1.6% | 1.5% |
| Rolling 12 Months: | |||||
| End June 16 to end June 17 | 9.2% | 14.7% | 18.9% | 21.8% | 5.75% |
| End June 15 to end June 16 | 4.0% | 1.6% | 0.3% | 1.4% | 4.3% |
| End June 14 to end June 15 | 4.5% | 4.4% | 4.7% | 4.4% | 0.0% |
| End June 13 to end June 14 | 5.3% | 7.0% | 8.5% | 8.6% | 4.4% |
| End June 12 to end June 13 | 1.3% | 6.6% | 11.4% | 14.2% | 4.2% |
| 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 | Charities and Trust |
Charity Wealth Preservation | Charity Wealth Enhancement (Medium Term) | Charity Wealth Enhancement (Long term) | Charity Wealth Generation |
|---|---|---|---|---|---|
| Last Quarter | 1.2% | 0.8% | 1.5% | 1.6% | 1.5% |
| Rolling 12 Months: | |||||
| End Mar 16 to end Mar 17 |
8.0% | 8.8% | 15.0% | 19.1% | 21.3% |
| End Mar 15 to end Mar 16 | -2.8% | 3.4% | 1.0% | -0.7% | -0.7% |
| End Mar 14 to end Mar 15 | 2.8% | 4.8% | 4.8% | 4.5% | 3.6% |
| End Mar 13 to end Mar 14 | 4.8% | 5.2% | 6.8% | 8.4% | 7.9% |
| End Mar 12 to end Mar 13 | 6.4% | 2.1% | 7.8% | 12.4% | 13.9% |
| 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
In May, we shifted our exposure in US energy infrastructure companies – or ‘Master Limited Partnerships’ (MLPs) – from a passively managed ETF to and actively managed fund. As oil prices stabilise, we think that an active manager will be better able to find value in this sector than simply following the index. We also locked-in gains made from the fall in sterling by selling a dollar-denominated share class and buying sterling hedged shares.
In June, we reduced risk across our portfolios by reducing our exposure to emerging market equity and high yield debt. We see emerging markets as economically sensitive and Asia ex-Japan and China are showing signs of having peaked, while high yield valuations are at the higher end of their historical range. We used proceeds to increase our holdings in our healthcare equity theme – which has more defensive characteristics and is supported by long-term demographic trends – and investment grade bonds.
As a further defensive measure, we added to our holdings in market neutral investment strategies, topping up holdings in defensive mandates and adding the strategy to our balanced mandates. The low volatility and low drawdown characteristics of this strategy make it a solid defensive play.
(Please note: not all fund additions will be relevant for all portfolios)
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.
