Despite market volatility at the beginning of the year, Coutts investments have performed well in 2016. While a number of situational factors worked in our favour, the biggest contributor to investment performance last year was sticking to our investment principles.
Riding out early market turbulence
Equity markets endured a disappointing start to 2016. Tumbling oil prices and concerns over a China-led global recession led to indiscriminate selling of virtually all assets apart from major government bonds, as investors fled to perceived safety.
Coutts investment mandates were skewed in favour of equities as the year began, and performance suffered in the early months as a consequence. Between the start of the year and the middle of February, a typical balanced portfolio fell 6.2% as the sell off continued.
However, despite the bad news, we stuck to our view that the environment favoured risk assets. Indeed, as markets fell we saw this as a buying opportunity and added to our holdings in our favoured equity markets, Europe and Japan. At the same time, we reduced holdings of government bonds and added corporate debt, where we felt that investors were putting too much emphasis on the chance of global recession .
Equity markets bounced back starting in the middle of February, and our investments, which were relatively low on cash and high in equities, outperformed. By the end of March, a typical balanced portfolio had grown by 0.8% compared to an average fall of 0.1% in the peer group.
This was an excellent demonstration of how sticking to our investment principles can provide a better returns for our clients. In addition our typically contrarian approach – adding to out-of-favour assets based on good value – proved a sound tactic.
Values in percentage
|12-month investment performance to the end of the last quarter|
|Dec11 Dec-12||Dec-12 Dec-13||Dec-13 Dec-14||Dec-14 Dec-15||Dec-15 Dec-16|
|Defensive strategy composite||5.2||2.7||6.4||0.8||8.4|
|ARC Cautious Private Client Index||5.8||5.0||4.0||1.3||5.1|
|Balanced strategy composite||6.4||8.8||5.5||1.3||12.2|
|ARC Balanced Private Client Index||7.7||9.2||4.5||1.9||8.6|
|Growth strategy composite||7.7||12.3||4.7||1.4||16.2|
|ARC Steady growth Private Client Index||8.9||12.5||4.7||2.3||12.0|