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

Second Quarter Commentary is now avaliable




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



  • Algebris Financial Credit Fund

    Algebris is a boutique investment house specialising in the financial sector. This fund is a relatively new addition to our portfolios that invests across the spectrum of debt issued by global financial companies. It focuses on systemically important financial institutions, which tend to have higher capital bases and better-quality assets.

    The fund was launched in September 2012 and currently has a team of nine analysts, headed by CEO and founder Davide Serra. Serra is regarded as an expert on financial services and is often consulted by central bankers and regulators on policy and financial reform. He provides macro-economic input to help shape the fund’s ‘top-down’ positioning, while individual analysts are responsible for security selection for their respective regions. All research is generated internally from a proprietary ‘bottom-up’ (company specific) research process.

    We chose this fund given the extensive experience of the team and their strong track record from following a holistic approach to analysing financial institutions, looking at both equity and credit components.

  • Investec UK Alpha Fund

    This fund aims to achieve long-term capital growth by investing in a concentrated portfolio of UK companies, through equities and derivatives (a financial instrument whose value is 'derived' from actual assets). In selecting investments, portfolio manager Simon Brazier and team assess the business model, financial strength and capital allocation of companies.

    The fund management team has a flexible style; it will hold at least 50% in large UK companies, but has a diverse mix of investment exposures from market leaders to out-of-favour firms with growth potential. Investing in a variety of themes including strong franchises, sustainable growth, restructuring/recovery potential, quality cyclicals (linked to the business cycle) and contrarian views, the fund aims to outperform the benchmark index in all market conditions.

    The flexible approach and lack of bias toward any particular style makes this an ideal core UK holding for us, while also reflecting our current belief that UK large-cap stocks should outperform their small and medium-sized peers this year as global growth fears begin to dissipate.

  • PIMCO GIS Capital Securities Fund

    This recent addition to our portfolios provides broad exposure to the financial sector of global corporate bond markets, with a particular focus on subordinated debt (lower down the list for getting repaid in the event of a default).

    The fund, launched in 2013, leverages PIMCO’s expertise within fixed-income markets and its access to corporate management, regulators and central banks. The fund’s managers Philippe Bodereau and Alex Struc lead a team of around 16 research analysts and traders across Europe, Asia and the US. They are also supported by PIMCO’s risk management and portfolio analytics team.

    Using a proprietary analytics tool, the team’s top-down (broad economic) house view is combined with rigorous bottom-up (company specific) credit analysis, where valuation is a key consideration in bond selection. Credit analysis is further reinforced by a rigorous approach to stress testing, which helps to assess risks associated with individual securities and financial institutions.

    We selected this fund given PIMCO’s strong track record in managing financial credit, which is underpinned by the depth and experience of its global teams.

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.

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