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 2018
PORTFOLIO
PERFORMANCE
The strong start to the year in January carried through the momentum from Q4 2017, with equities and commercial bonds performing very strongly. However, the sell-off in February – and continued volatility through March – led to muted performance across all strategies.
The main positive contributors over the quarter were emerging markets, with both equities and bonds providing a bulwark against falls elsewhere, and our technology equity theme. Technology stocks fell in February, and were subject to further pressure in March, but their strong performance earlier in the quarter meant that they made a solid positive contribution over the period. In addition, our active stock selection in the tech sector means we have avoided the worst of the falls as we have a lower exposure to the stocks most affected by the bad newsflow.
The main negative contributor was UK equity, which had its worst quartile performance since Q3 2011, although risk assets all struggled over the quarter.
Our disciplined investment process and core investment principles underpin our decision making:
- Macro-informed allocation – We continue to look beyond short-term noise to longer-term fundamentals and believe the outlook for equities over the course of this year remains broadly positive, albeit subject to larger price swings than last year. Although the momentum of economic growth may have peaked it remains above trend.
- Quality – Our 30-stock global best ideas portfolio draws on innovative quantitative and tactical analysis to support our bottom-up fundamental research. We seek to identify companies that best reflect the tactical and strategic opportunities we have identified, in line with our core investment principles of quality and value.
- Diversification – When markets are a little more ‘choppy’, maintaining a well-diversified portfolio is the best way to preserve investments. By making sure we have a diversified portfolio we’ve been able to tap into the different sources of return that continue to drive markets despite the increased volatility.
| Portfolio returns, after fees | Wealth Preservation | Wealth Enhancement (Medium Term) | Wealth Enhancement (Long Term) | Wealth Generation | Diversified Bond |
|---|---|---|---|---|---|
| Last Quarter | -2.0% | -3.1% | -4.3% | -5.5% | -0.6% |
| Rolling 12 Months: | |||||
| End march 17 to end march 18 | 1.8% | 2.6% | 2.4% | 1.3% | 5.6% |
| End march 16 to end march 17 | 10.6% | 15.5% | 19.4% | 23.7% | 7.7% |
| End march 15 to end march 16 | -1.7% | -3.5% | -4.4% | -4.5% | -2.5% |
| End march 14 to end march 15 | 3.4% | 3.1% | 3.0% | 9.2% | 4.6% |
| End march 13 to end march 14 | -0.7% | 1.7% | 4.0% | 3.8% | -1.1% |
| 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 | -3.3% | -2.1% | -3..2% | -4.4% | -5.5% |
| Rolling 12 Months: | |||||
| End march 17 to end March 18 |
1.5% | 1.4% | 2.5% | 2.2% | 0.7% |
| End march 16 to end march 17 | 14.5% | 10.4% | 15.6% | 19.2% | 22.6% |
| End march 15 to end march 16 | -4.2% | -2.2% | -3.7% | -4.2% | -6.3% |
| End march 14 to end march 15 | 8.8% | 10.0% | 9.3% | 8.7% | 8.7% |
| End march 13 to end march 14 | 1.8% | 0.2% | 2.2% | 4.4% | 3.6% |
| 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
We added to our holdings in the FTSE100 opportunistically in February when prices fell. Later in the quarter, we sold our position in UK real estate investment trusts (REITs). UK REITs have been underperforming the UK equity market since the start of 2018 and we believe the sector may struggle if inflation rises or if global growth cools. It is also more exposed to headline risk around Brexit developments. We used the proceeds to add further to the FTSE100, maintaining our overall UK exposure.
We have maintained our modest preference for equities over bonds, given continuing global economic growth. Within international equities, Europe and Japan remain our preferred regions for now based on attractive valuations and solid earnings growth potential, which should become more visible in the upcoming Q1 earnings announcements.
We sold our allocation to global high yield bonds in March as spreads with investment grade bonds have narrowed and we see limited potential for gains for the time being. However, we have retained our holdings in financial credit, one of our investment themes. In the current climate of rising inflation and interest rates we continue to prefer commercial debt over government bonds.
(Please note: not all positioning changes 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.
