Personal Portfolio Funds UK


Personal Portfolio Funds invest in a range of asset classes such as cash, bonds and equities and offer a number of different risk profiles to meet client needs and goals.

Second Quarter 2017



The Personal Portfolio Funds (PPF) are a simplified representation of our long-term investment house view. These five funds are actively-managed but are largely implemented through passive funds. The range of risk profiles enables investors to choose among the funds depending on individual objectives and appetite for risk.  

PPF 1  Cautious (Lower risk)
Mostly bonds (at least 70%)
PPf 2 Conservative (Lower - Medium risk)
Mostly bonds (at least 50%), some equity
PPf 3
Balanced (Medium risk)  
Equities (at least 45%) and bonds
PPf 4
Assertive (Medium-Higher risk)
Mostly equities (at least 65%), some bonds
PPf 5
Adventurous (Higher risk)
Mostly equities (at least 90%), minor cash allocation

Spotlight on

Asset Allocation


  • There are signs that emerging markets are peaking and we have reduced our allocation in favour of developed market equity.
  • We added to our allocation in UK investment grade corporate bonds in PPF 1, PPF 2, PPF 3 and PPF 4. We believe investment grade bonds offer good returns relative to their risk and benefit to a degree from safe-haven positioning. We financed this by taking profits from high yield, which is beginning to look highly valued in our view. 
  • Government bonds under pressure

    We prefer corporate debt to government bonds as rising inflation puts gilts under pressure

    In the wake of the financial crisis, inflation and interest rates have been low for a long time. However, there are signs that this is changing, introducing inflation and interest rate risk to portfolios.

    In the UK annual inflation rose to a new peak of 2.9% in May, compared to 2.7% in April and up from just 0.3% 12 months before. Prices have been driven up by the sharp fall in value of sterling, raising the price of imported goods and fuel. Meanwhile in the US inflation has been near the target 2% in core inflation for nearly a year, while Europe’s long period of near-zero inflation – and dalliance with deflation – appears to be coming to an end.

    In response central banks have signalled that monetary policy will tighten. The US Federal Reserve has raised rates twice in the last 12 months, and has indicated that it will soon start unwinding its bond holdings as 'quantitative easing' comes to an end. While the Bank of England and the European Central Bank have yet to raise rates, the tone of announcements has taken a more hawkish air.

    Rising inflation and interest rates can eat away at the return on bonds, particularly low-yielding government bonds. We have maintained the low duration of our gilt holdings to keep inflation risk low. In the meantime we have added to UK investment grade corporate bonds, which have some of the same diversification benefits of gilts while paying a higher yield. We have also reduced our holding in high yield bonds, which have become highly valued, adding further to UK investment grade corporate bonds.

  • Politics at the forefront

    Politics dominated the news flow this quarter, but in our view economics has more influence on markets over the long term

    Elections were a key theme of the second quarter, following the defeat of right-wing populist elements in the Dutch elections in March.

    In France, the presidential election turned into a race between the centrist Emmanuel Macron and the far-right Front National candidate Marine Le Pen. Markets were skittish on the prospect of a victory from the isolationist, anti-EU Le Pen, but rebounded as polls began to show a strong Macron lead. Macron went on to secure a strong parliamentary majority later in the quarter, causing European equities to rebound and the Stoxx Europe 600 Index to rise by 0.9%.

    In the UK, Prime Minister Theresa May called a snap election in April in the hope of securing a greater electoral mandate ahead of Brexit negotiations. However, the result saw no party get a majority of seats. The largest party, the Conservatives, entered into a support agreement with the Democratic Unionist Party to form a working majority.

    Looking ahead, while the upcoming German election is unlikely to cause upsets, we have yet to see a detailed policy agenda from US President Donald Trump.

    Evidence suggests that markets tend to overreact to political shocks, creating opportunities for value-based contrarian approaches such as ours. Recent history suggests we shouldn’t be alarmed by unexpected results, and they can create as many opportunities as dangers.


  • Some equity markets highly valued

    Equity markets worldwide continued their move upwards over the quarter but opportunities still exist and there’s no obvious trigger for a sell-off.

    We continue to have a positive outlook for global equity markets based on the view that global growth will enjoy a modest boost from economic policies in the US and UK.

    In global terms, we prefer European and Japanese equities, which are inexpensive relative to other developed markets. Europe is at an earlier stage in the economic cycle than the US, and growth and inflation are now picking up. We saw strong earnings from European companies last quarter, which boosted stock prices, and believe that the latest earnings season will be similarly positive.

    Performance of our Japanese equity holdings in the shorter term depends very much on the strength of the yen. While local currency returns have been solid, they have looked less impressive for sterling and dollar investors. In the longer term, though, on top of the attractive valuations, Japanese companies typically have strong balance sheets and are supported by an improving local economy.

    Some markets are highly valued, especially the US, and investors shouldn’t be alarmed by short-term market falls on the back of profit taking as markets continue to rise. At present there is no obvious trigger for a major correction – bear markets are frequently associated with a recession in the US, but data continues to show a strong US economy.

    We are therefore sticking with our slight preference for equities over bonds, but maintain a diversified portfolio, in line with our investment principles, to protect Coutts clients against any fall in equity values.



  Fund returns, after management and administration fees (platform fees not included)


Last quarter

30 Jun 16 to 30 Jun 17

Personal Portfolio Fund 1



 Personal Portfolio Fund 2



 Personal Portfolio Fund 3



 Personal Portfolio Fund 4



 Personal Portfolio Fund 5



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.

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