Personal Portfolio Funds UK
The Personal Portfolio Funds (PPF) invest in a range of asset classes such as cash, bonds and equities and offer a number of different risk profiles.
First Quarter 2018
The Personal Portfolio Funds (PPF) invest in a range of asset classes such as cash, bonds and equities and offer five different risk profiles.
They are a simplified representation of our long-term investment house view. These five funds are actively managed but are implemented through an index tracking approach. The five risk profiles enable investors to choose among the funds depending on their individual objectives and appetite for risk.
|Cautious (Lower risk)
|Mostly bonds (at least 70%)
|Conservative (Lower - Medium risk)
|Mostly bonds (at least 50%), some equity
|Balanced (Medium risk)
|Equities (at least 45%) and bonds
|Assertive (Medium-Higher risk)
|Mostly equities (at least 65%), some bonds
|Adventurous (Higher risk)
|Mostly equities (at least 90%), minor cash allocation
- We opportunistically added to our holdings in the FTSE 100 in February when prices fell following the stock market sell-off.
- In the current climate of rising inflation and interest rates we are maintaining an underweight allocation to UK government bonds.
- We have also reduced our allocation to global high-yield bonds and increased our cash holdings, as spreads with investment grade bonds have narrowed and we see limited potential for gains for the time being.
The UK remains one of the world’s largest economies and a popular place for business
The UK economy still has plenty going for it despite relatively modest growth.
Office of National Statistics projections of GDP growth of 1.5% for 2018 and 1.4% in 2019 look weak compared with projections (from the International Monetary Fund) of 2% and 1.9% in Europe, and global growth of 3.9% in both years.
But this comes after the UK enjoyed strong growth while other economies were faltering. For example, the UK grew by 2.1% in 2013 and 3.1% in 2014, while the eurozone saw growth of 0.2% and 1.6%.
Today, the UK remains one of the world’s largest economies and consistently ranks highly in the World Bank’s ‘Ease of Doing Business’ rankings. UK employment remains strong and robust global growth continues to support UK equities.
About 80% of our UK exposure is through large-cap stocks, which are more exposed to the global economy than small and mid-cap stocks. We’ve added to this large-cap exposure in February, opportunistically on market falls.
Clearly there are challenges for the UK economy, with a fragile retail sector and Brexit negotiations still being worked through. But generally, the UK is decent shape and UK equities should benefit from global and domestic growth.
A supportive global economy keeps equities attractive despite stock sell-offs and trade tantrums
Stock markets have had a challenging first quarter of 2018. After a very strong start to the year – one of the strongest Januarys in decades – equities experienced a sudden and dramatic sell-off at the start of February. They recovered steadily over the rest of the month but were then shaken again in March by the announcement of trade tariffs by President Trump and revelations of weak data security in the some of the biggest names in the technology sector.
These have shaken investor confidence, and sentiment has turned very negative. However, we continue to look beyond short-term noise to longer-term fundamentals. In our view, 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.
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.
Research shows that bear markets are typically caused by a US recession. We believe this is unlikely to happen this year as the country continues to benefit from the fiscal stimulus provided by the government’s tax reform package.
What next for high yield bonds?
High yield bonds have done well over the past couple of years, but we see little upside potential in the near future.
High yield bond markets fell steadily between 2014 and 2016. One of the main causes was slumping oil prices which affected a large proportion of issuers – particularly US companies within the metals and mining and energy sectors.
The market has recovered from its 2016 low, with prices boosted by a recovery in oil prices and deleveraging by companies reducing the volume of high yield debt available. High yield bonds have also benefitted from the low interest rate environment, which increased demand by pushing yield-hungry investors into the asset class.
More recently, an increasing number of companies have taken advantage of current supportive market conditions to buy back older, more expensive debt and replace it with new debt at a lower interest rate. The prospect of rising interest rates has encouraged the trend.
Credit spreads versus investment grade are now close to their medium term lows – high yield debt therefore looks expensive and vulnerable to rising inflation and interest rates. As such, we see this as an opportune time to exit the asset class.
march 17 to march 18
Personal Portfolio Fund 1
Personal Portfolio Fund 2
Personal Portfolio Fund 3
Personal Portfolio Fund 4
Personal Portfolio Fund 5
|*The returns are derived from the Fund net asset values (NAV) and are quoted net of all fees paid from within the Fund, which include the on-going charges figure (OCF) and transaction charges but do not include the platform fees or any potential one-off charges (e.g. advice fees or dilution levy).
27-Feb-2023As the new tax year approaches, you might want to know about possible changes to what you’ll pay in tax. In his Autumn Statement last November, Chancellor Jeremy Hunt announced a series of tax freezes and adjustments. While there are no personal tax rises, the fact that some rates have been frozen following a year of rising prices means we’re likely see more people fall into the higher rate category and find themselves paying more tax as wages increase.