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.

Second 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.

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

Spotlight on

Asset Allocation


  • Sterling weakness boosted returns from the FTSE 100 in Q2, contributing significantly to the performance of PPF funds. A large proportion of the earnings of FTSE 100 companies come from overseas – around 70% - meaning the moves in sterling can have a significant effect on company profits.
  • We’ve reduced our overweight to Europe and added to our US allocation, bringing overall exposure to the US to neutral. While we still favour Europe – and are maintaining a smaller overweight position – we think the fundamentals are no longer quite as strong and see positive signals coming from the US.
  • Strong global growth, led by the US, should continue to be positive for equities. Our bond portfolio continues to provide diversification benefits and has helped preserve clients’ wealth during periods of equity market volatility this year. But we still see a preference for equities as the right positioning, for the medium term at least.
  • Europe: staying positive but scaling back

    We’ve reduced our exposure to Europe but still have confidence in the region

    We have been very positive on European equity for some time and saw this confidence rewarded in 2017, with European equities up by 12% (in euro terms) over the year. As we enter the second half of 2018, however, we’re seeing some of the momentum drain out of the European economy and have decided to reduce our positive position.

    2017 was a year of broad synchronised growth across almost the entire global economy. The US and the eurozone grew at almost identical rates - 2017 saw the US economy grow by 2.7%, while the Eurozone grew by 2.8%. This situation favoured European equity, which had seen only modest absolute returns of 2.4% in 2016 compared to an absolute return of about 11% from the US.

    We still like the look of European equity. The economy is improving and growth remains positive, albeit lower than last year. The European Central Bank is tightening monetary policy only gradually, which will support equities, and corporate earnings in 2018 still look positive.

    A move to the US puts the funds in a slightly more defensive position while maintaining our overall overweight to equities over bonds. Looking ahead, the fund should still benefit from global growth but will have some protection against the potential of increased market volatility.

  • UK companies surge ahead

    UK equities bounce back after a weak Q1

    The FTSE 100 returned 9.6% over the three months to the end of June, significantly up on the previous quarter’s loss of -7.2%. This is good news for investors in the Personal Portfolio Funds as we took advantage of weakness last quarter to add to our allocations.

    In this quarter, a weaker pound played a role in the improved returns. The FTSE 100 is made up largely of multi-national companies which draw significantly on non-sterling earnings. A weaker pound boosts these non-sterling returns, improving company profits. This leads to higher dividends as well as driving up share prices by making companies more attractive.

    However, that’s not the whole story. After the sell-off in February, the FTSE 100 fell to levels not seen since late 2016. In our view, that contradicted the underlying picture – British companies have strong balance sheets, good earnings potential and established brands. While there are questions about the UK economy in the medium term, the fate of these companies is tied more to the global economy, which remains in good shape.

    Given these factors, we’re not surprised to see the FTSE 100 come back with a vengeance. This demonstrates the value of focusing on fundamentals rather than short-term market noise, in line with our investment principles.

  • Bonds having a tough time, but funds benefit from diversification

    Bonds are struggling in the current economic environment but remain a vital part of a portfolio

    It’s been a tough half year for bonds, and this quarter has seen the trend continue. Gilts returned just 0.2% over the quarter while global investment grade credit has lost -0.8%.

    This performance confirms our preference for equities over bonds. The current environment of economic growth and rising inflation is positive for equities because companies pass on the costs of higher prices and more expensive borrowing to their customers. In the meantime, economic growth is a sign of a wider market for their goods, which should support corporate earnings.

    Bonds, however, provide investors with important diversification benefits. For example, gilts saw a rise in value at the end of Q2 as investors sold off in the face of rising trade war rhetoric from President Trump. While we don’t expect a sustained market downturn any time soon, a properly diversified portfolio acts as a defence against markets turning.

    Stock selection can make a difference when returns are low. Our own holdings in investment grade debt outperformed the broad market by 0.5% in Q2 for example, providing some relative benefits for holders of the PPF funds.

    While returns look disappointing in absolute terms, it’s important not to lose sight of the role diversification plays in a portfolio and the benefits good stock selection can bring.




Last quarter

June 17 to June 18

June 16 to June 17

Personal Portfolio Fund 1 - Lower Risk




 Personal Portfolio Fund 2 - Lower/Medium Risk




 Personal Portfolio Fund 3 - Medium Risk




 Personal Portfolio Fund 4 - Medium/Higher Risk




 Personal Portfolio Fund 5 - Higher Risk


*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).

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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