Discretionary Portfolio Service
Investment strategies devised in line with your objectives and to maximise market opportunities.
Third Quarter 2016
Both bond and equity markets generally had positive returns for the quarter as Brexit fears eased amid healthy UK business activity, consumer demand and job growth.
While we have further reduced our overweight position in equities during the review period, a continued modest pro-equity stance and international exposure helped fund returns as all major developed markets reached new highs for the year and some hit new record highs.
Continued positive performance from corporate bonds, which we prefer to expensive and low- yielding government bonds, also helped portfolio returns. The latter, where we have a relatively low weighting, suffered a modest setback over the third quarter.
While overall equity positioning was positive, an underweight stance in US equities held back returns slightly as US shares reached new record highs. Our overweight stances in Europe and Japan also caused some drag as these regions lagged other major markets over the quarter.
|Portfolio returns, after fees||Defensive||Balanced||Growth|
|Rolling 12 Months:|
|End Sep 15 to end Sep 16||9.29%||12.39%||16.58%|
|End Sep 14 to end Sep 15||1.04%||-0.93%||-2.99%|
|End Sep 13 to end Sep 14||-||-||-|
|End Sep 12 to end Sep 13||-||-||-|
|End Sep 11 to end Sep 12||-||-||-|
|Blank cells represent periods prior to the Strategies launch|
|Source: Coutts/Thomson Datastream|
This portfolio comprises the 30 global stocks where Coutts has the highest conviction, providing regional diversity that has been beneficial during the recent period of sterling weakness. Our team selects companies that best reflect the tactical and strategic opportunities they have identified, in line with our core investment principles of quality and value.
Starting with an investment universe of 1,200 stocks from the S&P 500, FTSE 350 and Europe’s Stoxx 600 indices, this list is then filtered down using a number of parameters including liquidity (how easily shares can be bought and sold), the outlook for profit growth and sustainability of cash flows).
We then conduct a qualitative ‘bottom-up’ analysis based on company fundamentals to identify a final short list before selecting the 30 we believe reflect the most promising companies in our favoured themes.
Algebris is a boutique investment manager specialising in the financial sector. This fund invests across the capital structure of global financial credit, specialising in hybrid fixed-income securities, such as so-called contingent convertible bonds (which convert to equity when triggered by a specified event), of systematically important financial institutions.
The investment team’s analysis across both credit and equity markets offers a comprehensive understanding of the factors governing hybrid securities. The fund has a successful track record and has outperformed its annual return target of 6% to 8% since inception.
Throughout 2016 we have preferred corporate debt over government bonds. That is because we see little risk of any significant rise in corporate default rates and believe the additional yield over government bonds more than compensates investors for the added risk. We also see this asset class being supported by the ongoing hunt for attractive sources of income.
We have expressed our view through the PIMCO Global Investment Grade Credit Fund. The managers invest at least two-thirds of their assets in high-quality global investment grade credit using a diversified, risk-controlled and value-based strategy. We believe this approach provides a diversification benefit, yield premium and greater total return potential compared with government debt.
The BMO Equity Market Neutral Fund seeks to generate a positive return through most market conditions. Its strategy involves investing in stocks that demonstrate one or more of five styles – low valuations, price momentum, company size, low volatility, and earnings growth at a reasonable price. The philosophy underpinning this approach is that a substantial amount of investment performance can be explained by these styles.
The manager minimises stock-specific risk by taking both long (positive) and short (negative) positions. As a result, we classify the strategy as an alternative asset, which we use to add diversified sources of returns to portfolios that are uncorrelated with price movements in riskier assets, such as equities. We also selected this fund because it has relatively low fees and a transparent investment process that is easy to understand.
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.