Portfolio Service


Investment strategies devised in line with your objectives and to maximise market opportunities.

Second Quarter 2017



Performance slowed somewhat in the second quarter of 2017, but remained positive across mandates and remains solid over the year to date. Our positive position in equities continued to add to returns, in particular thematic holdings in healthcare and financials. Europe was another positive contributor, although being underweight US equity hurt performance as US equities continued to perform well across the quarter.

On the bond side, our positioning benefitted performance, especially our low allocation to government bonds, as developed market government bonds sold off. Being overweight global corporates added to returns, and our allocations to commercial property and alternative investment strategies were also positive.

Applying our disciplined investment process and core investment principles has continued to underpin our decision making:

  • Patience – We have added to our healthcare equity theme as we believe it has strong long-term prospects, characterised by an above average earnings/revenue growth outlook. This is supported by long-term demographic trends in both developed and emerging markets which will support the expansion of healthcare companies.
  • Macro-driven – Inflation is returning to developed economies, with central banks beginning to raise interest rates and tighten monetary policy. We have reduced the duration in our government bond holdings to reduce interest rate risk, and remain underweight in favour of corporate debt and alternative diversifiers.
  • Quality – Our holdings in financial credit are focused on larger national banks where risks of default are very low and which have the backing of their governments. Our UK equity holdings are focused on quality FTSE 100 companies and larger companies in the FTSE 250.
Portfolio returns, after fees Defensive Balanced Growth
Last Quarter 0.8% 1.1% 1.3%
Rolling 12 Months:
End Jun 16 to end Jun 17
7.7% 13.2% 18.3%
EndJun 15 to end Jun 16 4.0% 3.1% 2.8%
End Jun 14 to end Jun 15 4.8% 6.1% 6.3%
End Jun 13 to end Jun 14 4.8% 6.4% 7.9%
End Jun 12 to end Jun 13 3.3% 8.0% 11.3%
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.

Holdings and

Portfolio Update

In May, we shifted our exposure in US energy infrastructure companies – or ‘Master Limited Partnerships’ (MLPs) – from a passively managed ETF to and actively managed fund. As oil prices stabilise, we think that an active manager will be better able to find value in this sector than simply following the index. We also locked-in gains made from the fall in sterling by selling a dollar-denominated share class and buying sterling hedged shares.

 In June, we reduced risk across our portfolios by reducing our exposure to emerging market equity and high yield debt. We see emerging markets as economically sensitive and Asia ex-Japan and China are showing signs of having peaked, while high yield valuations are at the higher end of their historical range. We used the proceeds to increase our holdings in our healthcare equity theme – which has more defensive characteristics and is supported by long-term demographic trends – and investment grade bonds.

As a further defensive measure, we added to our holdings in market neutral alternative strategies, topping up holdings in defensive mandates and adding them to our balanced mandates. The low volatility and low drawdown characteristics of market neutral strategies make them a solid defensive play.

(Please note: not all additions will be relevant for all funds)

For a full breakdown of all the underlying funds within the portfolios, please refer to our monthly factsheets, available on request.

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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