All strategies delivered positive returns in the third quarter of the year as we continue to see solid, albeit slowing, global growth led by a strong US economy.

Companies in the FTSE 100 have benefitted this year from the weak sterling created by Brexit uncertainty as it boosts the value of their overseas earnings. We opportunistically increased our investment in the index in February when prices were low following a sell-off, benefitting from the subsequent rebound.

Our UK holdings have also been supported by positive stock selection from our active fund managers. This shows the benefits of active asset allocation as our experts pick and choose the best-performing companies.

Elsewhere in equity, we decided earlier in the year to move money to the US from our holdings in the emerging markets and Europe, recognising the current strength of the American economy. In local currency terms, US equities outperformed their European and emerging market counterparts by about 7% and 9% respectively over the quarter (source: Bloomberg).

Our investments in emerging markets have underperformed. The region is having a difficult year, with a stronger US dollar, trade war concerns and trouble in Turkey having a negative impact. While we have reduced holdings in emerging market equities, we continue to favour emerging market debt because of the high yields on offer, and because we think the emerging market currency sell-off was overdone.

Gilts fell slightly over the quarter as investors generally continued to prefer shares in the current growth environment.

Our disciplined investment process and core investment principles underpin our decision making:

• Value and selectively contrarian – The solid performance contribution of our FTSE 100 holdings shows the benefit of taking the contrarian view. While returns have been largely driven by the effect of a weaker sterling, the FTSE 100 includes a large number of global companies with currently strong earnings. We believe they will continue to deliver despite the present uncertainty surrounding the UK.

• Macro-informed asset allocation – While the US-China trade war is cause for concern, in our view the tariffs so far should not have a huge impact on the US economy or substantially disrupt worldwide growth. The American economy continues to flourish, US exports to China represent less than 10% of its total exports – according to the Office of the US Trade Representative – and we think, ultimately, pragmatism will prevail in the dispute. 

• Patience – Brexit currently casts a cloud over the UK economy but we are holding steady, waiting for the facts and sticking to our long-term plans until we know more. We pay attention to long-term economic fundamentals, not short-term noise and believe there is still plenty to like about the UK. For example, it is ranked seventh out of 190 countries for ease of doing business by the World Bank, and this attraction to international companies is good for its economy.