COUTTS MULTI ASSET FUNDS GLOBAL
Coutts multi-asset funds are a range of global funds that aim to deliver attractive long-term returns by investing in a broad range of asset classes such as cash, bonds, equities, commodities and property.
First Quarter 2016
The first quarter was challenging for our Funds, with sharp market volatility stemming from concerns about global growth and a US recession. Bond-orientated mandates proved more resilient in this risk-averse environment, and were helped further by revised expectations for interest-rate rises, delivering positive returns for the three months overall. Weakness in equity markets during the period proved difficult for our more equity-heavy Funds, though performance improved in late February and through March as investor sentiment brightened and stock markets rallied.
Our preference for Japanese and European stock markets – which had stood us in good stead in 2015 when these markets outperformed – dampened Fund performance as these markets lagged over the quarter. Investors appeared to be taking profits and there were worries over the potential consequences of negative interest rates, as well as stronger currencies.
|Fund returns, after fees (USD Class A - distributing)||Defensive||Balanced||Growth|
|Rolling 12 Months:|
|End Mar 15 to end Mar 16||-3.78%||-6.51%||-7.81%|
|End Mar 14 to end Mar 15||7.09%||6.86%||6.72%|
|End Mar 13 to end Mar 14||2.83%||6.73%||10.39%|
|End Mar 12 to end Mar 13||-||-||-|
|End Mar 11 to end Mar 12||-||-||-|
|Blank cells represent periods prior to the Funds launch|
|Source: Coutts/Thomson Datastream|
During market turbulence in January, we shifted some of our exposure to US equities, which we view as expensive, into a product designed to benefit from a decline in volatility in the US stock market. We subsequently took some profits on this strategy as volatility fell back to more normal levels in March.
Elsewhere, our preference for corporate bonds – and in particular financial credit – over expensive high-quality government bonds was expressed through our allocation to the PIMCO global investment grade and Algebris Financial Credit funds over the quarter.
As a result of the risk aversion seen at the start of the year, we believed that corporate bonds in general were overly discounting a global recession, which we didn’t see as justified by the underlying economic data. And potential returns from bank debt look particularly attractive given their additional yield and strong balance sheets. Furthermore, growth in bank earnings is currently being driven by the stronger sections of the economy, namely housing and the consumer. The increase in investment-grade and financial credit was largely funded by trimming exposure to Asian and emerging-market debt.
We also increased exposure in some funds to the AQR Style Premia market-neutral fund, a broadly diversified fund that aims to generate a positive return regardless of market direction. The AQR fund performed well in volatile markets last year but weakness in the year to date has provided what we see as an attractive level to add to this fund.
Algebris is a boutique investment house specialising in the financial sector. This fund is a relatively new addition that invests across the spectrum of debt issued by global financial companies. It focuses on systemically important financial institutions, which tend to have higher capital bases and better-quality assets.
The fund was launched in September 2012 and currently has a team of nine analysts, headed by CEO and founder Davide Serra. Serra is regarded as an expert on financial services and is often consulted by central bankers and regulators on policy and financial reform. He provides macro-economic input to help shape the fund’s ‘top-down’ positioning, while individual analysts are responsible for security selection for their respective regions. All research is generated internally from a proprietary ‘bottom-up’ (company specific) research process.
We chose this fund given the extensive experience of the team and their strong track record from following a holistic approach to analysing financial institutions, looking at both equity and credit components.
This fund aims to achieve long-term capital growth by investing in a concentrated portfolio of UK companies, through equities and derivatives (a financial instrument whose value is 'derived' from actual assets). In selecting investments, portfolio manager Simon Brazier and team assess the business model, financial strength and capital allocation of companies
The fund management team has a flexible style; it will hold at least 50% in large UK companies, but has a diverse mix of investment exposures from market leaders to out-of-favour firms with growth potential. Investing in a variety of themes including strong franchises, sustainable growth, restructuring/recovery potential, quality cyclicals (linked to the business cycle) and contrarian views, the fund aims to outperform the benchmark index in all market conditions.
The flexible approach and lack of bias toward any particular style makes this an ideal core UK holding for us, while also reflecting our current belief that UK large-cap stocks should outperform their small and medium-sized peers this year as global growth fears begin to dissipate.
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.