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 2017
Over the period, fund returns have been strong. Our allocation to emerging markets has been a key contributor as the sector recovered from the Trump election shock in the previous quarter,supported by a shift in sentiment towards the new president’s ability to implement his policies quickly or in the form he intended.
In terms of detractors, commodities – aside from gold – had a lacklustre quarter although the impact on the funds overall was minimal as a result of the importance we place on diversification and our underweight positioning to the sector generally. Over the quarter, currency played less of a meaningful role than it did in 2016 with the US dollar weakening slightly over the period.
Applying our disciplined investment process and core investment principles has continued to underpin our decision making:
- Diversification. We continue to believe alternative strategies provide attractive levels of diversification to more traditional asset classes such as equities and bonds as well as the potential for better returns than government bonds.
- Value. We have reduced our exposure to sovereign bonds in view of what we see as expensive valuations - many yields are near or below zero – due to rising US interest rates and robust macroeconomic fundamentals. We continue to see European equities as attractively valued relative to global peers, especially US equities.
- Patience and Contrarian. We have long-term thematic positions, such as emerging market equities and recently emerging market debt.
|Fund returns, after fees (USD Class A - distributing)||Defensive||Balanced||Growth|
|Rolling 12 Months:|
|End Mar 16 to end Mar 17
|End Mar 15 to end Mar 16||-3.8%||-6.8%||-8.2%|
|End Mar 14 to end Mar 15||7.3%||7.2%||6.9%|
|End Mar 13 to end Mar 14||3.0%||6.9%||10.6%|
|End Mar 12 to end Mar 13||-||-||-|
Blank cells represent periods prior to the Funds launch
|Source: Coutts/Thomson Datastream|
During the quarter we introduced exposure to emerging market local currency debt. We identified an opportunity to invest at attractive valuations, taking advantage of what we believe to be short-term negative sentiment triggered by President Trump’s protectionist rhetoric. The economic environment is improving generally for emerging markets which is supportive for local currencies and we also see inflation and interest rates trending down. This trade aligns with a number of our investment principles including macro informed asset allocation and value.
(Please note: not all fund additions will be relevant for all funds)
In an environment of rising interest rates and inflation expectations, we continue to believe alternative strategies can provide good levels of diversification and the potential for more attractive returns compared to more traditional asset classes such as government bonds. In this regard, funds such as the AQR Style Premia UCITS Fund have been supportive of our view over the first quarter.
We believe emerging market local currency debt represents an attractive investment as part of a diversified fund with the opportunity for attractive earnings through high coupons and capital appreciation as currencies revalue and local interest rates decline. This is in contrast to high yield bonds where we believe return expectations are less favourable.
We added the following fund in the quarter:
- The Blackrock BGF Emerging Market Debt Local Currency Fund seeks to outperform the JPMorgan Government Bond Emerging Markets Index through diversified exposure to emerging market debt denominated in local currencies. The fund holds bonds issued by governments such as Brazil and Mexico, together with some agencies and companies. The top-down investment philosophy focuses on identifying economic and market themes that have an impact on asset prices. These themes inform the managers’ views on market direction and how the fund is positioned. The fund employs a dynamic implementation policy which means positions change depending on the development of each theme and the associated risks.
During the quarter our positive view on European equities has remained unchanged. There have been strong signals in terms of economic growth and this has fed through to positive corporate earnings for both small and large-sized companies. The valuations of European equities are lower than US equities so this means it is still attractive to add to the asset class based on our core ‘value’ investment principle.
Our research has shown that technology, and particularly the automotive sector, is an area that merits a long-term investment focus. In March we added a German semiconductor manufacturer within our Global 30 Best Ideas basket of equities we favour.
We believe this type of company can offer strong exposure to the increasing use of semiconductors within the automotive sector, industrial applications and chip-card security. Coutts research believes these are the fastest-growing areas of the market. Companies in this sector are often at the forefront of technology developments in terms of the next generation of materials used for high-specification chips and state-of-the art production facilities. The latter is set to afford significant economies of scale.
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.