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.
Second Quarter 2018
Dollar strength took its toll in portfolios in Q2, even as share markets bounced back from their weakness in Q1. Our preference for equities over bonds continued to be positive for portfolios but gains from non-dollar denominated assets suffered. Investor sentiment wobbled at the end of June, however, as negotiations failed to prevent US trade tariffs from coming into force in the EU and China, and trade war rhetoric ramped up.
US equity continued to regain ground after the sharp falls in Q1 and good stock selection in the US helped our performance. Our allocation to US-dominated equity themes of healthcare and technology was also positive.
Elsewhere in equity, Europe did less well this quarter while the FTSE 100 saw strong performance, making back all its losses from Q1 thanks to a weaker sterling, a high oil price that helped the big energy companies, and some key acquisitions. Our preference for Japanese equity also added to performance this quarter. Having a low allocation to emerging market equities meant that we avoided some of the pain a stronger dollar inflicted on the sector, benefitting relative performance.
Government bonds flagged as investor confidence in equities returned in April and May but saw a small revival in June as equity markets fell, ending the quarter more or less flat.
Our disciplined investment process and core investment principles underpin our decision making:
- Value and selectively contrarian – The rebound in the FTSE 100 this quarter shows the benefit of taking the contrarian view. While returns have been largely driven by the effect of a weaker sterling, FTSE 100 companies represent high quality – with strong balance sheets and reliable earnings – that we believe will continue to deliver in spite of currency moves and the state of the UK economy.
- Macro-informed asset allocation – Trade war fears continue to have a negative effect on investor sentiment and equity markets slipped at the end of June as US tariffs on China and Europe took effect. While the effects of a potential trade war shouldn’t be discounted, in our view the impact of tariffs to date on global trade is not sufficient to disrupt worldwide growth and we maintain our positive view on equities.
- Patience – Emerging market debt has had a difficult half year with a stronger US dollar and trade war concerns having a negative impact. However, we continue to find the yields attractive, particularly in relation to developed market bonds, and have a positive long-term view on emerging economies and currencies. Emerging markets typically attract higher risk and some ups and downs should be expected.
|Fund returns, after fees||
(USD, Class B Acc*)
(USD, Class A Inc)
(USD, Class A, Inc)
|Rolling 12 Months:|
|End June 17 to end June 18
|End June 16 to end June 17||8.0%||15.1%||18.3%|
|End June 15 to end June 16||0.3%||-5.3%||-8.3%|
|End June 14 to end June 15||1.9%||2.5%||2.5%|
|End June 13 to end June 14||5.8%||12.6%||16.6%|
|*Inc share class no longer priced for this fund.
||Source: Coutts/Thomson Datastream|
We maintained our positions over the second quarter of 2018 as markets stabilised following the volatility of Q1. We continue to prefer equities over bonds as the outlook for global growth remains positive. Within this picture of overall growth, we note that 2018 has seen the US maintain the growth momentum from 2017 while other developed economies have moderated.
We added to our FTSE 100 holdings in February when prices fell. While the outlook for the UK economy is uncertain given the complexities of the withdrawal from the EU, UK companies typically have an international outlook and will benefit from the strong global economy.
We have a positive view on Europe – although economic growth has been slower over the last six months than the levels seen in 2017, the upward momentum remains firmly entrenched for the time being. We also maintain our preference for Japanese equities based on the positive environment for corporate earnings.
(Please note: not all fund additions will be relevant for every fund)