COUTTS MULTI ASSET FUNDS UK
Coutts multi-asset funds are a range of UK-biased 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.
The inherent home (UK) bias of the Funds also capped returns given the challenge presented to UK stocks by the uncertainties of the upcoming EU referendum. However, sterling weakness served to flatter returns from overseas, highlighting the benefits of global diversification.
|Fund returns, after fees (GBP Class A - distributing)||Defensive||Balanced||Growth||Equity Growth|
|Rolling 12 Months:|
|End Mar 15 to end Mar 16||-3.97%||-5.88%||-6.72%||-7.42%|
|End Mar 14 to end Mar 15||11.65%||10.62%||10.25%||9.97%|
|End Mar 13 to end Mar 14||1.33%||3.51%||5.05%||5.17%|
|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|
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.
During January, we took the opportunity offered by falling equity markets to increase our exposure to Europe and Japan, which we see as good value. We also boosted our allocation to a product designed to benefit from a decrease in volatility in the US stock market, subsequently taking some profit on this strategy when volatility did fall 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 Long Term Corporate Bond 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. Finally, we sold a basket of mining stocks after the strong rally in the sector in March.
Algebris Financial Credit 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.
Investec UK Alpha Fund
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.
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.
This webpage is a financial promotion for UK regulatory purposes. It provides general information only and is not intended as a personal recommendation, nor does it constitute an offer or solicitation to invest in the fund. Coutts multi-asset funds are sub-funds of Coutts Multi Asset Fund plc, an open ended investment company with variable capital incorporated in Ireland and authorised by the Central Bank of Ireland pursuant to the European Communities Undertakings for Collective Investment in Transferable Securities Regulations, 2011 as amended, supplemented and consolidated from time to time.
Investors should read the fund’s prospectus and Key Investor Information Document carefully before investing. Investors should consider the investment objective, risks and charges of the fund, which are contained in the prospectus and Key Investor Information Document. Any decision to invest must only be made on the basis of the prospectus and Key Investor Information Document. Copies of these are available from your Wealth Manager or online at www.coutts.com/cmaf.
The information contained in this summary is believed to be correct as at the date of publication, but cannot be guaranteed. Opinions and projections constitute our judgment as at the date of publication and are subject to change.
To the extent permitted by law and regulation neither Coutts & Co nor any connected company accepts responsibility for any direct or indirect or consequential loss suffered by you or any other person as a result of your acting, or deciding not to act, in reliance upon the above. Not all products and services offered by the individual Coutts companies are available in all jurisdictions and some products and services may be available only through particular Coutts companies. Certain aspects of the service may be performed through, or with the support of, different members of The Royal Bank of Scotland Group, of which Coutts & Co is a member.
Wealth division of Royal Bank of Scotland Group.
Coutts & Co. Registered in England No. 36695. Registered office 440 Strand, London WC2R 0QS.
Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Calls may be recorded.
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