T A T T O N M A N A G E D ( O B S R ) C A U T I O U S

Transcription

1 Q Q U A R T E R L Y R E P O R T F O U R T H Q U A R T E R ( O C T - D E C ) T A T T O N M A N A G E D ( O B S R ) C A U T I O U S 1

2 Cumulative Performance % (years) M O D E L P O R T F O L I O P E R F O R M A N C E Q * 12 months Annualised Tatton Managed (OBSR) Cautious OBSR Cautious Model Portfolio IA OE Mixed Investment 20-60% Shares peer group Calendar Performance % Month Quarter Year-to-date Since Inception** Tatton Managed (OBSR) Cautious OBSR Cautious Model Portfolio IA OE Mixed Investment 20-60% Shares peer group Past performance is not a guarantee of future performance. *Source: Morningstar. Please read the Disclosure section at the end of this document. ** The portfolio was launched on 01/01/2013. The above table shows the performance of your portfolio and also the average fund performance of the Investment Association (IA) peer group benchmark that broadly matches its profile. The short-term variances in performance between these are within normally expected ranges. Your portfolio is as a long-term investment and it continues to be on track to achieve its objective, which can be seen from its performance since inception. The table of returns produced later in this report shows the performance of major global indices and highlights the benefit of appropriate diversification. T i m e H o r i z o n C A U T I O U S P O R T F O L I O C H A R A C T E R I S T I C S Minimum of 5 years R i s k P r o f i l e Low to Moderate P o r t f o l i o Y i e l d * * * 2.1% 3 - Y e a r S t a n d a r d 8.5% D e v i a t i o n The leading objective of this portfolio is to produce a combination of income and growth. The portfolio gives limited exposure to capital markets through a range of diversified UK and international investments and aims to achieve above inflation investment returns over the longer term. Equity (stock market) exposure will follow the respective Ibbotson strategic asset allocation risk profile target which is currently set to 45%. In the shorter-term Tatton may deviate from this by a maximum of +/-12.5% (currently %) to adjust actual portfolios to prevailing market conditions. The ±12.5% comprises a maximum ±10% Tactical Asset Allocation (TAA) decision mandate and a ±2.5% buffer that allows for variation in prices, which can inadvertently drive the chosen allocation higher or lower (i.e. market drift). This portfolio is likely to be suitable for the following type of investor: A investor seeking to maintain capital over the medium to long term. An investor who is prepared to accept a lower investment return than equity markets over the longer term in exchange for trying to minimise potential losses. Someone who accepts that the portfolio will be subject to fluctuations in value. You should contact your adviser if you feel that this profile no longer matches your investment objectives or if your circumstances are likely to change. 2

3 C U M U L A T I V E P O R T F O L I O R E T U R N S * Past performance is not a guarantee of future performance. *Source: Morningstar. The model portfolio was launched on 01/01/2013. T A T T O N A S S E T A L L O C A T I O N Cash and Cash Proxies, 10% Property, 5% Manager of Managers, 0% UK Gilts, 9% UK Inflation-Indexed, 7% UK Corporate, 12% Global Bond, 12% UK Equity, 21% Europe Equity, 5% North America Equity, 7% Japan Equity, 4% Global Emerging Market Equity, 5% Asia Dev ex Japan Equity, 3% Global Equity, 0% Alternative, 0% The asset allocation of the Tatton Managed (OBSR) Cautious Model is valid as at 31/12/

4 P E R F O R M A N C E S U M M A R Y O F M A J O R G L O B A L I N D I C E S Asset Class Index Q FTSE 100 (UK) 3.7% -1.3% FTSE4Good 50 (UK Ethical Index) 2.5% -5.3% Equities Dow Jones Euro-Stoxx 50 (Euro-Zone) 5.7% 1.1% Standard & Poors 500 (USA) 10.0% 7.3% Nikkei 225 (Japan) 12.0% 15.0% MSCI All Countries World 7.4% 1.6% FTSE Gilts All Stocks -1.2% 0.6% Bonds IA Sterling Corporate Bond Index 0.5% 0.2% Barclays Global Aggregate Bond Index 1.8% 2.5% Goldman Sachs Commodity Index -14.3% -29.0% Commodities Brent Crude Oil Price -20.8% -31.2% Spot Gold Price -2.7% -6.3% Inflation UK Consumer Price Index (annual rate) 0.09% 0.12% Cash rates Libor 3 month GBP 0.15% 0.6% * Source: Morningstar, all returns in Pounds - Sterling ( - GBP) M A R K E T C O M M E N T A R Y Looking back, 2015 was very much a story of two halves. Until the beginning of June global stock markets had generated quite healthy single digit returns. However, thereafter the rekindling of the Greek Euro crisis returned capital markets focus to all the other potential issues that also exist at any point in time. In the end, a combination of concerns over global growth emanating from China, the deflation of the commodity price bubble and last but not least the timing of the first rate rise in the US, reversed the positive sentiment into one of far greater uncertainty about the near term future. Beyond the market noise of mid-cycle insecurity of global capital markets, the economy continued its slow yet sustained expansion path. While economic growth leadership is being passed from the developing world back to the developed world, there was little to suggest that there is an imminent risk of a global recession in This should allow companies to increase their earnings which, in turn, should drive up market valuations of their stocks and shares. However, over the shorter term, and the first quarter of 2016 in particular, we expect the recent, elevated levels of market volatility to persist while Global investors get over their fears of bad debt in the commodity sector and a slowing China. Climbing the wall of worry will therefore likely to continue to be the theme for There was nowhere to hide in the commodities sector, as fresh plunges in oil and metals led the continued deflation of the previous decade s commodity price bubble. In fact, the last quarter of the year was the worst of a bad bunch for commodities, with global oil benchmark Brent crude declining -20.8% over Q4, and the Goldman Sachs Commodity Index falling -14.3% (in - sterling). On the equity side of investing, stocks actually delivered positive returns over Q4, with the US Standard & Poor 500 index gaining 10% from October to December. This came on the back of relatively strong macroeconomic data out of the US and an apparent acceptance from markets of the inevitability of an interest rate rise from the US Federal Reserve (Fed) in December. Sure enough, after the US unemployment rate fell to a 7-year low of 5%, the rate rise came and went, with seemingly little 4

5 initial- effect on investors. The 10% gain for the S&P means that the index finished 2015 with a 7.3% increase in sterling terms. However, the high -Sterling return was mostly the result of the fall of Sterling relative to the US$. In US$ terms the increase was a much more modest 1.4%, meaning 2015 saw the S&P s lowest annual return since UK equities also saw a positive Q4, with the FTSE 100 index posting a return of 3.7% over the 3 months. The increase was not enough to push the index s 2015 return into the green, however, as the losses of previous quarters meant that the FTSE still ended the year down -1.3% overall. European stocks posted similarly positive returns, with the Dow Jones Euro-Stoxx 50 index s quarterly increase of 5.7% pushing its 2015 return up to 1.1%. The big regional winner over the quarter was Japan. With the Nikkei 225 index returning 12% over the quarter, and an impressive 15% for the year overall. This came on the back of a sharp rebound in October, following a downwards correction in August and September. While equities generally saw a positive Q4 overall, the quarter did end on a negative note. December saw some marked falls in stocks, largely down to the continuation of the commodity nosedive. In particular, the continued falls in crude oil weighed heavily on the US market, whose recent more significant oil and energy sector has once again made the country oil and energy self-sufficient. As in 2014, developed markets outperformed their emerging peers overall, despite positive quarterly returns for EM equity. The MSCI Emerging Markets index produced a 3.5% increase from October to December. However, this is less impressive when considered in the context of the MSCI World index, which posted an 8.6% return for Q4. In any case, the positive fourth quarter only slightly softened the blow that 2015 had on EM equity. The MSCI EM finished the year -9.7% down, compared to a 5.5% increase for the MSCI World. On the fixed interest bond side of things, trends in government bonds broadly reflected the diverging policies of the world s central banks. With still falling yields in the Eurozone boosting bond values, values in the US and UK stagnated, while yields remained at their historically low levels. In the US, corporate bonds were quite heavily affected on the negative by the anticipation of repayment difficulties of parts of the energy and materials sector, while, overall, the IA -Sterling Corporate Bond fund peer group return was virtually flat at 0.5%. 5

6 P O R T F O L I O P E R F O R M A N C E C O M M E N T A R Y The Tatton Managed (OBSR) Cautious portfolio returned a pleasing +3.2% over Q4 2015, after equity markets experienced a marked rebound starting in October and carried on into November. This came on the back of reduced concerns over Chinese growth and improved company earnings relative to fairly pessimistic expectations ahead of the reporting season. The reference benchmark returned +3.4%, meaning the Tatton portfolio underperformed the benchmark by -0.2% over the quarter. The best performing fund in the space was HSBC American Index C Acc which returned 12.7%. The worst performing fund was Vanguard U.K. Infl-Lnkd Gilt Idx Acc -3%. Compared to average UK asset class returns, the Tatton portfolio returned a more solid 3.3% during 2015, while the reference benchmark gained 2.4% and the average for the peer group stands at 1.5%. P O R T F O L I O A C T I V I T Y Tatton rebalanced the portfolio on the 12 December 2015, but we did not alter our tactical asset allocation. F U N D C H A N G E S Tatton sold the following funds: Investec JPM US Equity Income, Jupiter European Special Situations. We also decreased our weightings in the Vanguard UK Investment Grade Bond Index and AXA Framlington UK Select Opportunities. Tatton increased its weighting in the following funds: Henderson European Selected Opportunities, HSBC American Index, Old Mutual UK Alpha, Threadneedle UK Property Trust. I N V E S T M E N T R A T I O N A L E F O R P O R T F O L I O C H A N G E S During December all Tatton portfolios were rebalanced back to the neutral asset allocation weights that had been adopted in September. This was aimed at reducing client portfolios exposures to the expected heightened levels of volatility in the wake of the first interest rate rise in the US for nearly a decade. 6

7 G L O S S A R Y O F T E R M S IA Investment Association OBSR Old Broad Street Research DFM Discretionary Fund Management (i.e. the Tatton Overlay Service) Disclosure The portfolio returns presented in this document are for information purposes only and should be regarded as indicative of the returns individual clients will have achieved with their actual investment portfolios, which are managed in the same respective investment style and risk profile. While client portfolio returns are expected to be very similar to the returns shown here, they may differ as a result of new monies having been introduced by the client, or withdrawn from the portfolio and/or the specific fee charging arrangements agreed between the client and the adviser. The performance does not account for the differences due to the limitations of a particular platform. Past performance is not a guide to future performance. Please be aware that adjustments to previously reported data can occur. The value of your investments and the income from them can fluctuate and it is possible that investors may not get back the amount they invested. Please note that the performance data does not reflect the performance experienced by clients in the Scottish Friendly Assurance Onshore Bond (Nucleus only) nor the Nucleus Pension APP (Appropriate Pension Plan). All returns are calculated in -Sterling and are shown after fund charges, but before all other fees, like platform, Tatton (DFM) and adviser charges. The Tatton Portfolios were launched on 01/01/2013. The Income Portfolios were launched on 05/12/2014. The period covered in this update is from 01/01/ /12/2015. The charts, data and related performance calculations shown within this report has been obtained from Morningstar and is valid as at 07/10/2015. Asset Allocation: Operational cash of 2% is required by the platform to cover costs and charges, any additional amount is for strategic purposes. *** Portfolio yield is calculated as the rolling 12-month yield. I M P O R T A N T I N F O R M A T I O N Tatton Investment Management Limited is a trading style of Cambridge Investments Limited which is authorised and regulated by the Financial Conduct Authority. The value of your investments and the income from them can fluctuate and it is possible that investors may not get back the amount they invested. The information in this document does not constitute investment advice or a recommendation for any product and you should not make any investment decisions on the basis of it Old Broad Street, London EC2N 1AR. Tel: