When clients select our Managed Portfolio Service they expect us to take care of their wealth. Over the past decade we have been proactive and innovative in expanding our offering to meet the evolving requirements of clients and their advisers. Our service continues to offer a client-centric investment proposition, backed by performance figures which demonstrate why we are one of the most popular choices for clients seeking a carefully managed portfolio investment solution. MARTIN BAINES CHIEF EXECUTIVE OFFICER 02
Quilter Cheviot has a heritage that can be traced back to 1771. We are one of the UK s largest discretionary investment management firms, focusing on providing and managing bespoke investment portfolios for private clients, trusts, charities and pension funds. We are at the forefront of development and innovation. We led the way in developing professional investment outsourcing solutions for financial advisers, providing access to a range of managed portfolio strategies constructed using carefully researched funds. Our investment managers are committed to building long-term relationships with financial advisers and their clients, established on a foundation of exemplary personal service and investment expertise. Our commitment to excellence has been recognised by the award of a Defaqto 5 rating for our Managed Portfolio Service and Discretionary Portfolio Service in 2014. 03
MANAGED PORTFOLIO SERVICE The Managed Portfolio Service (MPS) provides a range of discretionary investment portfolios which offer clients diversified exposure to global financial markets. MPS was launched in 2001 and provides clients with a high level of diversification through investment in collective funds. We offer the choice of seven investment strategies and the flexibility to switch seamlessly between them without charge should an investor s circumstances or risk appetite change. The success of our service is built upon an adherence to three core principles: Follow a robust investment process Deliver compelling, risk-adjusted performance Provide a high level of personal service Our substantial resource of dedicated research analysts, and an experienced investment team, ensures we are able to identify future trends and select the funds positioned to exploit them. We have a strong performance track record, as demonstrated by the figures outlined for our initial three strategies in the table below: STRATEGY / BENCHMARK / IMA SECTOR PERCENTAGE GROWTH 1 YEAR 5 YEARS 10 YEARS MPS GROWTH 18.2 78.5 128.4 FTSE WMA Stock Market Growth TR 17.0 71.0 110.4 IMA Flexible Investment 15.4 65.2 90.7 MPS BALANCED 16.3 73.4 111.3 FTSE WMA Stock Market Balanced TR 14.1 63.9 104.8 IMA Mixed Investment 40-85% Shares 14.4 60.0 86.9 MPS INCOME 13.5 57.1 107.7 FTSE WMA Stock Market Income TR 10.0 55.8 93.5 IMA Mixed Investment 20-60% Shares 8.8 45.2 60.0 Source: Lipper, Quilter Cheviot March 2014. All figures to 31 December 2013 Strategy performance is shown gross of fees. Benchmarks will not include any charges, whilst the Investment Management Association (IMA) sector returns are net of the underlying fund manager charges. Past performance is not a guarantee of future returns. 04
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FUND SELECTION STRATEGIC ASSET ALLOCATION TACTICAL ASSET ALLOCATION INVESTMENT PROCESS: OVERVIEW Rigorous research forms the foundation of our MPS investment process. We endeavour to achieve the highest risk-adjusted return for each strategy. This is obtained by following a three stage approach to portfolio construction: STRATEGIC ASSET ALLOCATION Structuring the portfolios to reflect long-term investment themes. TACTICAL ASSET ALLOCATION Portfolio adjustments to exploit short-term market opportunities. FUND SELECTION Identify leading specialist managers to target long-term outperformance. The following pages explain why each of these stages is crucial, and demonstrate how they have contributed to our long-term track record. 06
INVESTMENT PROCESS: STRATEGIC ASSET ALLOCATION Long-term strategic asset allocation is a key determinant of a portfolio s investment returns. Our expertise in this area is the product of the structured input of investment professionals from across Quilter Cheviot s network of regional offices. By utilising this wealth of experience, we forecast long-term returns for a range of asset classes. These are based upon our views over an investment cycle, as well as our extensive analysis of the economic and market environment. By undertaking this detailed analysis, we seek to achieve the highest level of return possible, harnessing the benefits of diversification and, in turn, smoothing the path of returns. The following chart highlights the annualised return achieved and volatility experienced across different asset classes and regions over the last 10 years. Identifying the prospects for each of these portfolio components forms the basis of our strategic asset allocation. ANNUALISED RETURN % 14 12 10 8 6 4 2 EMERGING MARKETS EQUITIES ASIA PACIFIC (EX JAPAN) EQUITIES GOLD GLOBAL HIGH YIELD BONDS EUROPEAN (EX UK) EQUITIES UK EQUITIES EMERGING MARKET DEBT (USD) US EQUITIES INDEX LINKED GILTS UK PROPERTY STERLING CORPORATE BONDS JAPANESE EQUITIES GILTS GLOBAL GOVT BONDS CASH 3M GLOBAL HEDGE FUNDS COMMODITIES 0 0 5 10 15 20 25 ANNUALISED VOLATILITY % Source: Lipper, Quilter Cheviot March 2014. All figures to 31 December 2013 07
INVESTMENT PROCESS: TACTICAL ASSET ALLOCATION Markets are volatile and strong performance in one year is no guarantee of strong performance in the next. As the table below illustrates, there can be a wide variation in asset class returns during a calendar year for a sterling investor. By maintaining an active approach to asset allocation, we can enhance performance by identifying shorter-term investment opportunities, with the view that at times certain asset classes and markets offer better value than others. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 18.8 EM 50.5 20.1 EM 37.5 53.4 EM 59.4 29.4 15.6 17.8 29.9 EM 17.4 40.4 18.1 34.9 42.5 54.6 EM 22.9 9.3 17.2 25.2 14.7 39.7 16.8 30.4 12.8 30.1 22.1 8.1 EM 13.4 25.0 13.8 35.3 16.8 29.3 5.8 20.1 19.0 7.1 12.3 20.8 12.8 32.4 EM 16.3 15.7-1.1 16.3 18.7 2.9 10.9 10.9 9.3 24.1 7.9 9.1-12.7 12.6 14.5 0.9 3.9 1.7 7.9 22.0 4.9 6.1-22.5 2.2 14.5-0.4 3.3 0.5 6.6 18.8 1.6 5.3-23.9 1.3 12.5-3.5 2.7-3.1 4.7 3.4 2.9-2.5 17.3 7.9 4.9 4.1 0.7-6.9-7.4-25.5 5.3 3.7-5.5-6.4-25.9-29.9-33.0 EM -35.1 1.0-1.2-5.8-8.7 8.5 7.2 5.8 0.7-12.9-14.7-14.8 EM -17.6 2.3 0.9-2.8-4.3-3.9 EM -4.1-5.8-30.0 Source: Lipper, Quilter Cheviot March 2014 08
This tactical rebalancing draws upon the input and experience of Quilter Cheviot s asset allocation committee. Composed of global and UK strategists, and market leading investment professionals, the committee meets monthly to ensure a dynamic asset allocation overlay is applied across all of our strategies. The chart below illustrates how the allocation to different asset classes and geographical regions has changed over time. Source: Lipper, Quilter Cheviot March 2014 09
UNIVERSE 17,000+ FUNDS INVESTMENT PROCESS: FUND SELECTION We take an unbiased approach to fund selection and have the resource and expertise required to identify leading specialist managers. Our highly qualified research team assists in determining the initial and ongoing suitability of each fund for the MPS service. QUILTER CHEVIOT FUND RESEARCH APPROVED LIST 350 FUNDS PORTFOLIO CONSTRUCTION MPS PORTFOLIO CONSISTING OF 20 FUNDS As part of this process quantitative data is assessed including performance measures such as alpha generation, beta, information ratios and tracking error. A detailed analysis is also performed on the fund s underlying holdings to assess its current positioning and key style characteristics. In order to fully appreciate the fund manager s investment process and philosophy, significant importance is placed on meeting the individual managers and their teams. Once identified, Quilter Cheviot s Investment Fund Selection Committee must approve the selection. This rigorous approach provides our MPS team with a dynamic panel of funds from which to select. 10
The fund is then subjected to thorough, ongoing analysis, ensuring that it continues to fulfil its purpose within each strategy. The strength of our process is demonstrated in the chart below, which outlines the weighted performance of the UK fund holdings within our MPS Growth Strategy since its inception. The shaded area illustrates that approximately 60% of UK funds underperformed the FTSE All Share Index. In contrast, our MPS Growth Strategy s UK exposure remained consistently above the top performing quartile of funds, returning 210.5% versus the market s 134.2%. This supports our belief that comprehensive, skilled analysis can generate sustained outperformance over the longer-term, which is further reinforced by the long-term track record of the strategy since its inception. Source: Lipper, Quilter Cheviot March 2014. All figures to 31 December 2013. *Contains estimated data. Past performance is no guarantee of future returns, real returns may vary. 11
MPS STRATEGIES Our seven MPS strategies operate within a clear risk-controlled framework. This ensures that the volatility of returns across each strategy is consistent with our expectations and that any deviations outside these boundaries are reviewed. CAPITAL PRESERVATION CAPITAL GROWTH GLOBAL GROWTH GROWTH BALANCED EXPECTED RETURN CAUTIOUS CONSERVATIVE INCOME GLOBAL INCOME EXPECTED VOLATILITY UK Equity Overseas Equity Alternatives Fixed Interest & Cash Our strategies are risk rated by three independent companies. For more details please contact Quilter Cheviot. Asset allocations are for illustration purposes only based on strategy weightings as at 31 December 2013. 12
MPS INDEX (IDX) STRATEGIES At Quilter Cheviot we recognise that there is an increasing focus on the cost of investing. Whilst we can demonstrate our ability to select active fund managers who outperform over the medium and longer-term, we understand that, for some clients, a lower-cost solution delivered through index funds ( trackers ) can be an attractive proposition. Our MPS index strategies build upon our tradition of successful and innovative partnership with financial advisers, offering a range of four actively managed, multiasset portfolios constructed entirely from index funds. Founded upon the success of our MPS investment process, these strategies are constructed utilising our whole of market approach to fund selection, and driven by our expertise in strategic and tactical asset allocation. Combining the diversification benefits of a multi-asset portfolio with the disciplined, systematic and low-cost approach of index-tracking funds, the MPS index strategies are a powerful complement to our existing investment services. UK Equity Overseas Equity Alternatives Fixed Interest & Cash 13
MPS OR MPS INDEX STRATEGIES? We believe in offering a choice of flexible investment approaches depending on a client s individual needs. Whether through MPS or the MPS index strategies, we have an offering to satisfy an investor s unique requirements. MPS: Dynamically managed strategic and tactical asset allocation, together with active fund selection of leading specialist managers to target long-term outperformance Seven strategies Strong track record since inception in 2001 MPS index strategies: Dynamically managed strategic and tactical asset allocation, together with active selection of index funds Four strategies Lower-cost investment solution The asset allocation and fund returns outlined are for illustration purposes only, and should not be relied upon as an indication of MPS or IDX asset allocation decisions or anticipated fund selection returns. Please note that the asset allocation decisions of the MPS strategies are not identically replicated within the MPS Index (IDX) strategies. For example, absolute return funds do not form part of the asset allocation of the IDX strategies. 14
REPORTING We pride ourselves on the quality of our reporting, the efficiency of our support services and functionality of our proprietary technology systems. Clients of our MPS strategies will receive a comprehensive summary every six months. This summary includes a fully itemised portfolio valuation, performance report, transaction schedule, capital and income statements and market commentary. Monthly factsheets are provided for each individual strategy. Each year, an annual tax summary incorporating a capital gains tax report is also sent to each of our clients or their tax adviser*. In addition, we offer online access to the portfolio for financial advisers and their clients, which can also be accessed through our iphone and ipad App. * Please note: The service does not take unrealised capital gains into account when changes are made to the portfolios. This means there may be occasions when realised gains are in excess of the Annual Exempt Amount. 15
MEET OUR MPS TEAM JULIAN MENGES CHARTERED FCSI, DIPPFS JOINT HEAD OF MANAGED PORTFOLIO SERVICE Julian joined Quilter Cheviot in 2010 and is joint head of the Managed Portfolio Service. He is also a member of our asset allocation committee. Prior to moving to Quilter Cheviot, Julian was head of portfolio management at Heartwood Wealth Management. He started his career in investment management in 1986 at Williams de Broë, initially as a gilt dealer and then as a sales trader in the eurobond market. In 1993 he moved to Astaire & Partners where he continued as a bond sales trader before moving to become director of the private client department in 1999. BENJAMIN MOUNTAIN CFA JOINT HEAD OF MANAGED PORTFOLIO SERVICE AND HEAD OF INVESTMENT FUND RESEARCH Benjamin graduated with a BSc (Hons) degree in Information Technology for Business from Aston University. Benjamin joined Quilter Cheviot in 1999 and is joint head of the Managed Portfolio Service. He is also head of the investment fund research team, which has responsibility for analysing all third-party managed investments. Benjamin is a member of the company s asset allocation committee. He is a Chartered Financial Analyst (CFA) Charterholder and a Member of the Chartered Institute for Securities & Investment. From left to right: Kayen Chan (MPS & Platform Services Co-ordinator), Julian Menges (Joint Head of MPS), Wayne Smith (MPS & Platform Services Manager), Benjamin Mountain (Joint Head of MPS and Head of Investment Fund Research), Antony Webb (Investment Adviser), Simon Doherty (Investment Manager) 16
CONTACT US QUILTER CHEVIOT One Kingsway London WC2B 6AN CONTACT t: +44 (0)20 7220 7103 OTHER QUILTER CHEVIOT OFFICES: Belfast t: +44 (0)28 9026 1150 Birmingham t: +44 (0)121 212 2120 Bristol t: +44 (0)117 927 3377 Dublin t: +353 1 799 6900 Edinburgh t: +44 (0)131 221 8500 Glasgow t: +44 (0)141 222 4000 Jersey t: +44 (0)1534 506 070 Leicester t: +44 (0)116 249 3000 Liverpool t: +44 (0)151 243 2160 / t: +44 (0)1492 530 677 Manchester t: +44 (0)161 832 9979 Salisbury t: +44 (0)1722 424 600 quiltercheviot.com 2012 DFM (MPS) 2013 DFM (MPS) Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest. This document is not intended to constitute financial advice; if you are in any doubt as to its contents you should seek independent financial advice. Quilter Cheviot Limited is registered in England with number 01923571, registered office at One Kingsway, London, WC2B 6AN. Quilter Cheviot is a member of the London Stock Exchange and authorised and regulated by the UK Financial Conduct Authority. 17
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