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THE INVESTOR
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Income
Portfolios
PORTFOLIO OVERVIEWS
ADVENTUROUS
R
isk was rewarded over the
quarter and so, perhaps
unsurprisingly, the
Adventurous Portfolio was
the leading performer across our range
of Portfolios.
The Emerging Markets Equity fund
was the best-performing fund, as both
general market factors and favourable
currency conditions helped to drive
returns for sterling-based investors.
Ajay Krishnan ofWasatch, Portfolio
Manager of the fund, posits that, while
earnings for companies in the emerging
economies have increased, share prices
across the region do not reflect the
greater opportunities.‘Emerging
market equities as a group have become
more attractively valued, especially
in relation to developed markets.
Local currencies in emerging markets
generally have become less costly as
well. Looking ahead, we think these
factors are likely to provide tailwinds for
equities of well-positioned, high-quality
businesses,’ he added.
Politics remain a potential threat
to the outlook for the eurozone over
the rest of the year, with a number
of high-profile elections still to take
place; but for now equity markets in
the region are pushing on.Again, it was
the cyclical sectors that were the main
beneficiaries.Against this backdrop, the
portfolio managed by Stuart Mitchell
of S.W.Mitchell Capital (Co-manager
of the Greater European fund) achieved
a positive return. Key positions in both
the industrial and financial sectors were
among the best performers.
While achieving a positive return
in absolute terms, the UK & General
Progressive fund trailed other strategies
in the Portfolio and, alongside the
Corporate Bond fund, was the lowest-
performing fund over the quarter.
Reflecting his somewhat cautious view
on equity markets, and more specifically
his concern that‘management tends
to behave badly’ in times of investor
overconfidence, JohnWood of J O
Hambro Capital Management continues
to maintain a high cash weighting in
his portfolio.This has put a drag on
performance as markets have rallied
more recently. Furthermore, positions
in energy and mining companies have
cost the team at Majedie, co-manager
of the fund, as falling commodity prices
have hit these sectors hardest.
One of the better-performing fixed-
interest funds over the period, the
Corporate Bond fund benefited from
exposure to high-yield credits and,
specifically, exposure to subordinated
financials.A long-held theme in the
Portfolio, the team at Invesco Perpetual
continues to add new issues in the
sector, which offer the potential for
capital growth and an attractive yield.
Politics remain a potential threat to the
outlook for the eurozone over the rest of the year,
with high-profile elections still to take place
I
ncome remains a priority for
many investors. However, a focus
on assets that have historically
provided attractive levels of
income comes at the cost of capital
growth in the current environment.
Yet despite this, the Immediate Income
Portfolio recorded another consecutive
calendar quarter of positive growth.
Equity exposure, alongside
investments in high-yielding, cyclical
corporate bond assets, provided the
best rewards.The Global Equity Income
fund, managed by the team at Manulife
in Boston, was the star performer.
Healthcare, technology and significant
holdings in US financials – including
Wells Fargo – were among the key
contributors.An underweight allocation
to the energy sector also helped relative
returns. Stock selection in the consumer
discretionary and telecoms services
sectors weighed on returns; positions in
Total, Ralph Lauren andVerizon were
the key detractors.
The team at MidOcean, co-manager
of the Strategic Income fund, noted a
IMMEDIATE INCOME