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THE INVESTOR
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A
sian and emerging market
economies were notable
contributors to returns for
the Balanced Portfolio,
in what was a strong quarter for the
medium-risk strategy.
Unsurprisingly, the Emerging Markets
Equity andAsia Pacific funds were the
best and second-best performing funds
over the period. Losses suffered during
the final quarter of 2016 – as fears over
PresidentTrump’s trade policies hit those
economies that rely heavily on the US
– were reversed as the funds posted
growth of 12.7% and 8.1% respectively.
AlistairThompson, Senior Portfolio
Manager of theAsia Pacific fund at First
State StewartAsia, noted India and
Taiwan as major beneficiaries of the
recent recovery in the region.‘Indian
PORTFOLIO OVERVIEWS
BALANCED
Expectations of higher levels of inflation helped
fuel growth during the previous calendar year
for the Index Linked Gilts fund
emerging economies and holdings in
the technology sector outperformed.
TheArlington-based manager’s
position in LG Innotek, which provides
components for smartphones, was
a notable holding over the period.
‘We seek to invest in leading growth
businesses that are capable of sustaining
above-average earnings growth. Often,
this steers us towards innovative
companies that we believe are benefiting
from structural change and secular
trends – distinct from cyclical economic
factors – that provide select industries
and businesses with powerful growth
tailwinds,’ commented Portfolio
Manager David Levanson.
The three funds that posted negative
performance during the final quarter of
2016 –AlternativeAssets, Index Linked
Gilts and International Corporate Bond
– enjoyed something of a recovery in
absolute terms, adding positively to
growth. Expectations of a return to
higher levels of inflation during 2016
helped to fuel growth during the
previous calendar year for the Index
Linked Gilts fund. However, while
that inflation has now come through,
forecasters aren’t predicting significantly
higher levels anytime soon and returns
from the fund have been muted of
late. It is the expectation, rather than
reality, of inflation that typically drives
returns from the asset class.
The UKAbsolute Return and
Investment Grade Corporate Bond
funds were among the laggards across
the Portfolio in absolute terms, while
both still recorded positive nominal
growth. Loomis Sayles, manager of the
Investment Grade Corporate Bond fund,
pointed to improving data as a catalyst
for increasing risk appetite, noting that:
‘Synchronised improvements in the
US, the eurozone and China, and other
emerging market-leading indicators,
added to an uptrend in corporate
earnings and continued to support risk
assets for much of the quarter.’
equities rallied, boosted by a better-
than-expected earnings season, despite
the chaos of demonetisation.Taiwanese
markets also outperformed, with
Apple’s supply chain companies
[including chip-makerTaiwan
Semiconductor] lifted by a renewed tech
cycle.’ In the materials sector, Newcrest
Mining was another notable contributor.
The gold miner posted strong earnings
and was further buoyed by a surge in the
price of bullion over the period.
While the price of gold continued to
push higher, due to a weaker dollar
following dovish comments by the US
Federal Reserve, other commodities
fared less well.TheAlternativeAssets
fund, managed by BlackRock, provided
a positive return but was among the
lower-performing funds in the Portfolio.
The strategy has approximately 50%
invested in fixed-interest sectors, which
struggled in comparison to other risk
assets, and a 15%weighting to
commodities. Clean energy and the
water sector provided stronger gains
over the period.
Other funds in the Portfolio with a
bias towards fixed-interest assets, such as
the Investment Grade Corporate Bond
and International Corporate Bond
funds, trailed their equity-focused peers
against the backdrop of a return to a
risk-on mindset for investors.
Capital Four, based in Copenhagen,
co-manager of the International
Corporate Bond fund, remains upbeat