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share price above the highs of July 2016
– which had followed the release of
Pokémon Go – for the first time.
The Diversified Bond fund also
performed strongly, as corporate yields
decreased – both investment grade and
high-yield bonds benefited from inflows,
although high-yield bonds made the
largest gains (in bond markets, yields
move inversely to prices). In part, the
investor shift towards corporate bonds
reflected the improving corporate
outlook, as first-quarter earnings came
in strong.
On the sovereign credit side, the
rise in government bond yields
followed signs that leading central
banks are finally turning more hawkish
– and looking to slowly wind down
quantitative-easing programmes. Indeed,
across asset classes, government bonds
were one of the worst-performing.
In the UK, moreover, the hung
parliament result in the general election
was unexpected – markets also treated
it as unwelcome.The Bank of England
signalled that anAugust rate rise is now
on the cards, which helped to push up
both sterling and government bond
yields. Given these developments, it is
no surprise that the Gilts andAlternative
Assets funds were the major detractors
from Portfolio performance.
TheAlternativeAssets fund, which has
a significant weighting in commodities,
suffered as the oil price fell during the
quarter on oversupply fears.
THE PORTFOLIO REVIEW
28
|
THE INVESTOR
Portfoliooverviews
THE INVESTOR CENTRE
A
strong three months
for global equities and
corporate bonds provided
the Conservative Portfolio
with its greatest tailwinds, and helped
it to a positive return, although gains
were held in check by rising yields on
the Portfolio’s allocation to government
bonds, especially in the UK.
The Portfolio’s constituent equity
funds exhibited varied returns, but were
a net contributor to performance.The
International Equity fund returned
significantly less than what it had
posted during the first quarter.The
fund’s high cash weighting dragged on
performance. So too did its high US
exposure, since sterling rose by more
than 3.5% against the dollar over the
period. It was buoyed, however, by a
significant exposure to PayPal, which
enjoyed major gains over the quarter.
The US-listed digital payment platform
was popular among investors after
CONSERVATIVE
Summer 2017
T
he Defensive Portfolio
delivered a positive return
over the second quarter of
2017, despite its lower risk-
positioning, although it fell short of the
exceptionally high returns achieved over
the first quarter.
Investors globally remained largely
willing to take on risk over the period,
pushing some leading indices to new
highs.TheWorldwide Opportunities
fund was the strongest performer in the
Portfolio.Artisan Partners, co-manager
of the fund, benefited from its significant
holding in IHS Markit, the London-
headquartered business information
and analysis company.Another strong
performer forArtisan was Nintendo.
The Japanese consumer electronics and
video-game giant enjoyed improving
investor sentiment on the back of
launching its seventh major gaming
console, the Nintendo Switch, in March.
This year’s second-quarter rise took the
DEFENSIVE
Growth
Portfolios
A strong three
months for global
equities and
corporate bonds