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THE INVESTOR
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Income
Portfolios
PORTFOLIO OVERVIEWS
was the stand-out performer among
the Portfolio’s funds, and significant
contributors included Korean,
Argentinian and Indian positions.
European equities were buoyed
mid-quarter by improving growth and
jobs figures, and by the election of
centrist candidate Emmanuel Macron
to the French presidency, since he was
viewed as a far more market-friendly
candidate than his leading rival,
Marine Le Pen.The Greater European
fund, which employs a blended
manager approach split between
Burgundy and S.W. Mitchell Capital,
was a particularly strong performer
within the Portfolio. S.W. Mitchell
Capital’s holding in International
Consolidated Airlines Group (usually
shortened to IAG) was a significant
contributor to performance – the
Anglo-Spanish airline holding
company owns British Airways and
Iberia. IAG announced a 10% rise
in profits in the first quarter, amid
signs of a more general pickup for
Europe’s airline industry – the sector
performed poorly last year.
The Global Smaller Companies
fund, managed by Denver-based
Paradice Investment Management,
also enjoyed a positive quarter thanks
in part to exposure to European
equities.Top contributors included
Equiniti, a UK business services
provider, and Havas, a French
advertising and public relations major.
At a global level,
sovereign bonds
and corporate bonds
pushed in different
directions during
the quarter
T
he Immediate Income
Portfolio added another
consecutive quarter of
growth over the period.
At a global level, sovereign bonds and
corporate bonds pushed in different
directions during the quarter. Buoyant
corporate earnings created a greater
appetite for risk among investors,
improving sentiment towards corporate
bonds, and especially high-yield bonds.
This positive momentumwas reflected
in the performance of the International
Corporate Bond, Corporate Bond
and Diversified Bonds funds, each of
which delivered significant returns over
the period.The Corporate Bond fund
achieved the highest return across all
the Portfolio’s funds, benefiting from
both individual credit selection and
sector allocation towards financial and
energy stocks.Among the holdings that
rose in price over the period were Iron
Mountain, a US holding company, and
IMMEDIATE INCOME
Equiniti rose early in the quarter on
a solid trading update, and rose
further following the sale of a
competitor to a strategic buyer. Havas
received a takeover offer fromVivendi,
which shares a common controlling
shareholder.
The North American fund, which
is managed by Aristotle Asset
Management, was the major detractor
in the Portfolio during the quarter,
suffering negative returns as a result of
both the rise in sterling and the fund’s
sectoral allocations.While energy
stocks struggled over the period, IT
stocks performed strongly – the fund
was overweight on the energy sector
and underweight on the IT sector.A
holding in Kroger, the US retail major,
also detracted from performance. In
mid-June, the company announced
a 10% cut in its profits outlook – the
CEO said that a deflationary food
retail environment was most at fault.