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THE PORTFOLIO REVIEW
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THE INVESTOR
Portfoliooverviews
THE INVESTOR CENTRE
Summer 2017
T
he Balanced Income
Portfolio achieved a positive
return over the quarter,
benefiting from exposure to
a diversified approach across a range of
asset classes – equities, corporate bonds
and commercial property.
The Property fund was aided by
acquisitions made earlier in the year,
includingThe Cornerhouse, a large
retail block in Nottinghamwhere
tenants include Cineworld, Genting
Casino, Nando’s,TGI Fridays and
Pizza Hut. Cash levels reduced thanks
two energy majors: EDF, the French
electricity business, and Centerpoint
Energy, a US electricity and natural gas
company. Lloyds, Standard Chartered
and Société Générale also boosted
performance.
The Diversified Bond fund, a blended-
manager fund which accounts for 20%
of the Portfolio, was also a significant
source of growth.TwentyFourAsset
Management, which runs the European
high-yield portion of the fund, achieved
a positive return thanks in part to
sectoral allocations.‘Politics aside,
the focus remains on central bank
activity – the Fed announced its third
hike in six months and Mario Draghi
spooked euro markets by saying that
reflationary dynamics were taking
hold,’ said Gary Kirk of TwentyFour
Asset Management.‘Every sector of the
portfolio contributed to performance,
most notably bank capital and insurance.
It’s worth noting the lack of contagion
from the restructuring of three major
BALANCED INCOME
European banks during the period, none
of which were held in the fund.’
The only fund in the Portfolio to post
a negative return over the period was
the Gilts fund, which suffered partly
as a result of the rise in sterling and
in inflation, but mostly struggled in
June after senior figures at the Bank of
England indicated that UK interest rates
could be raised later in the year.
The equity income funds in the
Portfolio achieved a positive return but
gains were much lower than those in
the first quarter of the year. Investors
rotated back towards a more risk-on
mindset and, as quality stocks trailed
their more cyclical peers, both the
Global Equity Income andWorldwide
Income funds lost some momentum.
to the purchase of the property at
Hatton Garden, London.The team also
completed the disposal of aVolkswagen
showroom in Huddersfield for
£6.3 million – a figure greater than the
latest valuation price.
The star performer in the Portfolio
was the UK & International Income
fund, which benefited from its exposure
to financials.The private equity and
venture capital firm 3i, listed in
London, was a major contributor.
The company is a top-10 holding in
the fund, which is managed byAdrian
Frost and his team atArtemis
Investment Management.
Nevertheless, the manager took a
less bullish outlook towards the UK
by quarter-end, a fact reflected in
changes made to the portfolio.‘We
made a slight reduction in our domestic
exposure, some of which was acquired
in the aftermath of the Brexit vote,’
said Frost.‘Conversely, we made some
additions to our international weighting,
subscribing for the IPO ofAllied Irish
Bank and purchasing Kion, which equips
e-commerce distribution centres.’
The Equity Income fund improved
on its first quarter return to make a
significant contribution to Portfolio
performance, likewise aided by its
exposure to financials, notably Standard
Life.The Edinburgh-based investment
company gained more than 10%
over the period as the market reacted
favourably to news of its merger with
Every sector of the
portfolio contributed
to performance, most
notably bank capital
and insurance