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The UK High Income
fund, managed by
Neil Woodford of
Woodford Investment
Management, also
delivered positive
returns for the
Portfolio
THE INVESTOR
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33
PORTFOLIO OVERVIEWS
DEFERRED INCOME
R
eturns were dominated
by equity holdings as the
Deferred Income Portfolio
posted significant gains over
the quarter.
The strongest performing fund was
the UK & International Income fund.
The biggest contributors included
Legal & General and RELX.
The Equity Income fund, managed
by Nick Purves and Ian Lance of
RWC Partners, posted an improved
performance over the second quarter.
Energy stocks weighed somewhat on
performance – the decline in the oil
price spurred share price falls for both
Royal Dutch Shell and BP, both of which
feature in the top-10 largest holdings.
However, this was countered by gains
elsewhere in the fund. Unilever, another
of the largest holdings in the fund,
announced a surprise improvement
in sales for the first quarter. HSBC,
the UK-listed banking behemoth, was
likewise buoyed by results that beat
expectations – and by a weaker dollar.
The bank’s US operation paid its first
dividend out to the parent since the
global financial crisis.
The UK High Income fund, managed
by NeilWoodford of Woodford
Investment Management, also delivered
positive returns for the Portfolio.
AstraZeneca was a particular highlight,
and the team highlighted the company’s
encouraging report on its clinical
phase II trial for Imfinzi, a potential
treatment for non-small-cell lung cancer
– the announcement precipitated an
immediate jump of almost 5% in the
share price.
Woodford’s outlook for the UK
economy has given him reasons to alter
the size of some of his holdings in recent
weeks.‘In contrast to an increasingly
bearish consensus, we continue to
warm to the prospects for the domestic
economy,’ he said.‘In this regard, we
added two new holdings in housing-
related companies – Countryside
Properties and Kingfisher – and
increased the positions in a number
of domestic cyclicals, such as RBS
and Barratt Developments.To fund
these purchases, we sold the holdings
in GlaxoSmithKline and Compass
and trimmed our position in British
AmericanTobacco.With its implications
for looser fiscal policy and a softer
Brexit, the UK economic outlook
appears to have improved still further
and the portfolios are well-positioned
to benefit from this outcome over the
long term.’
Although all funds contributed
positively to performance, both the
Strategic Income and Global Equity
Income funds lagged their peers.And
despite stronger returns fromNestlé
andApple, the Global Equity Income
fund fell significantly short of the growth
rate enjoyed during the first three
months of 2017.
Portfolio fund allocations are not rebalanced
automatically. The overviews provided are
based on the fund managers currently in the
relevant portfolios. Client Portfolios may have
different fund allocations and, therefore, some
of the fund managers referred to may not
apply to their holdings.
AberdeenAsset Management.
The Strategic Income fund, a blended
manager mandate, was the poorest
performer in the Portfolio over the
period, but still achieved a marginal
positive return.