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THE INVESTOR
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T
he Balanced Portfolio
delivered a positive return
over the quarter, buoyed by
bonds and equities alike.
The Federal Reserve left US interest
rates on hold but announced it would
begin to reverse its programme of
quantitative easing in October – markets
seemed to take the news in their stride.
Both bond funds in the Portfolio
performed well, supported by strong
income streams – the Investment Grade
Corporate Bond fund, managed by
Loomis Sayles, and the International
Corporate Bond fund, co-managed by
Capital Four and Oaktree.
Global equities performed strongly
through the quarter, and emerging
markets outperformed developed
markets.The Global Equity fund
was a major contributor to Portfolio
performance. Edgepoint, one of the
fund’s co-managers, benefited from its
holding in Shiseido, one of the oldest
cosmetics companies in the world. In
August, the Japanese company lifted
its 2017 profits outlook on the back of
improved sales in China.
A weak dollar buoyed emerging
market stocks, which benefited from
investors’ willingness to take on more
risk. Nevertheless, the Emerging
Markets Equity fund, managed by
Wasatch Investors, made a small loss.
PORTFOLIO OVERVIEWS
BALANCED
The MultiAsset fund also made a
significant contribution to performance.
The element managed by Invesco
Perpetual suffered due to the rise of
the euro against the dollar, while the
Schroder and Payden & Rygel elements
ensured that the fund delivered a healthy
level of return, aided by rising global
stock indices and by fixed income
investments generating steady income.
TheWorldwide Opportunities
fund lost a little ground, but losses
were limited by its exposure to the
energy sector. Burgundy, which
manages 30% of the fund, benefited
from its holding in Cenovus, a
Canadian oil company. Nestlé suffered
a poor quarter on markets after
cutting its earnings outlook in July,
but Burgundy retained the holding
in expectation of improvement.
‘Nestlé offers a good example of a
globally diversified company,’ says Ken
Broekaert of Burgundy.‘With a new
CEO on board, the company is set for
a positive step change over the coming
months and years.’
Rising inflation in the UK, coupled
with growing expectations that an
interest rate rise is imminent, hampered
the performance of the Index Linked
Gilts fund, which weighed on Portfolio
returns through the quarter.
It was a good three months for energy
and commodities.The price of a barrel
of Brent crude rose from below $50
to above $55, taking the stock prices
A weak dollar buoyed
emerging market
stocks, which benefited
from investors’
willingness to take
on more risk
of many energy majors up with it.The
AlternativeAssets fund, which has a
significant energy exposure, benefited,
as it did from exposure to emerging
market infrastructure and clean energy
stocks. But the UKAbsolute Return
fund, managed by BlackRock, suffered
as a result of its short positions in the
mining sector.