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THE PORTFOLIO REVIEW
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THE INVESTOR
Portfoliooverviews
THE INVESTOR CENTRE
Autumn 2017
T
he Balanced Income fund
achieved a slightly positive
return over the quarter.
Investors continued to
increase allocations to a range of assets
over the third quarter, offering support
to equities, bonds and UK commercial
property alike.
Although growth remained slow,
corporate earnings in the UK were still
relatively buoyant and unemployment
remained at historic lows.The
commercial property sector benefited
from some of these trends, and has
enjoyed a strong year more generally,
after the jitters of the second half of
2016.The Property fund, managed
by Orchard Street, offered positive
performance.
The Portfolio’s leading contributor to
returns was the Strategic Income fund.
High yield credit performed strongly
over the period, as investors looked
to take on risk, and this contributed
The best-performing fund in the
Portfolio was the Strategic Income fund,
co-managed by Bluebay,MidOcean,
Schroders andTwentyFour. Bluebay,
which manages the emerging market
debt portion of the fund, benefited
from its exposure to sovereign bonds
and to utilities inArgentina, where the
economy has improved in the past year,
as well as from good credit selection.
While economic momentum gathered
in continental Europe, indicators in
the UK were less positive, as growth
and investment slowed, and political
uncertainty continued.Moreover,
inflation struck 2.9% inAugust, far
above the Bank of England’s 2% target
– the Bank’s Governor has since been
making noises around raising rates in
the near future. In line with this trend,
the Gilts fund slightly detracted from
performance over the period.
The major detractors, however,
were the Global Equity Income and
Worldwide Income funds.While
corporate results for the first half of the
year were broadly positive, there was
significant variation between sectors.
Technology and energy both enjoyed
strong quarters, but the picture was
more mixed within the consumer
discretionary sector, while consumer
staples suffered.TheWorldwide Income
fund, managed by Investec, suffered
from its consumer discretionary
allocations, and especially its holding in
21st Century Fox, which struggled on
BALANCED INCOME
markets as the UK regulator delayed
approval of the proposed tie-up with
Sky.The Global Equity Income fund,
managed by Manulife, saw its holdings
in the consumer staples sector take a hit
– BritishAmericanTobacco suffered due
to new regulations on reducing nicotine
in its products.
to positive performance for the
TwentyFour element of the fund, which
focuses on European HighYield debt.
Likewise, the Diversified Bond fund,
co-managed by Brigade, Payden &
Rygel andTwentyFour, posted a positive
return over the period, as investments
remained broadly stable and income was
buoyant.
The third quarter was positive for
equities, as leading indices in the US,
Europe and emerging markets all rose
on improved growth dynamics and a
positive corporate earnings season.
The UK & International Income fund
performed well over the period, buoyed
by its holdings in Laird, among others.
Laird, a UK technology group, had been
struggling somewhat in previous months
but reported a 47% underlying profit
(before tax) for the first half of the year.
The materials sector performed
strongly, as commodity markets enjoyed
significant tailwinds.The Equity Income
The third quarter was
positive for equities,
as leading indices
in the US, Europe and
emerging markets
all rose