Chilvester Investment Strategies

Transcription

1 Chilvester Investment Strategies Portfolio Review October 2017

2 Contents Introduction... 2 Investment returns... 3 Portfolio Review... 4 Summary... 6 Appendix... 7 Important information Economic update

3 Introduction Chilvester provide Independent Financial Advice which means we are unbiased towards any range of investment funds or products. We have access to a variety of different companies to meet your advice needs. Being Chartered Financial Planners demonstrates our commitment to achieving the highest professional standards and ongoing knowledge via qualifications to help meet our clients varied objectives. Our ethical practices ensure that we have you at the centre of the advice process and you are kept updated. We provide investment planning advice to help your money through the growth phase or income phase depending upon where you are in your life cycle and individual needs. Regular reviews of your investment goals will keep your investments in line with your requirements. We provide professional support for all of your investments. This ensures you remain invested in suitable funds in line with agreed risk profiles. Chilvester advise on a number of strategies to suit individual investment requirements. provide access to We A range of investment portfolios, predominately using passive (or tracker) funds our passive portfolios A range of ethical portfolios, using predominately actively managed funds which are screened against ethical, environmental or sustainable criteria our ethical portfolios Bespoke investment strategies built to suit individual client needs Third party managed investment solutions 2

4 Investment returns The following table details the gross returns over recent months and years. Declared Returns to 30/09/2017 Portfolio 3 month % 12 month % 3year % (cumulative) 3 (low risk) (lowest medium risk) (medium risk) (high medium risk) (highest medium risk) Ethical Cautious (low risk) Ethical Balanced (medium risk) Ethical Adventurous (highest medium risk) The above figures are the fund managers quoted returns excluding nominee account and advice charges which will reduce the returns seen by the investor. For more information about these charges, please refer to the Important Information in the attached appendix. 3

5 Portfolio Review Investment returns across all of our portfolios were again mostly flat for the three months to the end of September. Our UK and European equity holdings showed steady returns, but other asset classes such as corporate bond and gilts stood still over the quarter because of continuing inflation and interest rate concerns. Asset Allocation Changes There have been changes to the proportions of our asset allocation models across all portfolios this quarter to reflect changes in expectations of future returns from the different asset classes that we base the portfolios on. In Portfolio 3 there have been changes within the fixed interest element of the portfolio. UK Corporate Bond (-2%) and Global High Yield Bond (-5%) holdings have been reduced, with increased holdings in cash (+5%) and UK Index Linked Gilts (+2%). Similarly, in Portfolio 4, UK Corporate Bonds (-2%) and Global High Yield Bonds (-3%) have also been reduced with increased holdings in cash (+5%). There have been changes to both fixed interest and equity holdings in Portfolio 5. As above, UK Corporate Bonds (-3%) and Global High Yield Bonds (-2%) have been reduced, and holdings have increased in cash (+5%). There has been a slight reduced in European equities (-1%) with a corresponding increase in Japanese equities (+1%). In Portfolio 6, cash has been increase (+4%) in favour of UK Corporate Bonds (-3%) and Global High Yield Bonds (-1%) which have been reduced. In equities, there are reductions in Asia Pacific (-2%) and Emerging Markets (-3%) with increases to the more developed areas of North American (+3%) and Japan (+2%). Finally for our passive portfolios, Portfolio 7 has similar changes within the equity holdings with reductions in Asia Pacific (-3%) and Emerging Markets (-3%) and increases in North American (+3%) and Japan (+3%). Our Ethical Portfolios are based on the same asset allocation models, although we benchmark against the broader asset classes of cash, bonds, UK equity and international equity. Whilst there have been no changes in the proportions for the broader classes, we are recommending some changes to the proportions of funds held within the portfolios to more closely align with the benchmark. Recommended Changes To reflect these amendments so that the portfolios are better aligned to the new benchmark models, we are recommending changes to the fund proportions currently held within the portfolios. Details of the changes are in the appendix of this report. We are recommending the introduction of a new fund, the ishares Overseas Corporate Bond Index, to all of our passive portfolios. This fund allows us to more closely reflect our holdings in Global 4

6 Bonds than we had been able to with the existing fund holdings. This fund is recommended on the basis that it meets our criteria of having at least a 3 year track record, is at least 50 million in size and has lower than average charges. Within the Ethical Balanced and Adventurous portfolios we are recommending a new fund, F&C Responsible Sterling Bond, is added to further diversify our corporate bond holdings. This fund is already held in the Ethical Cautious portfolio. Additionally in the Balanced portfolio we recommend the introduction of the Stewart Investors Asia Pacific Sustainability fund, currently held within the Adventurous portfolio, to provide specific exposure to the Asia Pacific equities asset class. Other changes Within the passive portfolios we currently hold two different versions (classes) of the Legal & General Sterling Corporate Bond fund. In Portfolio 3 & 4 we hold the income class of the fund, however in Portfolio 5 & 6 we hold the accumulation version of the fund. As you know, we generally prefer to use income versions of funds because they provide regular income which can be used to fund withdrawals and ongoing charges. To remedy this anomaly, we will convert the holding in Portfolio 5 & 6 is from the Legal & General Sterling Corporate Bond Acc fund to the Legal & General Sterling Corporate Bond Inc fund. There are no differences in ongoing charges between the two classes and both Transact and Legal & General allow us to convert the fund version without any dealing charge which means that you will not be disadvantaged in any way as a result of this action. Legal & General have announced that the version of the Legal & General All Stocks Index Linked Gilt Index fund will be merged into another version of the same fund. We currently hold the M Inc version of the fund which will be merged into the I Inc fund on 24 November. To prevent any additional dealing charges being incurred when rebalancing portfolios this quarter, we will convert from the M Inc to the I Inc version of the fund ahead of making the recommended portfolio rebalance. This change applies to Portfolio 3 & 4 and also the Ethical Cautious and Balanced portfolios and once again, actioning this change will not disadvantage you in any way 5

7 Summary In summary, the investment committee are recommending changes to all our portfolios this quarter to reflect changes in the underlying asset allocation models. As it is over a year since many of our client portfolios were last rebalanced, we are recommending that the changes are made by way of a rebalance to bring the proportions of the existing investments and the new funds into line with the new proportions as discussed on the following pages. Whilst we do not make any charge for instructing these changes, Transact do have a dealing charge of 0.05% on fund purchases. The actual charge will depend on the total value of fund purchases to rebalance the portfolio back in line with the template, on a 100,000 portfolio where 20% is purchasing funds the charge would be 10. The latest portfolio and fund factsheets are available online at Please ask if you would like paper copies posting out to you. If you do think that you may need additional cash withdrawals in the coming months, or there have been any changes to your circumstances, then please do speak to us now. Chilvester Financial October

8 Portfolio Holdings Current % Proposed % Change Portfolio 3 Cash 7% 12% +5% ishares UK Gilts All Stocks Tracker 14% 14% 0% L&G All Stocks Index Linked Gilt Index 11% 9% -2% BlackRock Corporate Bond 1 to 10 Year 5% 5% 0% ishares Corporate Bond Index 13% 8% -5% L&G Sterling Corporate Bond Index 14% 8% -6% ishares Overseas Corporate Bond Index 0% 9% +9% Fund added L&G UK Property 10% 11% +1% L&G UK 100 Index 7% 7% 0% HSBC FTSE All Share Index 8% 7% -1% Vanguard FTSE Developed Europe ex UK Equity Index 2% 2% 0% Vanguard US Equity Index 7% 6% -1% ishares Japan Equity Tracker 2% 2% 0% Portfolio 4 Cash 3% 7% +4% ishares UK Gilts All Stocks Tracker 8% 8% 0% L&G All Stocks Index Linked Gilt Index 5% 5% 0% ishares Corporate Bond Index 11% 8% -3% BlackRock Corporate Bond 1 to 10 Year 5% 6% +1% L&G Sterling Corporate Bond Index 15% 8% -7% ishares Overseas Corporate Bond Index 0% 6% +6% Fund added L&G UK Property 10% 10% 0% L&G UK 100 Index 10% 10% 0% HSBC FTSE All Share Index 10% 9% -1% Vanguard FTSE Developed Europe ex UK Equity Index 4% 4% 0% Vanguard US Equity Index 10% 10% 0% ishares Japan Equity Tracker 4% 4% 0% SSGA Asia Pacific Tracker 5% 5% 0% Portfolio 5 Cash 2% 2% 0% ishares UK Gilts All Stocks Tracker 5% 5% 0% ishares Corporate Bond Index 8% 10% +2% L&G Sterling Corporate Bond Index 15% 11% -4% L&G UK Property 8% 9% +1% ishares Overseas Corporate Bond Index 0% 4% +4% Fund added L&G UK 100 Index 10% 9% -1% HSBC FTSE 250 Index 10% 9% -1% HSBC FTSE All Share Index 10% 9% -1% Vanguard FTSE Developed Europe ex UK Equity Index 5% 4% -1% Vanguard US Equity Index 12% 12% 0% ishares Japan Equity Tracker 5% 6% +1% SSGA Asia Pacific Tracker 5% 6% +1% ishares Emerging Markets Equity Index 5% 4% -1% 7

9 Portfolio 6 Cash 2% 2% 0% ishares Corporate Bond Index 5% 5% 0% L&G Sterling Corporate Bond Index 14% 11% -3% ishares Overseas Corporate Bond Index 0% 4% +4% Fund added L&G UK Property 5% 6% +1% L&G UK 100 Index 9% 12% +3% HSBC FTSE 250 Index 15% 11% -4% HSBC FTSE All Share Index 10% 9% -1% Vanguard FTSE Developed Europe ex UK Equity Index 5% 5% 0% Vanguard US Equity Index 10% 12% +2% ishares Japan Equity Tracker 5% 7% +2% SSGA Asia Pacific Tracker 10% 11% +1% ishares Emerging Markets Equity Index 10% 5% -5% Portfolio 7 Cash 2% 2% 0% BlackRock Corporate Bond 1 to 10 Year 3% 3% 0% ishares Overseas Corporate Bond Index 0% 5% +5% Fund added L&G UK Property 5% 5% 0% L&G UK 100 Index 6% 5% -1% HSBC FTSE 250 Index 15% 15% 0% HSBC FTSE All Share Index 18% 16% -2% Vanguard FTSE Developed Europe ex UK Equity Index 5% 5% 0% Vanguard US Equity Index 9% 10% +1% ishares Japan Equity Tracker 5% 8% +3% SSGA Asia Pacific Tracker 16% 16% 0% ishares Emerging Markets Equity Index 16% 10% -6% Ethical Cautious Cash 9% 13% +4% F&C Responsible Global Equity 15% 12% -3% F&C Responsible Sterling Bond 15% 13% -2% Kames Ethical Corporate Bond 17% 17% 0% L&G All Stocks Index Linked Gilt Index 15% 15% 0% L&G Ethical Trust 5% 6% +1% Liontrust Sustainable Future UK Growth 10% 10% 0% Royal London Ethical Bond 14% 14% 0% Ethical Balanced Cash 5% 3% -2% Aberdeen Ethical World Equity 13.5% 6% -8% EdenTree Amity International 10% 12% +2% F&C Responsible Global Equity 10% 0% -10% Fund removed F&C Responsible Sterling Bond 0% 12% +12% Fund added F&C Responsible UK Equity Growth 9% 9% 0% Kames Ethical Corporate Bond 8% 4% -4% L&G All Stocks Index Linked Gilt Index 5% 5% 0% L&G Ethical Trust 10% 10% 0% Liontrust Sustainable Future Absolute Growth 7.5% 12% +5% Liontrust Sustainable Future UK Growth 9% 9% 0% Royal London Ethical Bond 13% 13% 0% Stewart Investors Asia Pacific Sustainability 0% 5% +5% Fund added 8

10 Ethical Adventurous Cash 2% 2% 0% Aberdeen Ethical World Equity 8% 8% 0% EdenTree Amity International 8% 10% +2% F&C Responsible Global Equity 9% 6% -3% F&C Responsible Sterling Bond 0% 3% +3% Fund added F&C Responsible UK Equity Growth 13% 13% 0% Kames Ethical Corporate Bond 5% 5% 0% L&G Ethical Trust 10% 10% 0% Liontrust Sustainable Future Absolute Growth 7% 6% -1% Liontrust Sustainable Future UK Growth 14% 13% -1% Stewart Investors Asia Pacific Sustainability 12% 15% +3% Stewart Investors Global Emerging Markets Sustainability 12% 9% -3% 9

11 Appendix Important information This report provides detail on the recent review of our Investment Strategies and discusses our thoughts about their progress and details any changes recommended. Should your situation have changed since our last meeting, please do contact us for advice before acting on the content of this report. Should you require any additional information about your specific investments, please do not hesitate to contact us. For the purposes of this report, the gross returns quoted throughout are those declared by the current fund managers (with any income reinvested), they exclude the negotiated rebates and underlying charges applied by the nominee company that holds the assets and advice charges. The actual returns achieved by the investments will vary from client to client depending on the type of investment and fund size but are likely to be within 1.25% per annum of the figures quoted. The returns quoted are those of the current portfolio holdings and do not reflect past changes in the composition of the Portfolios. They also do not reflect any adjustments made to individual Client portfolios over this time, such as rebalancing, withdrawals or additional contributions. Please note that whilst this recommendation has been made to ensure that the portfolios are maintained in such a manner to suit the current economic conditions, there is no guarantee that the returns from these investments will outperform any other. Whilst most investments are readily saleable should you need access to capital at any time, some assets may suffer short term liquidity problems which may at times restrict access to all of your money. This may be particularly relevant to property funds which, whilst they maintain sufficient liquidity to cover most demands, they may have to sell assets to meet particularly high redemption requests. Due to the time it takes to sell commercial property, such funds may impose redemption restrictions which may delay access to some of your monies for some months. The value of investments can go down as well as up; past performance is not necessarily a guide to future performance and may not necessarily be repeated. 10

12 Economic update Our economic comment this quarter comes from Vanguard UK economic performance was sluggish in the third quarter, with the construction sector particularly weak. Since the Brexit vote, sterling has remained weak, leading to a sharp increase in import prices and inflation. Given the rise in inflation, at the most recent Monetary Policy Committee meeting, the Bank of England offered its strongest indication in a decade that it is poised to raise interest rates. Current market expectations suggest that there may be one interest rate hike at the end of The euro area performed strongly in the third quarter, with further improvements in business and consumer confidence. The strong performance of the economy is broad based, with the four major economies, Germany, France, Italy and Spain, all growing at an above trend pace. In Germany, national elections saw Angela Merkel elected as Chancellor for the fourth consecutive term. Merkel received a smaller share of the vote than at the previous election, and will now work to form a coalition government with other parties. In the US, the economy experienced a slightly softer third quarter with the temporary blowback from the two recent hurricanes. Interest rates remained between 1% and 1.25%, however the Federal Reserve announced that it would start to unwind the stimulus, or quantitative easing, that was implemented in the early years after the 2008 financial crisis. In Japan and China, economic performance has been robust in recent months. There have, however, been tensions in Asia regarding North Korea s nuclear weapons testing over Japanese territory. In response to these tensions, and a bounce in opinion polls, Japanese Prime Minister Shinzo Abe called a snap election which is likely to take place before year-end. Vanguard Quarterly Newsletter October