T. Bailey Dynamic Fund. Interim Short Report For the six month period ended 30 September 2016

Transcription

1 T. Bailey Dynamic Fund Interim Short Report For the six month period ended 30 September 2016

2 INVESTMENT OBJECTIVE & POLICY The benchmark of the Fund is UK Inflation plus 3%. The Fund aims to outperform UK Inflation plus 3% on a total return basis over the medium-to-long term. Asset Allocation The Fund invests predominantly in other regulated collective investment schemes. In other words it is a fund of funds. The Fund may have both UK and non-uk investments and, in addition to units in collective investment schemes, may also invest in transferable securities (shares, including investment trusts, debentures, government and public securities, warrants or certificates representing certain securities), money market instruments, cash and near cash and deposits as permitted by the Sourcebook in order to achieve its objective. Fund Selection The Fund will use a range of different active and passive managers in order to provide a diversity of style and to protect against possible periods of poor performance by any one Investment Manager or product. Derivatives The Investment Manager may use the powers given by the Sourcebook to enter into derivative transactions for hedging or efficient portfolio management purposes. FUND FACTS Launch date: 2 May 2006 Ex-distribution dates: 1 July, 1 October, 1 January, 1 April Distribution payment dates: 31 August, 30 November, 28/29 February, 31 May Synthetic Risk and Reward Indicator Ranking¹: 4 Ongoing Charges Figures 2 : Institutional units 1.41% p.a. Retail units 2.31% p.a. ¹ As calculated in accordance with ESMA guidelines. It is based on historical data and uses a scale of 1 to 7. The higher the rank the greater the potential reward but the greater the risk of losing money. 2 To 30 September As calculated in accordance with ESMA guidelines. The Ongoing Charge Figure ( OCF ) includes annual management charges ( AMCs ) and other operating expenses (Trustee s fee, audit fee etc). As the Fund invests in other funds, the weighted average costs of the underlying funds have also been taken into account. 2

3 INVESTMENT REVIEW Performance Cumulative returns for the periods ended 30 September 2016 (%) 3 months 6 months 1 year 2 years 3 years 5 years TBDYF - Institutional units TBDYF - Retail units IA Mixed Investment 20%-60% Shares Sector Mean CPI +3% Discrete returns for the 12 month period ended 30 September (%) TBDYF - Institutional units TBDYF - Retail units IA Mixed Investment 20%-60% Shares Sector Mean CPI +3% ¹ Performance based on Income units. Source: Financial Express. Total return, bid to bid. Sterling terms. Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. Equity markets across the globe have delivered high single-digit to low double-digit returns over the six month period when measured in Sterling terms. Much of this is owed to the weakness of Sterling following the UK s Brexit referendum decision. Relative to the US Dollar, for example, the fall in Sterling has been 11% over the period and has reduced yet further since then up to the date of this report. The T. Bailey Dynamic Fund, in part, invests in global, non-uk assets to provide alternative sources of growth and income and also diversification opportunities to assist in managing the volatility of the fund. This proportion of its assets provided the benefit of a natural hedge against the sharp fall in Sterling during the period. 3

4 Another feature of recent months has been a resurgence in the performance of Asian and Emerging Market equities relative to those of more developed markets of the US and Europe. Concern around the fragility of Chinese growth has dissipated somewhat since the start of the year and the T. Bailey Dynamic Fund has benefited from retaining exposure to these areas. Asset Class Index/Sector 6 months ended 30 September 2016 (%) 12 months ended 30 September 2016 (%) UK Equities IA UK All Companies Global Equities IA Global Emerging Equities IA Global Emerging Markets Corporate Bonds IA Sterling Corporate Bond Index Linked Gilts IA UK Index-Linked Gilts Gilts IA Gilts Property IA Property Gold S&P GSCI Gold Total Return Source: Financial Express. Total return, Sterling terms. Bid to bid. For somewhat different reasons, outsized returns have also been evident in debt markets where sovereign fixed income has provided double-digit returns as yields have moved lower and in index-linked markets where real yields have moved ever more negative. As a result, mainstream government bonds and those of high grade corporates are priced more like commodities, reflecting short-term sentiment around future growth and economic stability. The result has been a clear rise in volatility that we are mindful to avoid. Thus during the period we reduced exposure to debt funds, increased the cash weighting and replaced a couple of the absolute return fund holdings in the portfolio through introducing positions in F&C Global Equity Market Neutral and Jupiter Absolute Return funds. We have also made greater use of alternative assets as a source of income (Custodian REIT) and for managing portfolio volatility and risk (ETFS Gold Bullion Securities). Our selection of active managers used to populate the T. Bailey Dynamic Funds portfolio along with biases towards our favoured long-term growth themes, particularly around healthcare and infrastructure sectors, have also proved helpful in limiting the volatility of the fund through the more turbulent times for equity markets during the period. 4

5 Following a sharp fall in Sterling during the period, and aware of the risk any reversal would pose to delivering the fund s objective of UK inflation plus 3% per annum, we reduced the non-sterling exposure of the portfolio through forward currency contracts. This has efficiently mitigated a meaningful proportion of the portfolio (c.10%) exposed to non-sterling currencies whilst allowing us to retain the growth and diversification opportunities of the underlying investments. The asset allocations at the period end are shown below: Sector Asset allocation as at 30 September 2016 (%) Asset allocation as at 31 March 2016 (%) UK Equities Global Equities (ex UK) Emerging Markets Absolute Return Fixed Income/Debt Alternatives Forward Currency Contracts (0.1) - Cash and Other Total Outlook We live in a time where many asset prices are politically controlled, or heavily influenced at least, through the manipulation of the price of money and wider regulations that affect the decisions of market participants, i.e. financial repression. The purpose of such policies may well be for the good intentions of fostering growth and supporting economic stability. However, whether or not they will prove successful remains to be seen. Indeed, there are growing side effects of relying on such policies for the extended period of time we ve now seen them in action. The very fabric of financial markets from banking through to insurance and pension provision are struggling to provide the outcomes expected by customers of these products and services. Furthermore, without the rationing of financial resources through a real price of money it is little wonder productivity growth is lacking. These issues are now being recognised politically through the rise of more populist movements and talk of a greater role to be played for fiscal over monetary policy. 5

6 In a low rate, low growth environment, many investors have resolved to cut costs and in doing so, without discernment, have allocated to markets as a whole through passive investment products. Yet without a real cost of capital against which rational decisions can be taken, investors need to tread ever more carefully and replace the market mechanisms of rationing investment opportunities with their own judgement. Our investment approach recognises this by taking a more focused, thematic investment style that emphasises the longer-term trends that we consider will provide solutions to the longer-term needs of mankind as populations become older, wealthier, and less rural. We have every faith these longer-term trends will transcend shorter-term market sentiment and political cycles. Further, by partnering with like-minded investment professionals who are unconstrained to provide sound judgement in their investment choices we are confident of providing better outcomes for investors in the fund. Elliot Farley Fund Manager T. Bailey Asset Management Limited 18 November 2016 Peter Askew Fund Manager T. Bailey Asset Management Limited 18 November

7 TOP TEN HOLDINGS Top Ten Holdings as at 30 September 2016 (%) Top Ten Holdings as at 31 March 2016 (%) Gold Bullion Securities 7.8 Gold Bullion Securities 4.8 Polar Capital Healthcare Opportunities 4.4 Jupiter European 4.7 MI Somerset Emerging Markets Dividend Growth 4.3 Standard Life Global Focused Strategies 4.3 Pictet Security 4.3 Polar Capital Global Insurance 4.2 Man GLG Undervalued Assets 4.3 Old Mutual Global Equity Absolute Return 4.1 First State Global Listed Infrastructure 4.2 City Financial Absolute Equity 4.1 Polar Capital Global Insurance 3.9 New Capital Wealthy Nations Bond 4.0 New Capital Wealthy Nations Bond 3.9 Prusik Asian Equity Income 4.0 Prusik Asian Equity Income 3.9 CF Miton UK Value Opportunities 4.0 Aviva Investors Multi-Strategy Target Income 3.8 Polar Capital Healthcare Opportunities 3.9 7

8 PERFORMANCE Institutional Income Units 1 Apr 2016 to 30 Sept Apr 2015 to 31 Mar Apr 2014 to 31 Mar Apr 2013 to 31 Mar 2014 Change in net assets per unit Opening net asset value per unit Return before operating charges* 4.29 (0.18) Operating charges (0.20) (0.42) (0.40) (0.45) Return after operating charges* 4.09 (0.60) Distributions on income units (0.45) (0.98) (1.13) (0.92) Closing net asset value per unit *after direct transaction costs of: Performance Return after charges 7.60% (1.08)% 10.54% 4.94% Other Information Closing net asset value 22,359,015 20,836,519 21,032,341 19,374,252 Closing number of units 38,922,524 38,727,334 37,981,411 37,900,441 Operating charges (p.a.) 1.41% 1.48% 1.52% 1.49% Direct transaction costs (p.a.) 0.01% 0.01% 0.01% 0.01% Prices Highest published unit price Lowest published unit price Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. 8

9 Institutional Accumulation Units 1 Apr 2016 to 30 Sept Apr 2015 to 31 Mar Apr 2014 to 31 Mar Apr 2013 to 31 Mar 2014 Change in net assets per unit Opening net asset value per unit Return before operating charges* 5.40 (0.20) Operating charges (0.26) (0.52) (0.49) (0.54) Return after operating charges* 5.14 (0.72) Closing net asset value per unit Retained distributions on accumulation units *after direct transaction costs of: Performance Return after charges 7.63% (1.06)% 10.67% 5.00% Other Information Closing net asset value 32,344,351 22,102,249 1,635,341 1,291,316 Closing number of units 44,633,225 32,826,738 2,403,231 2,100,174 Operating charges (p.a.) 1.41% 1.48% 1.52% 1.49% Direct transaction costs (p.a.) 0.01% 0.01% 0.01% 0.01% Prices Highest published unit price Lowest published unit price Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. 9

10 Retail Income Units 1 Apr 2016 to 30 Sept Apr 2015 to 31 Mar Apr 2014 to 31 Mar Apr 2013 to 31 Mar 2014 Change in net assets per unit Opening net asset value per unit Return before operating charges* 3.96 (0.16) Operating charges (0.42) (0.85) (0.82) (0.79) Return after operating charges* 3.54 (1.01) Distributions on income units (0.42) (0.96) (1.07) (0.88) Closing net asset value per unit *after direct transaction costs of: Performance Return after charges 7.12% (1.96)% 9.56% 4.12% Other Information Closing net asset value 397, ,330 1,297,009 1,560,023 Closing number of units 751, ,953 2,510,806 3,241,458 Operating charges (p.a.) 2.31% 2.38% 2.42% 2.39% Direct transaction costs (p.a.) 0.01% 0.01% 0.01% 0.01% Prices Highest published unit price Lowest published unit price Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. 10

11 Retail Accumulation Units 1 Apr 2016 to 30 Sept Apr 2015 to 31 Mar Apr 2014 to 31 Mar Apr 2013 to 31 Mar 2014 Change in net assets per unit Opening net asset value per unit Return before operating charges* 4.99 (0.19) Operating charges (0.53) (1.06) (1.00) (0.95) Return after operating charges* 4.46 (1.25) Closing net asset value per unit Retained distributions on accumulation units *after direct transaction costs of: Performance Return after charges 7.14% (1.96)% 9.68% 4.20% Other Information Closing net asset value 2,365,289 2,155,192 3,053,411 3,489,514 Closing number of units 3,535,499 3,451,461 4,794,497 6,009,425 Operating charges (p.a.) 2.31% 2.38% 2.42% 2.39% Direct transaction costs (p.a.) 0.01% 0.01% 0.01% 0.01% Prices Highest published unit price Lowest published unit price Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. 11

12 Dividend Distributions for the Six Month Period Ended 30 September 2016 Quarter Ended Unit Class 30 June September 2016 Institutional Income Retail Income Institutional Accumulation Retail Accumulation Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. 12

13 RISK PROFILE The value of investments may go down as well as up in response to general market conditions and the performance of the assets held. Investors may not get back the money which they invested. There is no guarantee that the Fund will meet its stated objectives. The Fund invests in global shares and other asset classes (largely via collective investment schemes), with some of these being regarded as more risky. The movements of exchange rates may lead to further changes in the value of investments and the income from them. There is a risk that any company providing services such as safe keeping of assets or acting as counterparty to derivatives may become insolvent, which may cause losses to the Fund. 13

14 OTHER INFORMATION Authorised Fund Manager T. Bailey Fund Services Limited 64 St. James s Street Nottingham NG1 6FJ Tel: Fax: Dealing line: Website: t-bailey-funds Authorised and regulated by the Financial Conduct Authority. Investment Manager T. Bailey Asset Management Limited 64 St. James s Street Nottingham NG1 6FJ Tel: Website: Trustee National Westminster Bank Plc Trustee & Depositary Services 135 Bishopsgate London EC2M 3UR Authorised and regulated by the Financial Conduct Authority and by the Prudential Regulation Authority. Auditors Deloitte LLP 4 Brindleyplace Birmingham B1 2HZ Registered to carry out audit work by the Institute of Chartered Accountants in England and Wales. Authorised and regulated by the Financial Conduct Authority. Further information regarding the activities and performance of the Fund for this period and previous periods is available on request from the Authorised Fund Manager as are copies of the Annual and Interim Report and Financial Statements. 14

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16 Issued by T. Bailey Fund Services Limited ( TBFS ). TBFS is a Regulated Collective Investment Scheme Manager and is authorised and regulated by the Financial Conduct Authority. Registered in England No: