MERCANTILE CIRCLE OPPORTUNITIES PORTFOLIOS STRATEGY UPDATE Q mercantile circle

Transcription

1 MERCANTILE CIRCLE OPPORTUNITIES PORTFOLIOS STRATEGY UPDATE Q mercantile circle

2 2 3 ABOUT US I N T E L L I G E N T I N V E S T I N G T H E E A S Y W A Y Mercantile International Limited is an Introducer Appointed Representative of Agincourt Financial Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority (FCA). Mercantile Circle is a trading name of Mercantile International Limited. We pride ourselves on providing an unrivalled professional, transparent and cost-effective service to all of our clients, and our expert team has over 30 years global experience within the investment market place bringing a wealth of expertise to the table. We provide a range of portfolios and investment strategies, often bespoke to particular client groups, which are matched to their individual financial objectives and attitude to risk. These include, but are not limited to performance, diversification, market volatility and risk. Whether investing in standard shares and fixed income bonds, foreign exchange, Exchange Traded Funds (ETFs), derivatives, or emerging opportunities in growth companies and ventures, our aim is to provide an investment strategy that is dynamically managed to outperform our peers and market benchmarks. The three portfolios currently available to our clients comprise a range of asset classes and investments. They have been developed to cater to varying risk profiles: Cautious - 3% target rate* Balanced - 5% target rate* Adventurous - 7% target rate* Portfolios are constantly monitored and rebalanced by our professional discretionary investment manager - Mercantile Invest, to ensure they remain in line with strategic asset allocations. As such the products, assets and weightings of those products within the portfolios may change from time to time. Mercantile Invest will provide regular updates. If you have any queries in relation to your portfolio please get in touch with our team using the details below: hello@mercantilecircle.com *All data is expressed as at 8 August 2017.

3 4 5 SUMMARY RATIONALE cash is the lowest risk asset available - all UK retail investors will have their cash denominated in Sterling meaning no currency risk. It provides liquidity inside the portfolios - although it generates no growth, available cash can be used for new opportunities identified in the market place. equities Equities are units of ownership interest in a corporation or financial asset that provide equal distribution in any profits, if any are declared, in the form of dividends. Equities may benefit shareholders through appreciation and dividends. UK eurozone UK equities provide a good basis for UK investors as it allows them to Eurozone equities allow investors to access to the largest economy in benefit from the performance of business in their country. Holding GBP the world, the EU, though allocations are limited to lower risk investors assets allows such investors to alleviate any transactional currency risk. as currency can affect the investment. Overall the Eurozone provides good opportunity with steady growth from a developed global The value of the global equities market accounts to around $69 trillion and represent a large percentage of all assets globally. A global equity index is a good opportunity for investors to benefit from general growth in the global economy while gaining diversity. US The US equity market continues to be the largest in the world with the majority of household names listed on the major exchanges. US equities make up more than 50% of global equities and therefore any well diversified portfolio will hold an allocation of US equities. emerging markets market. high yield Seeking high yielding equities is a strategy for identifying companies that have progressive and sustainable dividend policies and management committed to increasing returns to shareholders. This can be achieved through analysing ratios such as dividend cover. emerging equities renewable energy and emerging technologies Emerging equities allow for the potential opportunity to benefit from Sustainable investing and emerging technologies is identifying assets large growth since the underlying companies aren t as established - which will generate a competitive financial return. Renewable energy meaning growth can be very expansive. Emerging economies are more is the major pillar of sustainable investing and emerging technologies volatile than developed economies, therefore it is easier to identify comprise companies whose innovative products forge the way forward equities which are cheaper relative to cash flow, as a result of unsettled within the sector. The ever-growing renewables sector has a gap in the geopolitical environments and variable economic environments. With market where investors are stepping in to fund and expand renewable more volatility there is more risk - as such, emerging equities are and clean energy sources as a result of an increased demand globally. pursued with a risk/reward mentality with more adventurous clients Since both sectors are not as established as many others they pose a having higher allocations. higher risk that the more adventurous investor can benefit from. EXCHANGE TRADED FUNDS Bought and sold like shares, Exchange Traded Funds (ETFs) allow access to a large range of asset classes and indices e.g. the FTSE 100. fixed income UK corporate bonds UK government bonds Corporate bonds are a fixed income product that give a more UK government bonds are also a fixed income product, issued by predictable and stable return back to the investor without fluctuation. governments to support public spending. They are traded on highly We seek only investment grade corporate bonds that are screened liquid markets in GBP and are considered a risk-free product as the and tested to ensure the companies issuing them have the capacity to guarantor of the debt is the UK government, therefore they form a part repay them. We secure corporate bonds from Blue Chip and household of all of our portfolios. names. All bonds are sterling denominated and are traded on highly liquid markets making them suitable for a large range of investors. property Housing is a necessity for all people across the globe - somewhere to call home. Investment in property can range from investing in rental opportunities through real estate investment trusts and real estate operating companies, to investment in property developers generating returns from building and renovations in property, to appreciation on rising property prices. Property provides investors with collateral in physical assets therefore overall we believe it offers good diversity inside the portfolio. UK property high yield property There are several ways investors can benefit from the UK property High yield property is a strategy to secure property at a relatively market. There is a large opportunity in rental income with high house cheap price compared to the income that can be generated on it. prices in the country forcing a large amount of people to rent a Property experts seek cheap and undervalued properties that they property rather than purchase one. Commercial property has been believe can achieve a good return on investment relative to the price a good investment in the country for several years now with large being paid for it. metropolitan areas, mainly London, generating good yields. European property developed markets property European property allows the investors to have access to a different We identified developed property markets as a good allocation in our market where they can benefit from rental incomes and general portfolios because they generate returns through several sources. appreciation on property. With the EU being a developed economy, Constant demand for commercial and residential property keeps property is a much more stable investment and houses prices rise at house prices on the rise and property constantly yielding, allowing a steady rate as is generally the standard in developed countries. For the investor to benefit overall from both appreciation and income. a UK investor to European property comes with a currency This sector introduces the client to further currency and geographical risk as holdings and property will generally be valued, paid for, serviced, as a result it is more suitable for investors with a higher risk and redeemed in Euro or other European currencies. capacity.

4 6 7 CAUTIOUS PORTFOLIO: TARGET RATE 3%* ASSET SELECTED SECTOR WEIGHTING 15% Vanguard FTSE UK All Share Index Unit Trust UK Equity ishares UK Gilts 0-5yr UCITS ETF 15% ishares UK Gilts UCITS ETF 15% ishares MSCI World UCITS ETF Blue Chip Global Equity ishares UK Property UCITS ETF UK Property 12% ishares European Property Yield UCITS ETF European Property 5% P O R T F O L I O S ishares Core Corp Bond UCITS ETF Healthperm Resourcing Limited UK Fixed Income Small Cap UK Equity 8% O V E R V I E W *All data is expressed as of 3 November 2017.

5 8 9 americas 8.56% emerging markets % small cap pacific 5.57% european property UK fixed income cash europe (ex uk) 9.22% cautious geographic developed markets cash & derivatives 15.23% utilities 1.38% industrials & materials % IT & communications 3.63% cautious portfolio consumer goods & services % energy 3.49% uk property united kingdom % health care 10.08% cautious sector blue chip global equity government bonds treasury 29.97% CAUTIOUS weighting rationale real estate 17.35% financials 8.15% The rationale behind the Cautious Portfolio is to offer lower A small allocation has been given to a UK small cap equity risk capacity clients the opportunity to generate a steady in the healthcare sector which looks to offer potential for a return whilst limiting their to risk, but still offering good income growth mix through share price growth and a diversified selection of assets that will benefit them when markets perform well. The first step in limiting the client s to risk is through holding 75% of the portfolio in GBP denominated assets - reducing currency to UK investors. UK Government bonds and cash make up a large percentage of the portfolio as they are generally considered the lowest risk assets available. Diversity is offered throughout the portfolio in both geographical and industry sectors. Investors have the chance to benefit from performance of developed markets from investment in ETFs that track the major UK index as well as an index of the major equities globally, which tend to be less affected by econom- future dividends. The portfolio also contains access to investment grade Sterling denominated corporate bonds as well as identified higher yielding equities to provide an income to the investor. Property funds have been included to generate a steady income, whilst also offering collateral through physical assets and diversity through another industry and asset classes. Overall the cautious portfolio has been built in line with a strategy that is suited for those with a lower risk appetite and capacity, but would still like to benefit from potential opportunities in the market place. The Cautious Portfolio has been created to keep a large allocation of the portfolio inside the United Kingdom and in GBP, therefore assets have been sought that can generate a steady return inside those parameters whilst also keeping in mind the client s capacity and appetite for risk. Larger to cash and treasury bonds has been included to reduce risk in the portfolio and generate a stable low risk passive income. The remaining part of the portfolio has been very well diversified across several industries and geographic sectors with only a minimal allocation to emerging markets. The assets in the portfolio have been selected in a strategy that ensures the investors is only exposed to GBP, EUR - 5% USD - 20% cautious currency GBP - 75% ic factors and therefore outperform the market. Euro and US Dollar as the three major Western currencies

6 small cap cash UK fixed income european property balanced portfolio uk property government bonds BALANCED weighting rationale BALANCED PORTFOLIO: TARGET RATE 5%* ASSET SELECTED SECTOR WEIGHTING Vanguard FTSE UK All Share Index Unit Trust ishares UK Gilts 0-5yr UCITS ETF ishares UK Gilts UCITS ETF ishares MSCI World UCITS ETF ishares UK Property UCITS ETF ishares European Property Yield UCITS ETF ishares Core Corp Bond UCITS ETF Healthperm Resourcing Limited *All data is expressed as of 3 November UK Equity Blue Chip Global Equity UK Property European Property UK Fixed Income Small Cap UK Equity blue chip global equity 13% 15% 12% The rationale behind the Balanced Portfolio is to offer the average investor a well-diversified portfolio that will generate steady return and growth whilst keeping a medium risk appetite and capacity in mind. More than 50% of the portfolio is denominated in GBP to limit currency to the client and a third of the portfolio is held in UK Government bonds and cash since they are considered low risk assets. The balanced portfolio is more geographically diversified across a range of sectors than the cautious portfolio, giving investors a higher potential return on their investment. An ETF that tracks the performance of the FTSE All-Share Index is again included - it is considered to be the best performance measure of the London equity market. A higher to Blue Chip global equities has been included due to balanced investors having a slightly higher risk capacity. There is a higher allocation to Healthperm Resourcing Limited which has been identified as a UK small cap equity with potential for growth and steady return in future dividends by providing solutions to an overburdened healthcare sector. Property has been given a larger allocation in the balanced portfolio, with greater diversification. Property funds are included to provide collateral in the underlying assets. The balanced portfolio overall gives more to speculative markets but keeps in mind the investor s risk capacity by holding the majority in lower risk assets with high allocations in Sterling denominated funds - limiting currency to the investor. The Balanced Portfolio has been allocated to keep a large percentage of the portfolio inside the United Kingdom and in GBP. To reach the higher target rate on the portfolio more diversity has been sought outside the UK with less allocation in cash and treasury bonds than the cautious portfolio. Treasury bonds still make up 20% of the portfolio whilst cash and treasury bonds are allocated to a third - this ensures the portfolio maintains a low risk element whilst generating a passive income. More has been included to developed markets outside the UK and to emerging markets in order to meet the target rate on the portfolio. Industry sectors included are still well diversified across several sectors.

7 small cap cash emerging markets % pacific 8.19% americas 11.70% developed markets property adventurous portfolio government bonds europe (ex uk) 14.93% balanced geographic developed markets cash & derivatives 13.23vv% utilities 1.53% industrials & materials % IT & communications 4.58% uk property blue chip renewable equities small cap blue chip global equity consumer goods & services % energy 3.80% health care 14.69% balanced sector treasury 19.98% ADVENTUROUS PORTFOLIO: TARGET RATE 7%* ASSET SELECTED SECTOR WEIGHTING USD - 25% real estate 20.51% financials 9.06% Vanguard FTSE UK All Share Index Unit Trust ishares MSCI Uited Kingdom Small-Cap ETF UK Equity Small Cap Equity 12% ishares UK Gilts UCITS ETF balanced currency ishares MSCI World UCITS ETF ishares Global Clean Energy UCITS ETF ishares UK Property UCITS ETF Blue Chip Global Equity Blue Chip Renewables Equities UK Property EUR - ishares Developed Markets Property Yield Developed Markets Property 12% Healthperm Resourcing Limited Small Cap UK Equity 16% GBP - 65% *All data is expressed as of 3 November 2017.

8 emerging markets % americas 16.77% developed markets adventurous geographic cash & derivatives 12.36% utilities 5.95% industrials & materials % pacific 13.17% consumer goods & services % IT & communications 6.16% energy 2.32% europe (ex uk) 4.75% united kingdom 57.23% adventurous sector treasury 9.99% health care 18.63% financials 5.96% adventurous weighting rationale real estate 22.97% The Adventurous Portfolio offers investors with a greater risk appetite and capacity for risk with potential higher returns through a substantial weighting towards emerging markets and small cap equities. More than a fifth of the portfolio is held in cash and UK government bonds to allow for low risk assets inside the portfolio. To meet the demands of those investors with a higher risk/reward mentality, higher earning potential assets have been selected and replaced the major equity index linked assets, as such UK small cap equities have been sought. A relatively high to Healthperm Resourcing Limited as compared to the portfolio has been included as the small cap equity has potential to provide share price growth and steady dividend yields through the underlying company providing solutions to an overburdened healthcare sector. Higher to property is included in the adventurous portfolio with an increased allocation to potential high property yields in developed markets, this gives the investor more to property in other developed markets such as the US and Hong Kong. Increased to renewable energy equities and MSCI World index has been included, with less of a concern towards geographical and currency. The adventurous portfolio has been allocated from a basis that the investor benefits from growth in the UK as well as in the developed markets and globally through a diversified allocation of assets. To support the higher risk/reward appetite of the adventurous investor we have increased allocations into specific sectors that have been identified to generate a substantial upside to the investor. The Adventurous Portfolio has been allocated to achieve a higher target rate - as a result it has greater geographical and currency. There is a lower allocation to cash and treasury bonds but they continue to make up more than 20% of the portfolio combined. Real estate has the highest allocation in the portfolio meaning investors can benefit from both rental income and capital appreciation in the sector. Industry sectors are highly diversified with the UK still being the major geographic sector. All developed market and emerging market assets outside of the UK are held in US Dollars. The adventurous portfolio has a higher risk than the cautious and balanced portfolios. USD - 32% adventurous currency GBP - 68%

9 Mercantile CIRCLE 6th floor, becket house, 36 Old jewry, london, EC2R 8DD Mercantile International Limited is an Introducer Appointed Representative of Agincourt Financial Limited who is Authorised and Regulated in the United Kingdom by the Financial Conduct Authority (FCA) with Firm Reference Number.: Company Registration No.: in England & Wales Mercantile Circle is a trading name of Mercantile International Limited.