SMARTFUND AGGRESSIVE GROWTH

Transcription

1 SMARTFUND AGGRESSIVE GROWTH Short report Period 04 November 2014 to 03 May 2015

2 Smartfund Aggressive Growth Short report Period 04 November 2014 to 03 May 2015 Investment objective Asset allocation as at * To provide a long term capital growth by investing in growth assets. Investment policy The Fund will seek to achieve its investment objective through investing in a diversified portfolio of collective investment schemes and other permitted investments that have a similarly diversified character such as investment companies and exchange traded funds (ETFs). The portfolio will be invested in collective investment schemes investing in growth assets (such as shares) to provide the potential for capital growth. Performance review As the fund has less than one year s performance, there is insufficient data to provide a useful indication of the past performance. Absolute Return/Hedge 6.18% UK Equity 17.29% US Equity 19.37% European Equity 15.68% Japan Equity 11.46% Asia ex Japan Equity 19.99% Emerging Market Equity 10.04% *Calculated as a percentage of total value of investments Risk and Reward Profile Lower Risk Typically lower rewards Higher Risk Typically higher rewards The risk category above indicates how much the price of the fund is expected to go up and down. It was calculated using indicative performance data and does not necessarily provide a good indicator of future risk. Even funds in the lowest risk category are not risk-free. This fund is in category 6 because medium to high levels of volatility are anticipated over a five year period. The risk category is based on simulated historical data and may not be a reliable indication of the future risk profile of the fund The risk category of the fund is not fixed and may well change over time. Other key risks to understand for this fund are: The value of your investment and any income is not guaranteed and can go down as well as up depending on investment performance. Accordingly, you may not get back the full amount you invest in the fund. The value of funds, equities and bonds may be adversely affected by political, economic or company news as well as changes in company earnings and interest rates. This fund typically invests in collective investment schemes. There are risks associated with investing in investment fund vehicles including that the relevant fund could be terminated, fees and charges could change or the manager or depositary could be replaced. This fund can use derivatives for efficient portfolio management. Derivative transactions may involve the risk (including credit risk) that a counterparty will be unable to honour its financial obligation to the fund.

3 Market and Fund Review (provided by Smart Investment Management, a trading company of Smartfund Administration Limited) Overview This period has been characterised by strong performance across most risk assets as the European Central Bank (ECB) finally announced a massive programme of quantitative easing, promising to buy 60bn of European sovereign bonds and high quality corporate debt starting in March and lasting until at least September But the period wasn t without its drama early on. Most markets made steady gains in the month of November but this was punctuated by sharp falls mid-way through the month of December. The oil price continued its precipitous fall, crashing past the $60 a barrel mark. China released weak industrial production data and the ruling Greek coalition government admitted they were still short of the support needed to stop the government collapsing in a December parliamentary vote. This increased the possibility of an anti-austerity extreme left wing party coming to power. In just over a week the MSCI AC World lost 6%, whilst Emerging Markets lost over 10% buffeted by the falling oil price and the continued strength in US dollars. Sovereign bond markets rose in value, but for most investors, ourselves included, this offered little comfort as with yields at such low historic levels, most investors are very underweight. The sharp increase in volatility subsided as the ECB announced that the take up of its second round of the Targeted Longer-Term Refinancing Operation (TLTRO) had once again disappointed, with only half of the available funding taken up. Whilst the failure of a mechanism designed to inject capital into the banking system (thereby stimulating lending and growth) would not be an obvious sign for optimism, the market took it as even more evidence that the ECB would have to enact full-blown QE, a step seen as necessary to kick-start the European economy. And finally, on the 22nd January 2015 the president of the ECB announced a 60bn-a-month bond buying programme, far bigger than investors had expected, in a bid to revitalise the Eurozone economy and counter deflation. The euro not unexpectedly weakened versus all other major currencies, whilst the dollar continued to strengthen. Fixed income assets appreciated in value, with yields on shorter dated German bunds turning negative for over 6 years of duration at their peak in early March. Equity markets all moved upwards in unison. The Greek ruling coalition government called a snap general election on the 29th December, and by 26th January, Syriza formed a coalition government with the promise of bringing austerity to an end. A promise which to many looked unachievable. In April, data out of the US suggested that growth in the first quarter for yet another year would be much weaker than consensus. At the end of the month preliminary GDP numbers came in at +0.2% quarter on quarter annualised versus a market expectation of +1%. It was put down to a number of factors, another very cold winter, a West Coast port strike, the strong dollar. Whatever the reason, yet again the US economy appears to be struggling to escape the low levels of growth witnessed post the 2008/09 financial crisis. With markets expecting a US interest rate rise, the date for the first rise started to get pushed back from June to September, with some pencilling in 2016 for the first rise. For the moment, the US dollar rally ran out of steam. In Europe, encouraging bank lending data, retail figures and unemployment led to yields to start to rise, with the 10 year German bund yield having bottomed at 0.08%, jumped up to 0.36% by the end of the period. North Sea oil, having fallen to $46 a barrel at the end of January, finished at $64, but the debate between the price being a supply or a demand issue raged on. Aggressive Growth Performance over the period was positive with the fund returning +10.5%. Most holdings appreciated in value over the period, but equities were the strongest driver of returns with the MSCI AC World rising by over 12% in sterling terms. UK equities were the largest contributors to performance with all our holdings performing well, but of particular note CF Lindsell Train UK Equity increased +15.4%. Towards the end of the period we reorganised our UK holdings selling out of Ardevora UK Equity and Schroder UK Alpha Plus, replacing them with Neptune UK Mid Cap and TB EEA UK Equity. In our European exposure we held share classes hedged into pound sterling or US dollars to mitigate the impact of the weakening euro. All of our European holdings returned in excess of 14%. Japanese equities was the strongest performing major equity market over the period, of which the fund benefitted from a small holding in GLG Japan CoreAlpha Equity. We switched out of the pound sterling hedged share class towards the end of the period as the Yen has weakened substantially since quantitative easing was introduced in Japan and it is not clear that any further easing will happen for a while. We continue to hold the Pictet Japanese Opportunities fund in a dollar hedged share class. Within US equities, we sold out of Harris Concentrated US equities in favour of Old Mutual North American Equity favouring the latter fund as it less of a value style bias. Asian equities performed very well as investors speculated that the poor growth figures emanating from China might lead to further monetary and fiscal easing. Both Liontrust Asia Income and the fund we switched into towards the end, Hermes Asia ex Japan comfortably outperformed the MSCI AC Asia Pacific ex Japan which returned +13.5%. Whilst Schroder ISF Asian Total Return, a more conservatively managed fund with one eye to the downside still returned a very credible +8.5%.

4 Our absolute return holding, Old Mutual Global Equity Absolute Return was broadly flat over the period returning +0.3%, but this was not a concern whilst the long only equity holdings in the portfolio were performing strongly. Outlook Europe is showing signs of early recovery but investors will want to see evidence that it is more than simply the impact of a weaker euro. However, for the moment the sheer scale of the ECB s QE programme will act as a strong support to European markets in general, whether fixed income or equity. The probability of a Grexit has increased over the past quarter, but in truth, the impact of Greece leaving the Euro today would be considerably lower than during the European crisis in 2011 as European banks and insurance companies have significantly lower exposure. However, there is little doubt there would be unintended consequences. Although the US economy slowed in the first quarter, this has happened in each of the last six years, caused by a series of harsh winters, and this provides comfort that data for the second quarter will improve. However, this is something that markets are watching closely and has direct implications for the likely first interest rate rise in the US. The US has been, and remains, the main engine for global growth and investors want to see growth rates in areas such as Japan and Europe rise up to the level of the US rather than collapse in one region as they accelerate elsewhere. The weak oil price remains a positive factor for net energy importing countries and the consumer, and whilst it is hard to judge where the oil price will settle as supply and demand dynamics fluctuate, we think it is unlikely that it will return to $100 anytime soon. If that is the case then it will remain a positive boost to the global economy. We remain in a global economy with sub-normal growth, dragged down by the sheer indebtedness of developed countries. This is an environment in which inflation is likely to remain relatively subdued and therefore interest rates relatively low, which remains a positive environment for risk assets, particularly equities. Returns over the rest of the year are likely to be more muted, as investment views are much more consensual today and trades crowded. In addition, many of the risks that we have seen of late have not gone away, including the possibility of a Grexit, increased tension in the Ukraine or the Chinese authorities losing control of their economy; therefore, a degree of caution is warranted. Top 10 holdings as at Holdings %* Old Mutual North American Equity Schroder International Selection - Asian Total Return Hermes Asia Ex Japan Equity 8.10 BGF European Equity Income A5G USD Hedged 7.78 Pictet-Japanese Equity Opportunities-HI USD 6.89 Old Mutual Global Equity Absolute Return 6.30 Nordea 1 - Emerging Stars Equity BC GBP 6.23 HSBC American Index 5.86 Schroder European Alpha Income 5.09 GLG Japan CoreAlpha Equity 4.79 *Calculated as a percentage of Net Asset Value Top 10 holdings as at Holdings %* Harris Associated Concentrated US Equity HSBC American Index 9.47 GLG Undervalued Assets Professional 8.17 Schroder ISF Asian Total Return 7.68 BCIF Emerging Markets Equity Tracker 7.41 Schroder UK Alpha Plus 6.88 Artemis European Opportunities 5.42 Old Mutual Global Equity Absolute Return 5.31 Liontrust Asia Income 4.99 Somerset Global Emerging Markets 4.93 *Calculated as a percentage of Net Asset Value

5 Price & Income History You should be aware that prices for Smartfund AC shares operate differently to other classes which operate in a conventional manner. The figures given below for the AC share are based on a representative share. On 14 July 2014 each unit in Smartfund Advantage was converted into one AC share in Smartfund Advantage ICVC. The AC share used as a representative share is that which arose on the conversion of the representative unit in Smartfund Advantage. Unlike other share classes, AC shares in the Smartfund Advantage are created and priced uniquely for each share holder. For further information on how AC share prices are calculated, you should refer to our Smartfund Advantage Prospectus. If you have already invested in the Smartfund you should login to check your own current and historic prices. Unit Prices to AC Class ( ) Z Class ( ) iguard ( ) Highest Price 6, Lowest Price 5, Net Asset Value AC Class ( ) Z Class ( ) iguard ( ) , Distribution Statement AC Class ( ) Z Class ( ) iguard ( ) Net Income The sub-funds accrue distributions on a daily basis and pay any income available to the unitholder on a monthly basis, up to three and a half months in arrears. All distributions are paid net of income tax. Ongoing Charges AC Inc 1.67% Z Inc 1.51% iguard Inc 2.70% * The ongoing charge reflects the annual operating expenses of the Smartfund to the average daily net asset value of each sub-fund. They include the costs incurred by the underlying funds held during the period. For investors in the AC class, this does not include any Adviser Charging which is specific to each individual unitholder. Adviser Charging: the amount of remuneration that the Investor agrees with their Adviser that the Manager will pay the Adviser for services provided. Sub-fund details Authorised Corporate Director (ACD) Investment Adviser Trustee/Depositary Auditor Smartfund Administration Ltd 6 Broad Street Place London, EC2M 7JH Smartfund Administration Ltd 6 Broad Street Place London, EC2M 7JH HSBC 8 Canada Square Canary Wharf London, E14 5HQ BDO LLP 55 Baker Street London, W1U 7EU Investment Adviser Start Date 14 July 2014 Fund Launch Date 14 July 2014 Fund Accounting Date Fund Currency Fund Sector Fund Type Distribution Policy 03 November GBP Unclassified Open Ended Investment Company Paid Monthly Other information The information included in this document is designed to enable Investors to make an informed judgement on the activities of the fund during the stated period and the results of those activities at the end of the period. More information regarding these activities and performance of this fund over this period can be obtained from the Manager. The Long Report is available on request from the Manager.

6 Smartfund Administration Limited 6 Broad Street Place, London, EC2M 7JH Tel: Fax: Authorised and regulated by the Financial Conduct Authority whose address is 25 The North Colonnade, Canary Wharf, London E14 5HS.