Fund Management Diary

Transcription

1 Fund Management Diary Meeting held on 19 th March 2019 Macroeconomic Update There have been reports that the summit aimed at finalising the agreement between the US and China is now expected to be moved to June amid reports of slower negotiations. China s President Xi has demanded an assurance that a future summit will be concluded with a deal, while President Trump wants to keep the option of walking away from the deal as he did during the earlier summit with Korean leader Kim Jong Un. There were three key votes held in the House of Commons last week. First, MPs voted on Theresa May s deal, which has been rejected for the second time, although by a smaller margin of 149 votes, down from 230 votes after the first vote held in January. At the second vote MPs voted for or against leaving the EU without a deal, which was voted against and suggests that MPs would like a deal to be concluded. A third vote was held about asking for a potential extension to Brexit negotiations beyond the end of March, where MPs have voted in favour of an extension. Shortly after the third vote, Donald Tusk proposed to provide the UK with a 2-year extension to rethink the Brexit deal, while Theresa May proposed holding another vote on her Brexit deal instead. The UK equity market and Sterling signal mixed sentiments. While UK equities performed strongly over the last two weeks, Sterling was relatively flat to slightly negative. Strategy Brexit remains a mess, but things are progressing in line with our expectations. Shortly after the Brexit referendum we have said that negotiations between the UK and Europe will go to the last hour and the outcome of these negotiations will be unclear until the very end. We remain positive on valuations of UK equities, but have decided to trim our allocations in lower risk portfolios following recent market rises. Our allocations in other areas remain intact and we continue to be sceptical of the economic growth in Europe and equity valuations in the US.

2 Fund Comments The below charts show the current positions of the funds, the tactical (short term) targets, and the strategic (long term) allocations of the funds. We aim to keep the current positions in line with the tactical targets from week to week. The differences between the tactical and strategic weightings reflect the views and convictions of the Margetts Investment Committee. Providence 6 5 the tactical targets set by the committee. Following the recent market rises, we have decided to reduce our exposure to the UK by 1% in favour of cash. Fund Selection: The Providence fund performed in line with the IA Mixed Investment 20-60% Shares sector over 1 week and outperformed by c.1.8 percentage points over 3 months. The fund continues to benefit from an overweight equity allocation and an overweight allocation to the UK in particular. Selection among equity funds remained strong, with all but 2 underlying funds outperforming their respective sectors. The Committee are pleased with the improvement in the relative performance of the L&G Asian Income fund, which outperformed the IA sector during the short-term dip in Asia and. The Committee had no significant concerns about any underlying UK holdings. The Threadneedle UK Equity Income fund lagged the sector over another week. The Committee looked at this fund in more details are agreed that while it lagged the sector more recently due to some stock specific issues, the strategy remain strong over the longer term. Franklin UK Equity Income and Royal London UK Equity Income were the two best performing funds over 1 week. No fund changes are being considered at this time.

3 Select % 35.0% 25.0% 15.0% 5.0% the tactical targets set by the committee. Following the recent market rises, we have decided to reduce our exposure to the UK by 1% in favour of cash. Fund Selection: The fund was 0.5 percentage points behind the IA Mixed Investment 40-85% Shares sector over 1 week, but outperformed by the same amount over 12 weeks. Performance of the underlying fund selection improved over the short-term as most underlying holdings outperformed their respective sectors. The Vanguard US Equity Index fund was the best performer over 1 week, however UK funds followed closely. The Committee discussed the performance of the Jupiter UK Special Situations fund in more detail. This fund has a tilt to defensive stocks and historically it performed in line with the sector during periods of market rises and outperformed during periods of market falls. The fund performed in line with expectations during market falls in the second half of 2018, but lagged the IA UK All Companies sector during the recent recovery. The Committee raised no significant concerns about this holding. The IP European Equity Income strategy will be re-visited in the following week. This fund has a significant tilt to value, which detracted from its performance in 2017 and contributed to it in The Committee will look at the underlying portfolio and determine whether the rationale for holding this fund remains in place. No fund changes are being considered at this time.

4 International 6 5 the tactical targets set by the committee. No changes are being made to the tactical targets or current allocations this week. Fund Selection: International was behind the IA sector over 1 week as well as over 3 months. Overall, the fund s performance during the year to date was more in line with the sector, as performance of the IA America sector was similar to other geographic regions over 3 months. The fund s underlying fund selection was mostly positive over one week, with only four underlying funds lagging their respective sectors. The fund selection showed more mixed results over 12 weeks as only half of underlying funds outperformed. The Vanguard FTSE UK All Share Index fund was the best performing holding over 1 week as the UK equity market reacted positively to recent votes in the House of Commons. Performance of the Threadneedle UK Growth and Income fund remained relatively weak. This fund has a significant overlap with the Threadneedle UK Equity Income fund and underperformed for the same reasons. Japan was the weakest equity market over 1 week. equities are highly exposed to global trade conditions and tend to underperform when global trade volumes are expected to slow. Our equal split between a hedged and unhedged position in Japan reduced the volatility of the overall exposure to Japan as performance results of the two holdings cancelled each other out over 12 weeks. No fund changes are being considered at this time.

5 Venture 35.0% 25.0% 15.0% 5.0% the tactical targets set by the committee. No changes are being made to the tactical targets or current allocations this week. Fund Selection: Venture was behind the IA Flexible Investment sector over one week and performed in line with the sector over 3 months. The strategy continues to be overweight to Asia and, which have underperformed Western developed markets over the period and detracted from the fund s relative returns. Our more defensive holdings in Asia and had positive absolute returns over 1 week, while the more aggressive underlying strategies underperformed. The Henderson Opportunities fund was the best performing holding among Asia and funds, with c.0.5% absolute returns over 1 week. The Committee are pleased with the improving performance of the Threadneedle Equity fund, which is now the best performing underlying strategy over 12 weeks. The active allocation to the UK had a positive effect on the portfolio s relative returns. The UK was one of the best performing regions over 12 weeks and the best performing region over 1, 2 and 4 weeks. The Committee discussed the recent merger of the and Asia investment teams at Invesco Perpetual. Following this merger and the recent weaker performance of the IP fund, the Committee discussed the potential for replacing this holding with another strategy. There was no final decision made at this meeting and it will be discussed in more detail at the meeting next week. No other fund changes are being considered at this time.

6 Important Information Please note that the contents are based on the author s opinion and are not intended as investment advice. This information is aimed at professional advisers and should not be relied upon by any other persons. Any research is for information only, does not constitute financial advice or necessarily reflect the views of the author and is subject to change. It remains the responsibility of the financial adviser to verify the accuracy of the information and assess whether the fund is suitable and appropriate for their customer. Past performance is not a reliable indicator of future performance. The value of investments and the income derived from them can fall as well as rise and investors may get back less than they invested. Important information about the funds can be found in the Supplementary Information Document and NURS-KII Document which are available on our website or on request. Issued by Margetts Fund Management Ltd Margetts Fund Management Limited is authorised and regulated by the Financial Conduct Authority For any information about the company or for a copy of the company's Terms of Business, please contact the company on or at 1 Sovereign Court, Graham Street, Birmingham B1 3JR You can us at admin@margetts.com