Greystone Wealth Management. Quarterly Report. September 2016

Transcription

1 Greystone Wealth Management Quarterly Report Third quarter 216

2 Third Quarter Review James Menzies Investment Director Fund Manager Greystone Investment Committee We are pleased to send you our quarterly report for the Greystone multi-asset funds. Portfolio performance and activity is discussed in our fund manager review, whilst global events are covered in the economic and market commentary. The Investment Committee rotate between asset classes and incorporate high levels of portfolio diversification to help generate consistent returns. James Jackson Investment Analyst Greystone Investment Committee Our strategic investment decisions help to reduce fluctuations in performance and protect the value of your investments. Please see below a snapshot of our funds performance for Q3 216 versus their respective Investment Association (IA) sector averages. Scott Osborne Investment Analyst Greystone Investment Committee Performance % Q3 Conservative Fund R Acc IA Mixed Investment -35% Shares NR Cautious Managed Fund R Acc IA Mixed Investment 2-6% Shares NR Balanced Fund R Acc IA Mixed Investment 4-85% Shares NR Global Growth Fund R Acc IA Global NR Source: Thomson Reuters Lipper for Investment Management. All performance in this report is based upon R share class accumulation units denominated in GBP. Investment Associations (IA) sector NR refers to Nominal Returns. All performance data is sourced from Thomson Reuters Lipper for Investment Management and compiled to unless stated otherwise. The Conservative Fund achieved a conservative allocation and assumed the name Conservative on The Cautious Managed Fund changed mandate on The Balanced Fund changed mandate on The Global Growth Fund launched on Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 1

3 Multi-asset Portfolios Fund Manager Commentary Conservative Fund Performance Summary The fund rose 3.92% over the third quarter versus the Investment Association (IA) Mixed Investment -35% Shares sector average 4.67% and the IA Money Market.7%. Since the fund s re-launch on 1 st September 212 it has delivered 2.23% versus the IA sector average 21.63% and IA Money Market 1.11%. The fund s share price as at 3 th was; p (R share class accumulation units). The fund continues to offer investors low risk access to investment markets and provides the opportunity to outperform inflation and cash rates over the course of an economic cycle. Performance % Sep/12 Sep/13 Sep/14 Sep/15 Sep/16 Calendar Year Performance % Fund Review & Outlook The fund s objective is to deliver long-term capital growth and outperform both the IA sector average and cash whilst maintaining; limited equity exposure and low levels of risk. A key theme for the Investment Committee is maximising returns whilst minimising risks. Holdings Cash 1% Fixed Interest 41% GAM Star Credit Opportunities ishares FTSE UK Gilts Rogge Short Duration Global Real Estate Bond Rubrics Global Credit UCITS Vanguard Global Bond Index USD Vanguard Global Short-Term Bond GBP Equity 28% CF Woodford Equity Income Evenlode Income Majedie UK Income Trojan Income Threadneedle UK Extended Alpha Henderson European Focus Old Mutual Hermes Asia ex Japan Alternatives 21% Old Mutual Global Equity Absolute Return Lazard Global Listed Infrastructure Aberdeen Property Trust Aviva Investors Property Trust Legal & General UK Property Standard Life UK Property Threadneedle UK Property Trust 216 YTD Conservative Fund R Acc IA Mixed Investment -35% Shares NR Source: Thomson Reuters Lipper for Investment Management. (Key applies to both charts). The fund performed well in absolute terms, but lagged the sector average in Q3. An underweight position in long dated sovereign debt, relative to our peers, was the key reason. Exposure to UK commercial property also detracted. Overseas bond and equity exposure delivered solid returns. All performance in this report is based upon R share class accumulation units denominated in GBP. All performance data is sourced from Thomson Reuters Lipper for Investment Management and compiled to All Investment Association (IA) sector performance is Nominal Return (NR). The Conservative Fund achieved a conservative allocation and assumed the name Conservative on Data for 212 shown for period to The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 2

4 Fund Manager Commentary Conservative Fund Fixed interest and equity markets rose sharply in Q3. Loose monetary policy from central bankers across the globe, was the key reason. An extension of the Bank of England s quantitative easing programme coupled with a reduction in interest rates, also helped to buoy investor sentiment and asset prices. Commercial property bounced back as overseas investors were drawn in by Sterling weakness and attractive income yields. The Pound was relatively stable in Q3 when compared to the dramatic rise of nearly 5%, in the days leading up to the referendum, and then the subsequent fall of over 1% after the vote. All our fixed interest managers delivered positive returns. Economically sensitive mining and subordinated bank bonds helped our specialist credit manager to be the standout performer in Q3. Insurance and utility debt powered returns for our investment grade corporate bond fund, whilst limited interest rate sensitivity meant our sovereign debt manager was the relative laggard this quarter, as yields fell and bond prices rallied. Within the UK equity component, all of our managers posted solid numbers. Financials and pharmaceuticals drove returns for our standout income specialist, whilst utilities and oil stocks dampened performance for the laggard. Despite this he still delivered 5%. Overseas equities rose dramatically over the quarter, with Asia and North America leading the way. A Korean power company and Chinese port owner helped our specialist Asian growth manager generate returns of 14% in Q3. Internet and healthcare stocks delivered for our standout US equity manager, whilst Swiss healthcare and a Portuguese utility company drove performance for our European growth fund. Europe was the relative laggard amongst our overseas holdings but still delivered double digit growth. Short positions in financials and consumer staples, tempered returns generated in technology and mining stocks for our global absolute return manager. As transaction and pricing visibility became clearer during Q3, most property funds reopened and removed their market value adjustments. As a consequence, capital values bounced back significantly and now stand within touching distance of their pre referendum level. Commercial real estate is a valuable portfolio diversifier and delivers a solid income yield. North American and Middle Eastern investors have been buying; offices, shops and warehouses in Q3, taking advantage of a weaker Pound, attractive yields and long lease lengths. Demand from overseas institutional buyers has helped absorb the pressure of domestic retail sellers post referendum, leading to a rapid recovery in confidence and capital values. Asset Allocations Please see below the current asset allocation for the Conservative fund and the relative position versus the IA sector average. Current Asset Allocation 3% 4% 4% 21% 17% Underweight 1% 41% Cash Fixed Interest Alternatives Source: Greystone Wealth Management. Relative Positioning versus IA Mixed Investment -35% Shares sector average -18% -9% % 9% 18% Overweight Cash Fixed Interest Japanese Equity Emerging Markets Equity Alternatives Source: Greystone Wealth Management and Lipper. Turning to our holdings, retail and industrial warehouses in south east England drove returns for our standout manager, whilst London offices and a south west shopping centre detracted for the laggard. We took advantage of recent weakness in prices, by topping up our positions in existing real estate managers. North American railroads and Italian electricity producers helped our global listed infrastructure manager, have another solid quarter. All data is sourced from Greystone Wealth Management for current fund asset allocations and historical fund asset allocations. Data compiled to The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 3

5 Multi-asset Portfolios Fund Manager Commentary Cautious Managed Fund Performance Summary The fund rose 7.51% over the third quarter versus the Investment Association (IA) Mixed Investment 2-6% Shares sector average 6.9% and the IA Money Market.7%. Since the fund s mandate change on 24 th July 29 it has delivered 66.84%, versus the IA sector average 64.18% and IA Money Market 3.41%. The fund s share price as at 3 th was; 146.7p (R share class accumulation units) and 11.51p (R share class income units). The fund s natural yield of 3.16% (IA sector average 2.6%) is generated from equities, fixed income and alternative investments. Performance % Jul/9 Jul/11 Jul/13 Jul/15 Calendar Year Performance % 12 Fund Review & Outlook The fund s objective is to deliver high income with the potential for capital growth whilst outperforming the sector average and cash over a rolling three year period. We look to achieve this with less than half the volatility of equities. The fund has met all three objectives over the last six calendar years and remains welldiversified across the three core asset classes; fixed interest, equities, and alternatives. Holdings Cash 3% Fixed Interest 27% Capital International Global High Income Opportunities GAM Star Credit Opportunities Rogge Short Duration Global Real Estate Bond Royal London Short Duration Global High Yield Bond Rubrics Global Credit UCITS Vanguard Global Bond Index USD Equity 53% CF Miton UK Multi Cap Income CF Woodford Equity Income Eden Tree Higher Income Evenlode Income Fidelity Enhanced Income Majedie UK Income Schroder Income Maximiser Trojan Income Montanaro European Income Prusik Income Fidelity American Special Situations Artemis Global Income Sarasin Global Higher Dividend YTD Cautious Managed Fund R Acc IA Mixed Investment 2-6% Shares NR Source: Thomson Reuters Lipper for Investment Management. (Key applies to both charts). Alternatives 17% CF Ruffer Total Return Lazard Global Listed Infrastructure Aberdeen Property Trust Aviva Investors Property Trust Legal & General UK Property Standard Life UK Property Threadneedle UK Property Trust All performance in this report is based upon R share class accumulation units denominated in GBP. All performance data is sourced from Thomson Reuters Lipper for Investment Management and compiled to All Investment Association (IA) sector performance is Nominal Return (NR). Cautious Managed Fund changed mandate on Data for 29 shown for period to Natural yield data sourced from Thomson Reuters Lipper for Investment Management and compiled to The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 4

6 Fund Manager Commentary Cautious Managed Fund Fixed interest and equity markets rose sharply in Q3. Loose monetary policy from central bankers across the globe, was the key reason. An extension of the Bank of England s quantitative easing programme coupled with a reduction in interest rates, also helped to buoy investor sentiment and asset prices. Commercial property bounced back, as overseas investors were drawn in by Sterling weakness and attractive income yields. The Pound was relatively stable in Q3 when compared to the dramatic rise of nearly 5%, in the days leading up to the referendum, and then the subsequent fall of over 1% after the vote. All our fixed interest managers delivered positive returns. Tightening yields on Indian and Argentinian sovereign bonds along with currency strength enabled our emerging market debt manager to be the standout performer in Q3. The fund also yields 7%. Economically sensitive mining debt and subordinated bank bonds drove performance for our specialist credit manager, whilst insurance and utility debt powered returns for our investment grade corporate bond fund. Limited interest rate sensitivity meant our real estate bond manager was the relative laggard. Within the UK equity component, all of our managers posted solid numbers. A logistics firm and a specialist finance company helped our multi cap income manager to be the lead performer. Consumer goods and insurance stocks held back returns for our mega-cap income fund, despite this, the strategy delivered 5% for the quarter. Korean electronics and Indian utilities helped our Asian Income specialist to be the standout investor within the overseas equity component. French energy and Swiss healthcare dampened returns for our international equity income fund, but Spanish and Swedish property stocks delivered for our mid cap value manager. As transaction and pricing visibility became clearer during Q3, most property funds reopened and removed their market value adjustments. As a consequence, capital values bounced back significantly and now stand within touching distance of their pre referendum level. Commercial real estate is a valuable portfolio diversifier and delivers a solid income yield. North American and Middle Eastern investors have been buying; offices, shops and warehouses in Q3, taking advantage of a weaker Pound, attractive yields and long lease lengths. Demand from overseas institutional buyers has helped absorb the pressure of domestic retail sellers post referendum, leading to a rapid recovery in confidence and capital values. Asset Allocations Please see below the current asset allocation for the Cautious Managed fund and the relative position versus the IA sector average. Current Asset Allocation 8% 5% 6% 17% Underweight 3% 34% 27% Cash Fixed Interest Alternatives Source: Greystone Wealth Management. Relative Positioning versus IA Mixed Investment 2-6% Shares sector average -18% -9% % 9% 18% Overweight Cash Fixed Interest Japanese Equity Emerging Markets Equity Alternatives Source: Greystone Wealth Management and Lipper. Turning to our holdings, retail and industrial warehouses in south east England drove returns for our standout manager, whilst London offices and a south west shopping centre detracted for the laggard. We took advantage of recent weakness in prices, by topping up our positions in existing real estate managers. North American railroads and Italian electricity producers helped our global listed infrastructure manager, have another solid quarter. US sovereign debt and Japanese equities powered returns for our absolute return manager in Q3, making him the standout performer within the alternatives component. All data is sourced from Greystone Wealth Management for current fund asset allocations and historical fund asset allocations. Data compiled to The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 5

7 Multi-asset Portfolios Fund Manager Commentary Balanced Fund Performance Summary The fund rose 9.43% over the third quarter versus the Investment Association (IA) Mixed Investment 4-85% Shares sector average 7.62% and the IA Money Market.7%. Since the fund s mandate change on 1 st September 21 it has delivered 67.7% outperforming the IA sector average 57.51% and IA Money Market 2.%. The fund s share price as at 3 th September 216 was; p (R share class accumulation units) and p (R share class income units). The fund continues to offer investors the ability to maximise capital growth whilst managing risk through a combination of bond, equity and alternative investments. Performance % Sep/1 Sep/12 Sep/14 Sep/16 Calendar Year Performance % YTD Balanced Fund R Acc IA Mixed Investment 4-85% Shares NR Fund Review & Outlook The fund s objective is to deliver positive returns over the course of an economic cycle from a diversified portfolio whilst maintaining a balanced attitude to risk. There is flexibility to rotate between asset classes which helps smooth returns and protects against volatility. Holdings Cash 1% Fixed Interest 14% Capital International Global High Income Opportunities GAM Star Credit Opportunities Rogge Short Duration Global Real Estate Bond Vanguard Global Bond Index USD Equity 75% CF Miton UK Multi Cap Income CF Woodford Equity Income Evenlode Income Majedie UK Income Trojan Income CFP SDL UK Buffettology City Financial Absolute Equity Old Mutual UK Dynamic Equity Polar Capital UK Absolute Equity Threadneedle UK Extended Alpha Jupiter European Montanaro European Income Artemis US Extended Alpha F&C North American Fidelity American Special Situations Majedie US Equity Old Mutual Hermes Asia ex Japan Equity Prusik Income Hermes Global Emerging Markets Alternatives 1% Lazard Global Listed Infrastructure F&C Real Estate Equity Long / Short Old Mutual Global Equity Absolute Return Source: Thomson Reuters Lipper for Investment Management. (Key applies to both charts). All performance in this report is based upon R share class accumulation units denominated in GBP. All performance data is sourced from Thomson Reuters Lipper for Investment Management and compiled to All Investment Association (IA) sector performance is Nominal Return (NR). Balanced Fund changed mandate on Data for 21 shown for period to The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 6

8 Fund Manager Commentary Balanced Fund Asset Allocations The fund performed well in absolute and relative terms in Q3. Fixed interest and equity markets rose sharply. Loose monetary policy from central bankers across the globe, was the key reason. An extension of the Bank of England s quantitative easing programme coupled with a reduction in interest rates, also helped to buoy investor sentiment and asset prices. UK Sterling was relatively stable in Q3 when compared to the dramatic rise of nearly 5%, in the days leading up to the referendum, and then the subsequent fall of over 1% after the vote. Politics will influence markets in coming months, as voters go to the polls on the continent and across the pond. Referendums and general elections are just another risk factor for investors to price into asset valuations. We are pragmatic in our approach to investment management. The fund is highly diversified across; asset classes, geographies and currencies, helping to defend capital when markets fall but also designed to capture investment returns when prices rise. Turning to the portfolio, all of our holding made money over the period. Within fixed interest, tightening yields on Indian and Argentinian sovereign bonds enabled our emerging market debt manager to be the standout performer. Economically sensitive mining and subordinated bank bonds drove returns for our specialist credit manager whilst insurance and utility debt delivered for our corporate bond fund. Limited interest rate sensitivity meant our real estate bond manager was the relative laggard, as yields fell globally and capital values rose. In the UK, all our equity managers posted solid numbers. Mid cap stocks struggled immediately after the referendum result, but we used this period to top up our existing holdings. Food retail and IT securities helped our mid cap growth manager bounce back strongly in Q3, he was our standout performer. A logistics firm and a specialist finance company powered returns for our multi cap income manager. Consumer goods and insurance stocks held back our large cap value fund. Long positions in chemicals and financials were tempered by short positions in miners and healthcare for our equity long short manager. He was the laggard within the UK equity component but still delivered 5%. Please see below the current asset allocation for the Balanced fund and the relative position versus the IA sector average. Current Asset Allocation 1% 1% 3% 1% Cash Fixed Interest 14% 16% 6% 4% Emerging Markets Equity Alternatives Source: Greystone Wealth Management. Relative Positioning versus IA Mixed Investment 4-85% Shares sector average -16% -8% % 8% 16% Cash Fixed Interest Japanese Equity Emerging Markets Equity Alternatives All our overseas holdings rallied strongly in Q3. Chinese internet and Indonesian banking stocks helped our Emerging Market manager to be the standout performer, whilst Korean electronics and Indian utilities drove returns for our Asian Income specialist. Spanish and Swedish property stocks delivered for our European mid cap fund. Technology and TV advertising powered returns for our best performing US manager. Short positions in financials and consumer staples tempered returns generated in technology and mining stocks for our absolute return fund. North American railroads and Italian electricity producers helped our global listed infrastructure manager, have another solid quarter. Underweight Overweight Source: Greystone Wealth Management and Lipper. All data is sourced from Greystone Wealth Management for current fund asset allocations and historical fund asset allocations. Data compiled to The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 7

9 Multi-asset Portfolios Fund Manager Commentary Global Growth Fund Performance Summary The fund rose 11.8% over the third quarter versus the Investment Association (IA) Global sector average 9.68% and the IA Money Market.7%. Since the fund launched on 5 th December 25 it has delivered % outperforming the IA sector average 11.62% and IA Money Market 12.14%. The fund s share price as at 3 th September 216 was; p (R share class accumulation units). The fund continues to offer investors the potential for high levels of capital growth from geographically diverse investments across more than 3 countries worldwide. Performance % Dec/5 Dec/7 Dec/9 Dec/11 Dec/13 Dec/15 Fund Review & Outlook The fund s objective is to deliver long-term capital appreciation from a globally diverse portfolio. Investment exposure to multiple geographies helps dampen volatility and maximise returns. Holdings Cash 1% Equity 99% City Financial Absolute Equity Threadneedle UK Extended Alpha Artemis US Extended Alpha Baillie Gifford American F&C North American Fidelity American Special Situations Majedie US Equity Old Mutual Polen Capital Focus US Growth Schroder US Smaller Companies Vanguard US Equity Index BlackRock European Dynamic Henderson European Focus Jupiter European Montanaro European Income Man GLG Japan CoreAlpha Morant Wright Sakura Hermes Asia ex Japan Equity Prusik Income Hermes Global Emerging Markets Calendar Year Performance % 25 The fund performed well in absolute and relative terms. Overweight positions in Emerging Markets and Asia were the key drivers YTD All equity markets bounced sharply in the third quarter. Japan led the way up, followed by Emerging Markets and Asia. UK and Europe also posted solid returns. US equites lagged. The Global Growth fund has outperformed its sector average peers in nine out of the past ten calendar years. Source: Thomson Reuters Lipper Investment Management Global Growth Fund R Acc IA Global NR Source: Thomson Reuters Lipper for Investment Management. (Key applies to both charts). All performance in this report is based upon R share class accumulation units denominated in GBP. All performance data is sourced from Thomson Reuters Lipper for Investment Management and compiled to All Investment Association (IA) sector performance is Nominal Return (NR). Global Growth Fund launched on The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 8

10 Fund Manager Commentary Global Growth Fund Fixed interest and equity markets rose sharply in Q3. Loose monetary policy from central bankers across the globe, was the key reason. An extension of the Bank of England s quantitative easing programme coupled with a reduction in interest rates, also helped to buoy investor sentiment and asset prices. UK Sterling was relatively stable in Q3 when compared to the dramatic rise of nearly 5%, in the days leading up to the referendum, and then the subsequent fall of over 1% after the vote. Politics will influence markets in coming months, as voters go to the polls on the continent and across the pond. Referendums and general elections are just another risk factor for investors to price into asset valuations. We are pragmatic in our approach to investment management. The fund is highly diversified across; industrial sectors, geographies and currencies, helping to defend capital when markets fall but also designed to capture investment returns when asset prices rise. Turning to the portfolio, all of our managers delivered solid numbers. In Japan, car manufacturers and banking stocks helped our large cap value manager to be the standout performer, delivering over 2%. TV broadcasting and insurance stocks buoyed returns for our mid cap Japanese specialist. Indian banks, and a South African hospital operator drove performance for our emerging market fund. He was our second best performer during Q3, delivering 15% growth. Significant positions in US technology and banking stocks helped lift our large cap growth manager to the top of the pack amongst our North American funds. Real estate and low cost airlines powered returns for our US small cap manager. She adds sector and style diversification to the largest geographical weighting within the portfolio. A specialist finance company offering tax advice, coupled with poor stock selection in healthcare, meant our value focused US manager was the laggard this quarter. Long positions in chemicals and financials were tempered by short positions in mining, for our equity long short manager. He was the laggard within the UK equity component, but still rose by 5%. Oil and tobacco stocks buoyed performance for our standout UK equity manager. A Korean power company and Chinese port owner helped our Asian growth manager deliver 14% in Q3. Indian utilities and Korean electronics drove returns for our Asian income specialist, he also yields 4%. Asset Allocations Please see below the current asset allocation for the Global Growth fund and the relative position versus the IA sector average. Current Asset Allocation 8% 14% 18% 7% Underweight 1% 7% 45% Cash Japanese Equity Emerging Markets Equity Source: Greystone Wealth Management. Relative Positioning versus IA Global sector average -12% -6% % 6% 12% Overweight Cash Fixed Interest Japanese Equity Emerging Markets Equity Alternatives Source: Greystone Wealth Management and Lipper. Spanish and Swedish property stocks delivered for our standout European mid cap fund. Swiss healthcare and a Portuguese power company buoyed performance for our European growth specialist, but French software and a Swiss agricultural chemicals manufacturer, tempered returns for our value manager. All data is sourced from Greystone Wealth Management for current fund asset allocations and historical fund asset allocations. Data compiled to The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 9

11 Investment Committee Economic & Market Commentary Passing the Baton In comparison to the major economic and political events of the first half of this year (China fears, Oil price collapse & rebound, negative rates in Europe, Brexit) Q3 was virtually tranquil. As the dust settled on the EU referendum a picture of relative stability emerged over the course of the summer. The Rio Olympics and Paralympics provided a welcome distraction and team GB s record medal hauls of 67 and 12, surpassing the totals achieved at London 212, helped improve the national disposition following the stress of the EU referendum. There was also a rapid turnaround in market sentiment and leading economic indicators, perhaps best demonstrated by the purchasing manager surveys recorded in the immediate aftermath of the vote to leave and those recorded one month later (see Improving Conditions on pg12). The reasons for the strong market performance are discussed in more detail below, but if nothing else, the last 3 months demonstrated perfectly the opportunities available to sensible long term investors during volatile markets. Despite the contrasting conditions over the last 9 months, the multi-asset approach used in the Greystone funds continued to dampen volatility and provide the same solid risk adjusted returns we have delivered consistently over the last 11 years. Commercial property assets also experienced short term shifts in sentiment. Bricks and mortar funds tend to maintain high levels of cash because a building can take months to sell but many investors need daily liquidity. The fear of sharp devaluations post Brexit however, saw many worried investors rush for the exits. This ultimately forced a number of funds to suspend dealing in order to prevent liquidity reserves from drying up completely. Those funds that did remain open imposed value adjustments reflecting the higher cost of liquidity during less than favourable market conditions. This created a short lived liquidity crisis which was widely reported in the media and likely caused many shareholders unnecessary angst. As with other areas of the market, anxious investors quickly realised that the sky had not fallen in and that companies still needed offices and warehouses, but the episode itself serves as a useful demonstration of how cool heads are needed during turbulent times. Within the Greystone portfolios our property exposure is divided over five different funds to minimise the specific liquidity risks. By the 6th of July three of the five funds had suspended dealing and the remaining two were priced at discounts to their pre-brexit valuations. Throughout the period we conducted regular reviews of these holdings, but given the geographical diversification of our managers and the valuable income provided by long term tenancy agreements we did not believe the medium term benefits of holding property had materially changed, particularly given that bonds had become even more expensive over the same period. As a result we decided to top up our property positions to pre-brexit model weights and take advantage of the depressed valuations imposed because of temporary liquidity problems. As at the end of September all liquidity related value adjustments had been removed and all but one of our funds have announced they are lifting dealing suspensions. Aside from the short term reversal in the property sector there may well have been some head scratching from investors as to why broader equity markets performed so well following the surprise EU referendum result. The largest factor, which we discussed in our previous commentary, was the devaluation in sterling. This immediately increased the value of overseas investments but also improved the outlook for UK companies with overseas earnings or UK exporters whose products became cheaper overnight. The second contributing factor was further easing of monetary policy by the Bank of England (BoE). Although this did not materialise until August, the 7bn quantitative easing package, including 1bn of corporate bond purchases, and the.25% cut in interest rates provided significant support to domestic markets. This was effectively a pre-emptive strike. The bank anticipated the potential for a negative impact and acted to stimulate growth. Economic indicators since the referendum however, have shown the UK economy to be in rude health. Time will tell if the BoE s pre- Brexit predictions were accurate, but the stimulus is very real. Some commentators have suggested this was a solution without a problem and markets responded accordingly. One important factor in determining where markets move from here will be politics, both foreign and domestic. France, the Netherlands and Germany all face general elections in the next 12 months and politicians are worried about a surge of anti-establishment sentiment. The bellwether for Europe may come in the form of a constitutional reform vote in Italy, scheduled for December 4th. As the average tenure of an Italian government since the end of WWII is just over 12 months, it should perhaps come as no surprise that the current Prime Minister, Matteo Renzi, is pushing through a series of reforms to create a more stable and decisive political system. The pro-european Renzi has faced the same populist backlash seen across European politics and the anti-eu Five Star Movement, a party established by Italian comedian Beppe Grillo, has made significant gains in the polls. The outcome will have widespread ramifications for Italy, not least because Renzi has previously stated he will resign if he loses, but also as an indicator of the wider mood in Europe. With poor but not disastrous results for Chancellor Merkel s Christian Democrats in German local elections, Italy will be the first real test for the European project post Brexit. The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. All performance data compiled from Thomson Reuters Lipper for Investment Management, data correct to Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 1

12 Investment Committee Economic & Market Commentary By the time Italy goes to the polls we will already know who is going to be the next President of the United States, where the political landscape has also been shifting. The populist surge has already had an impact by returning Donald Trump as the Republican candidate, and he has revelled in painting Democrat Hillary Clinton as the quintessential establishment figure. A victory for Trump would undoubtedly be seen as a boost to the chances of populist parties elsewhere in the world, but the effects on the real economy are less clear. Both Clinton and Trump are likely to push for spending increases in one form or another, with Clinton seen as the more conservative of the two, but how the candidates will pay for the spending is altogether less clear. Aging US infrastructure is sorely in need of investment, but whichever candidate enters the White House will need Congress to support their spending plans, and negotiating congressional agreements on fiscal expenditure has been anything but straightforward in recent years. Fiscal stimulus is also likely to be the major political sticking point in the UK where Chancellor of the Exchequer, Phillip Hammond, has spoken of a fiscal reset. The Autumn statement on the 23rd of November will be the first real indication of the government s tax and spending plans post Brexit, although if previous chancellors are anything to go by, expect some of the major details to be strategically leaked in advance. Whatever the government s spending plans may be, it is becoming increasingly obvious that Central Banks are pushing on a string when it comes to the impact of monetary policy on consumer behaviour. Across the globe there may well be talk of a passing of the baton from monetary policy to fiscal policy, but anybody watching the relays at Rio could see this is often where races are won or lost. In the case of European Central Bank president Mario Draghi, there may well be nobody to pass the baton to if the reluctant Germans refuse to loosen their fiscal purse strings. Anything less and price increases would turn a nominal gain into a real loss. Given August s sharp increases in the price of goods bought by UK manufacturers (up 7.6%) 1 and in the output prices for goods produced by UK manufacturers (core factory gate prices up 1.3%) 1, it would seem more inflation is heading our way, not less. The only question is how much of these price increases companies will absorb themselves and how much they will pass on to consumers. One other development in markets over recent years is the increasingly positive correlation between equities and bonds. This means the traditional protection provided by bonds during equity market dips (and vice-versa) may no longer hold true. The inverse relationship between bonds and equites has been the foundation of portfolio risk management for decades and this development means broad portfolio diversification is more important than ever. Through our multi-asset strategies we can deliver this diversification by using alternative asset types, such as real estate, infrastructure and absolute return funds; and by finding talented, active managers capable of differentiating themselves from the broader trend within their asset class. At Greystone we rely on our comprehensive, in depth, research methods to ensure we can react to these kinds of market shifts by matching new ideas with the best possible managers. For over a decade we have made this active approach a core principal when investing our client s money, and will continue to do so through whatever conditions prevail over the coming years. Thank you for your continued support. As always, please contact your usual adviser for further information or for access to our monthly updates. Politics aside, one thing is for certain and that is both Government borrowing costs and commodity prices are at mutli-year lows and that should be the perfect environment for spending on long term infrastructure projects. With all four of the major central banks keeping policy unchanged in September the ball is firmly in the court of the policy makers. Institutional investors hungry for reliable income streams would also be keen to invest in structural projects as an alternative to the expensive bond market, where valuations have come down slightly but remain at eye watering levels versus history. Ultra-high bond prices are of course a side effect of ultra-low interest rate policies. There is also a straight forward reduction in bank deposit rates and much was made of the pain savers were feeling following the BoE s rate cut in August. In reality however, cash has not offered real returns in excess of inflation for years. Even with falling inflation an investor would need to have received more than 2% above the banks base rate since the global financial crisis just to stay still. The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. All performance data compiled from Thomson Reuters Lipper for Investment Management, data correct to Sources: 1 Office for National Statistics Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 11

13 Index Level Percentage Growth Key Charts Final Thoughts Pound for Pound We have seen significant divergence in currencies in recent months. Euro & US Dollar vs. UK Pound Sterling 2% Year-to-date the US Dollar and Euro have risen 12.8% and 16.2% respectively versus UK Sterling. In contrast, the Pound on a trade-weighted basis 1, has fallen 13.7% over the same time period. Sterling rose in the lead up to the referendum, as markets expected the remain campaign to prevail. As votes were counted and results came in, the currency fell more than 1%. Post Brexit, key fundamentals remain intact. UK consumer confidence is returning and unemployment is at its lowest level in 1 years. 1 Trade-weighted Sterling an average of the exchange rates with the currencies of the UK s most important trading partners. 1% % -1% -2% Jan/16 Mar/16 May/16 Jul/16 Sep/16 UK GBP Trade Weighted ¹ US Dollar Euro Source: Lipper for Investment Management. Improving Conditions UK Purchasing Managers Indices (PMI) are leading indicators of sentiment within the services, construction and manufacturing sectors and thus the broader economy. A result above 5 indicates improving conditions, below 5, worsening conditions. UK PMI s (Services, Manufacturing & Construction) 7 6 In our previous quarterly commentary, we noted PMI s fell sharply following the Brexit vote. Services, the largest proportion of economic output, circa 79%, returned to growth in August, as output and new business rose, following abrupt contractions in July. Construction recovered from July s low as civil engineering activity stabilised. Housing activity and commercial building experienced slower reductions. Manufacturing increased at the fastest pace in seven months, with rebounds in output and new order contracts. Source: Markit Point Level Services PMI Manufacturing PMI Construction PMI Source: Markit. The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing unless otherwise stated. Data for currencies sourced from Lipper for Investment Management. Data for UK Purchasing Manager Indices sourced from Markit. Data is correct as at Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 12

14 Visit for additional information IMPORTANT INFORMATION This document is for professional investors, advisors and retail clients. It does not constitute a form of financial advice and should not be relied upon. This is provided for information only. At Greystone we seek to guide you with your investment strategies by assessing and continually checking the levels of investment risk you are willing and able to take, thus ensuring suitable investments are made on your behalf. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Investment markets and conditions can change rapidly and as such any views expressed herein should not be relied upon when making investment decisions. Neither the payment of dividends or return of capital is implied or guaranteed. There is a risk of loss of capital. Rates of exchange may cause the value of investments to go up or down. The information and any opinions expressed herein may change at any time and therefore this document does not constitute investment, tax, legal or other advice or recommendation or an offer to sell or an invitation to apply for any product or service. Investors should consider carefully whether an investment in this fund or portfolio is suitable in light of circumstances and resources. Greystone Wealth Management is a trading name of Foundation Investment Management Limited who are authorised and regulated by the Financial Conduct Authority. Financial Services Register Number Q316-September