Greystone Wealth Management. Quarterly Report. July Second quarter 2018

Transcription

1 Greystone Wealth Management Quarterly Report July 218 Second quarter 218

2 July 218 James Menzies Investment Director Fund Manager Greystone Investment Committee James Jackson Head of Investment Research Greystone Investment Committee Second Quarter Review We are pleased to send you our quarterly report for the Greystone 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. 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 Q2 218 versus their respective Investment Association (IA) sector averages. Nathan Chan Investment Analyst Greystone Investment Committee Q2 218 Performance % Q2 Conservative Managed Fund R Acc IA Mixed Investment -35% Shares NR Cautious Managed Fund R Acc IA Mixed Investment 2-6% Shares NR Balanced Managed 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 Association (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 Managed Fund achieved a conservative allocation and assumed the name Conservative on The Cautious Managed Fund changed mandate on The Balanced Managed 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 Managed Fund July 218 Performance Summary The fund rose 1.39% over the second quarter versus the Investment Association (IA) Mixed Investment -35% Shares sector average 1.75% and the IA Money Market.11%. Since the fund s re-launch on 1 st September 212 it has delivered 29.14% versus the IA sector average 26.86% and IA Money Market 1.47%. The fund s share price as at 3 th June 218 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 Sep/17 Calendar Year Performance % YTD * Conservative Managed Fund R Acc IA Mixed Investment -35% Shares NR Source: Thomson Reuters Lipper for Investment Management. (Key applies to both charts). Fund Objective & Review The fund s objective is capital growth with outperformance of its sector average and cash. We aim to achieve this with less than a third of equity market risk. The fund holds a minimum of 45% investment grade bonds and between % - 35% UK and overseas shares. We target 3% - 6% annualised growth over the recommended investment time horizon of at least three years. Holdings Cash 1% Fixed Interest 42% GAM Star Credit Opportunities ishares FTSE UK Gilts Muzinich Global Tactical Credit Rogge Short Duration Global Real Estate Bond Rubrics Global Credit UCITS Vanguard Global Bond Index USD Vanguard Global Short-Term Bond GBP Equity 24% Majedie UK Income TB Evenlode Income CFP SDL UK Buffettology City Financial Absolute Equity Polar Capital UK Absolute Equity Marlborough European Multi-Cap Old Mutual Hermes Asia ex Japan Equity 24% Old Mutual Global Equity Absolute Return Lazard Global Listed Infrastructure VT Gravis UK Infrastructure Income Aberdeen UK Property Trust Aviva Investors UK Property Trust Legal & General UK Property Standard Life UK Property Threadneedle UK Property Trust The fund performed well in absolute terms, but lagged sector average peers in Q2. Absolute return strategies and commercial property posted a solid quarter. UK and overseas equities drove returns. A long-short manager detracted for the fund, whilst fixed interest helped defend capital. 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 Managed 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 July 218 Fund Manager Commentary Conservative Managed Fund Asset Allocations Bond managers with less sensitivity to interest rates fared better than those with more, as yields pushed higher and bond values fell. Sterling denominated government bonds benefitted from this, however ended the quarter flat. Dollar strength helped our sovereign debt manager lead the way for fixed interest holdings in Q2. Commercial asset-backed securities and limited interest rate sensitivity drove returns for a global real estate specialist. Insurance and banking debt held back our corporate bond manager, he was the laggard over the period. All but one UK equity fund contributed positively. Long positions in technology and mining, coupled with short positions in industrials and index futures, drove returns for our UK absolute return manager. In contrast, short positions in US healthcare and IT stocks detracted for a long/short equity manager. Defensive large-cap stocks outperformed more economically sensitive small-cap equities, however both investment styles delivered positive returns. Energy stocks and insurers enabled a large-cap income manager to be the lead performer, whilst a data analytics business and beverages manufacturer boosted performance for our defensive multi-cap fund. North America led the way up for international equities, followed by Asia and Europe. Overweight positions in technology and healthcare delivered for our US holding, whilst gains in Chinese internet stocks and Korean industrials helped an Asian growth manager. Norwegian financials and a Spanish chemicals manufacturer buoyed returns for our European multi-cap growth fund. Within the alternatives component of the portfolio, listed infrastructure delivered the strongest returns. Italian and US utilities powered performance for a global manager, whilst solar energy and wind farms helped our UK focused income fund. Long positions in US technology were tempered by weak performance from short positions in European consumer discretionary stocks, pushing our equity market neutral strategy into the red in Q2. UK commercial property had another solid quarter. London-based offices and an out of town shopping centre in the South West drove returns for our top real estate fund, whilst retail warehouses in the South East held back the laggard. Please see below the current asset allocation for the Conservative Managed fund and the relative position versus the IA sector average. Current Asset Allocation 3% 3% 3% 24% 15% Underweight 1% 42% Cash Fixed Interest Source: Greystone Wealth Management. Relative Positioning versus IA Mixed Investment -35% Shares sector average -2% -1% % 1% 2% Overweight Cash Fixed Interest Japanese Equity Emerging Markets Equity 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 3

5 Multi-asset Portfolios Fund Manager Commentary Cautious Managed Fund July 218 Performance Summary The fund rose 4.24% over the second quarter versus the Investment Association (IA) Mixed Investment 2-6% Shares sector average 2.92% and the IA Money Market.11%. Since the fund s mandate change on 24 th July 29 it has delivered 83.91% versus the IA sector average 77.76% and IA Money Market 3.78%. The fund s share price as at 3 th June 218 was; 161.2p (R share class accumulation units) and p (R share class income units). The fund s natural yield of 3.22% (IA sector average 2.1%) is generated from equities, fixed income and alternative investments. Performance % Jul/9 Jul/11 Jul/13 Jul/15 Jul/17 Calendar Year Performance % 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). Fund Objective & Review The fund s objective is high income generation and capital growth along with outperformance of its sector average. We aim to achieve this with less than half of equity market risk. The fund holds a minimum of 3% fixed interest and between 2% - 6% UK and overseas shares. We target 4% - 7% annualised growth over the recommended investment time horizon of at least five years. Holdings Cash 1% Fixed Interest 29% BlueBay Global Sovereign Opportunities Capital International Global High Income Opportunities GAM Star Credit Opportunities Man GLG Global Emerging Markets Debt Muzinich Global Tactical Credit Rogge Short Duration Global Real Estate Bond Royal London Short Duration Global High Yield Bond Rubrics Global Credit UCITS Equity 49% Eden Tree Higher Income LF Miton UK Multi-Cap Income Majedie UK Income Man GLG UK Income MI Chelverton Income Schroder Income Maximiser TB Evenlode Income Montanaro European Income Prusik Income Artemis US Extended Alpha Artemis Global Income Lazard Global Equity Franchise Sarasin Global Higher Dividend 21% LF Ruffer Total Return Lazard Global Listed Infrastructure VT Gravis UK Infrastructure Income Aberdeen UK Property Trust Aviva Investors UK Property Trust F&C UK Property Feeder 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 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 July 218 Fund Manager Commentary Cautious Managed Fund Asset Allocations The fund rose in value and outperformed sector peers in Q2. UK and overseas equities led the way up. Fixed interest was mixed, whilst commercial property and absolute return had a solid quarter. Within the bond component of the portfolio, Argentinian and South African government debt enabled our emerging market bond specialist to be the standout performer. He has the ability to generate positive returns even when bond yields are rising. Currency positions in Brazilian Real and Turkish Lira detracted for our absolute return bond fund, whilst Dollar strength delivered for a global high yield manager. Turning to UK equities, retail and financial services exposure delivered for a small-cap income fund, whilst overweight positions in a defence technology firm and residential property developer drove returns for our UK value manager. Domestic bonds with a longer term to maturity, and underweight position to the resources sector, detracted for our multi-asset UK income manager. Within the international equity component, North America led the way up, followed by global equities and Asia. Solid returns from an online data storage provider were offset by short positions in IT stocks for our flexible US manager. He still delivered double-digit growth over the period. Indian utility stocks and Chinese infrastructure tempered returns for an Asian income manager, whilst European telecoms and North American financials boosted performance for our top global equity position. Listed infrastructure powered performance for the alternatives component of the portfolio, as wind farms and solar energy delivered for a UK manager. He was the top performer during Q2. Italian and US utilities drove returns for global listed infrastructure. Japanese banking stocks and Dollar strength helped our absolute return manager post solid numbers for the quarter. All UK commercial property delivered positive numbers. Londonbased offices and an out of town shopping centre in the South West drove returns for our top real estate fund, whilst retail warehouses in the South East held back the laggard. 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% 8% 6% 21% 1% 27% 29% -18% -9% % 9% 18% Underweight Overweight Cash Fixed Interest Source: Greystone Wealth Management. Relative Positioning versus IA Mixed Investment 2-6% Shares sector average Cash Fixed Interest Japanese Equity Emerging Markets Equity 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 5

7 Multi-asset Portfolios Fund Manager Commentary Balanced Managed Fund July 218 Performance Summary The fund rose 3.12% over the second quarter versus the Investment Association (IA) Mixed Investment 4-85% Shares sector average 4.9% and the IA Money Market.11%. Since the fund s mandate change on 1 st September 21 it has delivered 96.18% versus the IA sector average 78.99% and IA Money Market 2.37%. The fund s share price as at 3 th June 218 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 % Fund Objective & Review The fund s objective is capital growth and outperformance of its sector average with less risk than equity markets. The fund holds between 4% - 85% UK and overseas shares. We target 5% - 9% annualised growth over the recommended investment time horizon of at least seven years. 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 Man GLG Global Emerging Markets Debt Rogge Short Duration Global Real Estate Bond Equity 66% LF Miton UK Multi Cap Income Schroder Income Maximiser TB Evenlode Income CFP SDL UK Buffettology City Financial Absolute Equity MI Chelverton Growth Old Mutual UK Dynamic Equity Polar Capital UK Absolute Equity Jupiter European Marlborough European Multi-Cap Montanaro European Income Artemis US Extended Alpha Majedie US Equity Old Mutual Hermes Asia ex Japan Equity Prusik Income Hermes Global Emerging Markets YTD Balanced Managed Fund R Acc IA Mixed Investment 4-85% Shares NR Source: Thomson Reuters Lipper for Investment Management. (Key applies to both charts). 19% F&C Global Equity Market Neutral Old Mutual Global Equity Absolute Return Old Mutual UK Specialist Equity Lazard Global Listed Infrastructure VT Gravis UK Infrastructure Income Polar Capital Global Insurance 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 Managed Fund changed mandate 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 6

8 July 218 Fund Manager Commentary Balanced Managed Fund Asset Allocations The fund performed well in absolute terms, but lagged sector average peers over the quarter. A long-short equity manager and alternative investment strategies were the key reasons. Overseas equities and infrastructure led the way up, followed by UK equities and fixed interest. Bond managers offered mixed returns. Bank securities held back a specialist financials manager, whilst emerging market government debt and Dollar strength delivered for our global high yield fund. Commercial asset-backed securities and limited interest rate sensitivity drove returns for a global real estate specialist. Argentinian and South African government debt performed well, enabling our emerging markets bond fund to be the standout performer. All but one of our UK equity funds made money in Q2. Defensive large-cap stocks outperformed more economically sensitive smallcap equities, however both investment styles delivered positive returns. Financials and industrials held back our multi-cap growth manager, whilst oil & gas producers and media stocks powered returns for a large-cap value manager. He was the lead performer over the period. Long positions in technology and mining, coupled with short positions in industrials and index futures, benefitted our UK absolute return fund. In contrast, short positions in IT stocks and US healthcare detracted for our long/short equity manager. European equities held up well. Norwegian financials and a Spanish chemicals manufacturer buoyed returns for a multi-cap growth strategy, whilst Danish pharmaceuticals and a German electronic payments company drove returns for our top European position. US holdings benefitted from Dollar strength. Internet stocks and financials delivered for our standout manager, whilst an underweight position in online retail detracted for a value focused fund. Taiwanese semiconductors and a South Korean electronics company pushed an emerging markets specialist into the red. Indian power grid stocks and Chinese infrastructure tempered returns for an Asian income manager, whilst a Hong Kong-based shipping company and Chinese oil producer drove returns for our Asian value specialist. Listed infrastructure drove performance within the alternatives component. Italian and US utilities powered ahead for a global manager, whilst solar energy and wind farms helped our UK focused income fund. Please see below the current asset allocation for the Balanced Managed fund and the relative position versus the IA sector average. Current Asset Allocation 3% 1% 11% 19% 8% Underweight 1% 14% 34% Cash Fixed Interest Emerging Markets Equity Source: Greystone Wealth Management. Relative Positioning versus IA Mixed Investment 4-85% Shares sector average -16% -8% % 8% 16% Overweight Cash Fixed Interest Japanese Equity Emerging Markets Equity Source: Greystone Wealth Management and Lipper. Strong returns from Japanese telecommunications, coupled with short positions in consumer discretionary and health care stocks, enabled our global equity market neutral fund to 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 7

9 Multi-asset Portfolios Fund Manager Commentary Global Growth Fund July 218 Performance Summary The fund rose 6.98% over the second quarter versus the Investment Association (IA) Global sector average 7.96% and the IA Money Market.11%. Since the fund launched on 5 th December 25 it has delivered % outperforming the IA sector average 16.69% and IA Money Market 12.54%. The fund s share price as at 3 th June 218 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 Dec/17 Calendar Year Performance % 2 1 Fund Objective & Review The fund s objective is capital growth and outperformance of its sector average with less risk than global equity markets. At least 8% of the fund will be held in overseas shares. We target 6% - 1% annualised growth over the recommended investment time horizon of at least ten years. Holdings Cash 1% Equity 94% CFP SDL UK Buffettology City Financial Absolute Equity Polar Capital UK Absolute Equity 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 Carmignac Long-Short Jupiter European LF Miton European Opportunities Marlborough European Multi-Cap Montanaro European Income Man GLG Japan CoreAlpha Morant Wright Sakura Hermes Asia ex Japan Equity Prusik Income Hermes Global Emerging Markets 5% Polar Capital Global Insurance YTD Global Growth Fund R Acc IA Global 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 Q2. Overweight Asia and underweight European equities relative to our peers were the key reasons. North America and Europe led the way up, followed by Asia and Japan. A long-short equity manager detracted for the fund. 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 July 218 Asset Allocations The Global Growth fund has outperformed its benchmark in ten out of the past twelve calendar years. (Source: Thomson Reuters Lipper for Investment Management). Across the portfolio, all but two of our managers made money in Q2. Almost half delivered double-digit performance. A games manufacturer and biotechnology company powered returns for the standout UK holding. Long positions in technology and mining, coupled with short positions in industrials and index futures, delivered for one of our UK absolute return managers. Short positions in US healthcare and IT stocks held back the other. He was the laggard within the UK equity component. An overweight position in North American equities, combined with Dollar strength, benefitted our US holdings. Primary commercial insurance and reinsurance meant our sector specialist was the laggard. Information technology and online media providers delivered for a US large-cap growth holding, whilst financials and health care held back our deep value focused manager. Within European equities, markets favoured large-cap growth over small-cap value strategies. A German electronic payments company and Danish pharmaceuticals manufacturer boosted performance for our top European manager. Norwegian financials and a Spanish chemicals manufacturer buoyed returns for our multi-cap growth fund. Banks and car manufacturing helped our large-cap Japanese fund, whilst our mid-cap manager benefitted from financials and media stocks. Yen strength helped both positions over the quarter. Taiwanese semiconductors and a South Korean electronics company pushed our emerging markets specialist into the red. Indian power grid stocks and Chinese infrastructure tempered returns for an Asian income manager, whilst a Hong Kong based shipping company and Chinese oil producer drove returns for our Asian value specialist. 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% 1% 6% 5% Cash 9% 1% 18% 43% Japanese Equity Emerging Markets Equity Source: Greystone Wealth Management. Relative Positioning versus IA Global sector average Cash Fixed Interest Japanese Equity Emerging Markets Equity -1% -5% % 5% 1% 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 9

11 July 218 Investment Committee Economic & Market Commentary Summer Loving Heart-warming royal events gripped the nation in Q2; first came the birth of Louis Arthur Charles, the Duke and Duchess of Cambridge s third child, quickly followed by the marriage of Prince Harry and Meghan Markle at Windsor Castle. UK equity markets also found some cheer and rallied strongly, buoyed by receding concerns of a global economic slowdown. Popularity of the royal family, and their ability to project pomp and ceremony representing the dignified branch of the British state, appear to be at record highs. In contrast; the government, parliament, cabinet and civil service, which represent the efficient arm of the nation s apparatus, appear to be in a funk. A hung parliament, Brexit haggling, NHS spending and ministerial resignations can be enough to give anyone indigestion, whilst royal babies, regal weddings, flower shows and garden parties are a soothing tonic. Twenty years ago the monarchy was not in such fine fettle and the government not in such peril. Tony Blair s New Labour and Cool Britannia had captured the mood of a nation, whilst the death of Princess Diana made the monarchy appear aloof and out of touch. It was only the diplomacy of Prime Minister Blair and the acknowledgement that William and Harry s mother was the People s Princess that brought the nation closer to the royal family again and averted a constitutional schism. Popularity can wax and wane, just ask the contestants on this year s reality ITV show Love Island. For real nation state upheaval though, we must look across to mainland continental Europe at Spain, but firstly Italy. It was Bill Clinton s former economic adviser James Carville, who once said that when he died he wanted to be reincarnated as the bond market in his next life, because that is where the real power is. Italy felt that power at the end of May in the form of unprecedented price volatility in its sovereign bonds caused through political instability. Italian President Sergio Mattarella, is mainly a figurehead for the nation and has limited constitutional authority, but the power he does possess, he used to dramatic effect on May 27 th, halting the formation of a populist coalition between the anti-establishment Five Star Movement and the hard-right Northern League. He refused to swear in Eurosceptic Paolo Savona, as Finance Minister, thus halting the formation of an Italian government and sending bond markets into a tizzy. Mr Savona s nomination was ultimately withdrawn and his replacement, Professor Giovanni Tria, was accepted, meaning that Giuseppe Conte was sworn in as Italian Prime Minister on June 1 st and able to form a new government. This makes him Italy s 44 th Prime Minster since the end of the Second World War. Italy has struggled with sluggish economic growth for years and is burdened with public debt of around 2.3trn, or 132% of Gross Domestic Product (GDP). Outspoken populist politicians from both parties have stirred up fears surrounding both problems - along with the more worrying fear that the Eurozone s third largest member may be stumbling towards an Ital-exit. In consequence, yields on Italian bonds jumped and prices fell as investors demanded higher compensation for the risk of holding Italian government debt. Two-year bonds, which had a negative yield as recently as mid-may, leapt to over 2.7%, (the highest since 213) before retreating see page 12 key charts, Bonds Away. Yields on German Bunds, Europe s safest government bonds, declined and prices rose as investors scrambled for a safe haven. Italian financial stocks wobbled due to the fact that Italy's banks hold c. 6bn of government bonds. Markets have since regained some poise and yields have retreated (meaning bond values have recovered) but this has been a shot across the bows for investors complacent about the gyrations of bond markets and a supposed risk-free asset class. Spain managed to oust its government with surgical precision and replace it with a colourful alliance of parties. On May 24 th a court ruled that Spain s right-wing People s Party had run an illegal financing scheme - and that Prime Minister Mariano Rajoy s evidence denying this, lacked credibility. Mr Rajoy had often stressed, particularly in relation to the Catalan issue, that the judiciary is independent and the rule of law paramount, thus his position was deemed untenable, a fact that Pedro Sanchez, leader of the left-wing opposition, quickly seized upon. The Socialist Workers Party won a vote of no confidence in parliament by 18 votes to 169, thus ousting Mr Rajoy after seven years in power. Mr Sanchez, an economist by trade, was sworn in as Spain s next Prime Minister on June 2 nd. He appointed a cabinet aimed at tempering investor concerns, but drew a few raised eyebrows from socialist colleagues when he appointed Nadia Calvino (currently the European Commission s Director-General for budgets) as his Economy Minister. His new Foreign Minister Josep Borrell, is an experienced former minister and president of the European Parliament, and also a Catalan. Moreover, Mr Sanchez has 11 women in a cabinet of 17 members, the highest ever ratio for a government in Europe. Turning away from politics for a moment and towards monetary policy, the US Federal Reserve (Fed) lifted interest rates by.25% in June, targetting a range of between 1.75% and 2%, the second rise this year. Fed chairman Jerome Powell, hinted that there would be a further two rate rises this year and that monetary policy is unlikely to be stimulative, a key phrase in central banker speak. Since December last year, the US central bank has begun to cautiously shrink its balance sheet by gradually reducing how much of its maturing bond portfolio it reinvests in the market. As a result, the total assets held on the Fed s balance sheet has slowly reduced from about $4.5trn to $4.32trn, thus withdrawing the emergency stimulant first injected into the economy nearly a decade ago. 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 July 218 Investment Committee Economic & Market Commentary In contrast to the hawkish monetary policy stance taken in North America, the European Central Bank (ECB) appears much more dovish. ECB President Mario Draghi, announced that the government bond buying programme will continue until December albeit at a slower rate (the ECB has bought over 2trn of bonds) and that interest rates are unlikely to rise until June 219. Deposits with the ECB offer a head-scratching interest rate of minus.4%. At home, Bank of England Governor Mark Carney and the Monetary Policy Committee (MPC) have been accused of dithering. Weaker than expected inflation and consumption statistics were blamed for the MPC s delay in lifting rates above.5%, a level at which, apart from an emergency post referendum cut, they have remained for more than 9 years. The Bank of Japan (BOJ) kept its short-term interest rates at minus.1% and pledged to keep ten-year government bond yields at around zero percent. Weaker inflation numbers were the reason for a more dovish stance from BOJ Governor, Haruhiko Kuroda. It begs the question, how will tightening international monetary policy affect economic growth? The world economy surged ahead in 217; global trade growth rose to 4.9%, buoyed by a rebound in business investment and surging consumption from OECD 1 countries. This, in turn, led to the fastest economic growth since 211 and resulted in global GDP expansion of 3.8%. In April 218 the IMF 2 said that the global economic upswing had become broader and stronger. However, we must temper positive comment from economic think tanks with the increasingly real prospect of a trade war and the ensuing implications this would have for global economic growth and thus asset prices. President Trump is clashing with both his G7 allies, and with China, in an effort to close America s trade deficit and Make America Great Again in the lead up to the Senate and House elections on November 6 th. These policies could ultimately trigger a slowdown that would be something to worry about. Busy Mr Trump also met Kim Jong Un on June 12 th, which seems to have cooled tensions on the Korean peninsula and calmed markets, for now. Another threat talked up by worried investors is the oil price, which has risen close to $8 a barrel. The Organization of Petroleum Exporting Countries (OPEC) met in late June, its members are looking at a very different world than just a few years ago when prices were suppressed and there was a supply glut. The cartel have a fine balancing act to pull off, they wish to optimise revenue by supplying more oil to world markets, but don t want prices to collapse. However, a high oil price could slow the world economy and lead to lower demand and, ultimately, lower prices anyway. Oil ministers from OPEC States have a tricky supply and demand conundrum to puzzle over. What does this all mean for global equity markets? Based on current consensus estimates, global equities are forecast to deliver approximately 15% Earnings Per Share (EPS) growth in 218, a 1% increase from estimates in March and in-line with the 15% achieved in 217. Further evidence of expansionary economic conditions globally and supportive fiscal stimulus (most notably in the US) are expected to feed through to corporate profitability over the course of the year. At a regional level, the US is the main driver of the revised estimate and is expected to deliver approximately 21% EPS growth in 218 (up from the 19% anticipated in March), the strongest level of earnings growth across the major indices. Better than anticipated calendar year Q1 financial results (78% of the S&P 5 constituents delivered Q1 earnings ahead of forecasts) have helped boost expectations for the full year. President Trump s recent tax reform, which not only reduces the corporate tax rate for US companies (thus potentially increasing headline profitability) but also incentivises companies to repatriate vast levels of cash held overseas, is anticipated to provide a catalyst for heightened levels of share buybacks (another boost for EPS figures). Equity markets in continental Europe, on an aggregated basis, are expected to deliver 8% EPS growth, a deceleration from the 1% anticipated in March. The momentum of the economic recovery across the Eurozone has shown signs of slowing in recent months and heightened political uncertainty has marginally dampened profitability expectations for the full year. Turning to the UK, continual uncertainty surrounding Brexit is expected to weigh on both consumer spending and business investment which could feed through to earnings growth. Consensus currently points to 9% EPS growth in 218 for the All-Share, which is an improvement in the 7% anticipated back in March. The revised estimate is largely driven by improving fundamentals for the resources and materials sectors which have benefitted in recent months from the strong performance of commodity prices. Increased volatility in all asset prices has been a worthy test for our investment process and strategies. Each Greystone fund defended capital well as equity markets took a tumble in Q1, and each fund delivered solid gains as stocks sprang back in Q2. On average, over the last three years, each of the Greystone funds has captured 116% * of upside relative to their sector average peers, but only 84% * of the downside. We are acutely aware of the risk and return targets for each of the funds. We are increasingly focusing on the risk side of the equation at our investment committee meetings, but are keen to deliver capital growth when the investment case presents itself. As always, please contact your usual adviser for further information or for access to our monthly updates. We wish an enjoyable Summer to all our investors and thank you for your continued support. 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 Key: 1 Organisation for Economic Co-operation & Development, 2 International Monetary Fund. Source: * Greystone Financial Services. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Quarterly Commentary 11

13 Performance (%) Yield July 218 Key Charts Final Thoughts Bonds Away Term to maturity is the time between the date a bond is issued and the date it matures. Traditionally, bonds with a longer term to maturity have higher yields than shorter term bonds, as they are more sensitive to interest rate rises. This is known as the term premium. Italian Government Bond Yields 2 years & 1 years 3% Following the 28 Global Financial Crisis, Central Banks have sought to stimulate economies through bond purchases. The aim was to cut borrowing costs, thereby encouraging lending, with the ultimate goal of boosting economic growth. When bond yields go negative, this is a reflection of extremely high prices, which can be pushed higher by further demand from Central Bank purchases. The chart shows the yields for 2 year and 1 year Italian government bonds. Until recently, those with a 2 year term to maturity have consistently offered negative yields. 2% 1% % In May, Italian government bonds, particularly shorter term, experienced a spike in yields. Investors demanded higher compensation for the risk of holding Italian government debt amid fears that the country could exit the Eurozone. Changing Times Volatility in global asset prices increased over the first half of 218, as investors worried over inflation and Central Bank monetary policy. Despite markets recovering from the lows reached during April and surpassing the record highs achieved back in January, this marks a significant shift from the exceptionally low volatility observed in recent years. -1% 6/27/217 Jun/17 9/26/217 Sep/17 12/27/217 Dec/17 Mar/18 3/28/218 Jun/18 1 Year Italian Government Bond Yield 2 Year Italian Government Bond Yield Source: The Wall Street Journal. Asset Class Performance Year-to-date Both bonds and equities are experiencing fluctuations in prices, as illustrated in the chart. We expect these oscillations to continue, but are confident that economic fundamentals remain intact. Term to maturity (duration) also measures a bond s sensitivity to interest rate movements. As a result, bonds with a longer duration typically experience greater swings in prices. Within the Greystone fund range, we maintain shorter duration in order to dampen down portfolio volatility, whilst remaining mindful of further oscillations in asset prices going forward Jan/18 Feb/18 Mar/18 Apr/18 May/18 Jun/18 UK equities Global equities Bonds Source: Thomson Reuters Lipper for Investment Management. 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 Asset Class Performance sourced from Thomson Reuters Lipper for Investment Management. Bonds IA UK Gilt NR sector, UK Equities IA UK All Companies NR sector, Global Equities IA Global NR sector. Data correct as at Data for Italian Government Bond Yields sourced from The Wall Street Journal. Data 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 advisers 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 Q2 18-July