T. Bailey Dynamic Fund. Annual Short Report For the year ended 31 March 2016

Transcription

1 T. Bailey Dynamic Fund Annual Short Report For the year ended 31 March 2016

2 INVESTMENT OBJECTIVE & POLICY* The benchmark of the Fund is UK Inflation plus 3% per annum. The Fund aims to outperform UK Inflation plus 3% per annum on a total return basis over the medium-tolong term. Asset Allocation The Fund invests predominantly in other regulated collective investment schemes. In other words it is a fund of funds. The Fund may have both UK and non-uk investments and, in addition to units in collectives investment schemes, may also invest in transferable securities (shares, including investment trusts, debentures, government and public securities, warrants or certificates representing certain securities), money market instruments, cash and near cash and deposits as permitted by the Sourcebook in order to achieve its objective. Fund Selection The Fund expects to use a range of different active and passive managers in order to provide a diversity of style and to protect against possible periods of poor performance by any one manager or product. Derivatives The Investment Manager may use the powers given by the Sourcebook to enter into derivative transactions for hedging or efficient portfolio management purposes. * Please note that the Investment Objective of the Fund changed on 7 September This was treated as a fundamental change and was therefore approved by unitholders. The previous Investment objective was as follows: The aim of the T. Bailey Dynamic Fund is to outperform the Investment Association Mixed Investment 20%-60% Shares Sector average on a total return basis over the medium-to-long term. 2

3 FUND FACTS Launch date: 2 May 2006 Ex-distribution dates: 1 July, 1 October, 1 January, 1 April Distribution payment dates: 31 August, 30 November, 28/29 February, 31 May Synthetic Risk and Reward Indicator Ranking¹: 4 Ongoing Charges Figures 2 : Institutional units 1.48% p.a. Retail units 2.38% p.a. ¹ As calculated in accordance with ESMA guidelines. It is based on historical data and uses a scale of 1 to 7. The higher the rank the greater the potential reward but the greater the risk of losing money. 2 To 31 March As calculated in accordance with ESMA guidelines. The Ongoing Charge Figure ( OCF ) includes annual management charges ( AMCs ) and other operating expenses (Trustee s fee, audit fee etc). As the Fund invests in other funds, the weighted average costs of the underlying funds have also been taken into account. CHANGES TO THE FUND As well as the change of Investment Objective, the Fund also changed from a non-ucits retail scheme (NURS) to a UCITS retail scheme on 7 September This was treated as a fundamental change and was therefore approved by unitholders. The Authorised Fund Manager of The T. Bailey Dynamic Fund is T. Bailey Fund Services Limited ( TBFS ). TBFS was previously called T. Bailey Fund Managers Limited and the name was changed on 30 June On 1 October 2015 T. Bailey Defensive Fund was merged into T. Bailey Dynamic fund. At which point all investments and units holders of T. Bailey Defensive fund were transferred to the T. Bailey Dynamic Fund. 3

4 INVESTMENT REVIEW Performance Cumulative returns for the periods ended 31 March 2016 (%) 1 year 2 years 3 years 5 years TBDYF - Institutional units 1 (1.03) TBDYF - Retail units 1 (1.92) IA Mixed Investment 20%-60% Shares Sector Mean (2.46) CPI +3% Discrete returns for the 12 month periods ended 31 March (%) TBDYF - Institutional units 1 (1.03) TBDYF - Retail units 1 (1.92) (0.90) (1.64) IA Mixed Investment 20%-60% Shares Sector Mean (2.46) CPI +3% ¹ Performance based on Income units. Source: Financial Express. Total return, bid to bid. Sterling terms. Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. 4

5 Financial markets have struggled to make progress through the last 12 month period. Across equity markets, corporate earnings have been disappointing, particularly so within the energy and materials sectors where excess supply relative to demand has been a cause of severe weakness in the prices of many commodities. Those areas with relatively strong earnings, some of which we would argue are supported by longer-term structural growth trends have also tended to de-rate. This includes companies within the technology and healthcare space where valuations have fallen as the market has taken a more pessimistic view of future prospects. In fixed income markets valuations are at historic highs whilst low interest rates offer miserly nominal returns in the form of income. As a result, mainstream government bonds and those of corporates are priced more like commodities, reflecting short-term sentiment around future growth and economic stability. Taken collectively, the growing lack of natural returns from these mainstream asset classes has resulted in a build-up of leverage in order to engineer financial returns. Corporates have taken advantage of low interest rates to issue debt and buy back shares. For some this helps balance sheet efficiency and corporate tax planning. However for others it simply inflates earnings per share at a time when genuine earnings growth is hard to come by. Whatever the reason for it, greater use of leverage results in more fragility within the financial system. Indeed, volatility has become a growing feature of markets in recent months. This may not be apparent from the more benign looking returns of the 12 month period as a whole but, for example, the IA Global sector mean, as a measure of global equity returns, fell by 14.7% from the start of the period (31 March 2015) through to 12 February 2016 before recovering sharply in the subsequent month and a half to finish 3.4% down for the year (in Sterling terms) to 31 March Trying to time entry and exit of such markets with any degree of precision is obviously fraught with danger. Yet it is perhaps no wonder that Gold has been a better performing asset class, acting as a reserve currency through these more turbulent times. Asset Class Index/Sector 6 months ended 31 March 2016 (%) 12 months ended 31 March 2016 (%) UK Equities IA UK All Companies 2.70 (2.41) Global Equities IA Global 9.44 (3.36) Emerging Equities IA Global Emerging Markets (9.20) Corporate Bonds IA Sterling Corporate Bond 2.46 (1.03) Index Linked Gilts IA UK Index-Linked Gilts Gilts IA Gilts Property IA Property Gold S&P GSCI Gold Total Return Source: Financial Express. Total return, Sterling terms. Bid to bid. 5

6 Our selection of active managers used to populate the T. Bailey Dynamic Funds portfolio along with biases towards our favoured long-term growth themes, particularly around healthcare and infrastructure sectors, proved helpful in limiting the volatility of the fund through the more turbulent times for equity markets during the period. Furthermore, maintaining diversification across a broad spread of what we consider to be more attractive income themes than the miserly yields available in mainstream fixed income markets proved useful. Here we have favoured alternative investments in higher yielding income products with a preference for asset backed or government supported income streams, particularly those we consider less economically sensitive, to provide some diversification benefit when paired alongside equity market investments. Sector Asset allocation as at 31 March 2016 (%) Asset allocation as at 31 March 2015 (%) UK Equities Global Equities (ex UK) Emerging Markets Absolute Return Fixed Income/Debt Alternatives Cash and Other Total In addition, we have increased the allocation to absolute return vehicles through the period. These are funds that that have the powers and have also demonstrated the ability to use financial instruments to generate positive returns and manage volatility in difficult market conditions, typically through forms of hedging strategies. Outlook The world is now seven years on from the nadir in markets reached in the wake of the financial crisis. Financial assets such as government bonds, real estate and equities have all benefitted from the return of financial stability and economic growth. Furthermore, the provision of highly accommodative monetary policy in the form of low interest rates and quantitative easing has played a very large part in lifting the prices of assets generally. Equity market valuations across sectors and regions are now at or beyond their historical averages of the last couple of decades. Whether the real growth rates that transpire in the coming years justify the view taken by markets in aggregate at the moment remains to be seen. In the near-term monetary indicators and activity surveys suggest a positive view, however it is difficult for us to become convinced there is a broad-based, long-term opportunity that would be cause for us to significantly add to risk assets. 6

7 We do though have greater confidence in the longer-term opportunities for a more focused and thematic investment approach. In part this means more differentiation between the outlooks for individual countries, sectors and companies within markets. It also directs us to the potential we strive to capture in the longer-term themes that underpin our global equity holdings. These seek to provide solutions to mankind s growing longer-term needs, and thus areas of demand growth, in fields such as healthcare, technology and infrastructure. In bond markets interest rates are at or near historic lows so we continue to look elsewhere, across real and financial assets, for individual opportunities to add diversification to the funds equity exposure. Managing the T. Bailey Dynamic Fund to a designed outcome, namely UK inflation plus 3% per annum over the medium to long-term means finding assets that can contribute to generating that return. To do so with any degree of confidence means finding those assets that are inherently able to provide such returns in a sustainable way without having recourse to unnecessary leverage or a short-term turns in market sentiment. Elliot Farley Fund Manager T. Bailey Asset Management Limited 1 July 2016 Peter Askew Fund Manager T. Bailey Asset Management Limited 1 July

8 TOP TEN HOLDINGS Top Ten Holdings as at 31 March 2016 (%) Top Ten Holdings as at 31 March 2015 (%) ETFS Gold Bullion Securities 4.8 Polar Capital Healthcare Opportunities 6.5 Jupiter European 4.7 Prusik Asian Equity Income 5.1 Standard Life Global Focused Strategies 4.3 Artemis Global Income 5.1 Polar Capital Global Insurance 4.2 Polar Capital Global Insurance 4.9 Old Mutual Global Equity Absolute Return 4.1 Somerset Emerging Markets Dividend Growth 4.2 City Financial Absolute Equity 4.1 GLG Undervalued Assets 4.2 New Capital Wealthy Nations Bond 4.0 Evenlode Income 4.1 Prusik Asian Equity Income 4.0 Fidelity Strategic Bond 4.0 CF Miton UK Value Opportunities 4.0 PFS TwentyFour Dynamic Bond 3.9 Polar Capital Healthcare Opportunities 3.9 Standard Life Global Absolute Return Strategies 3.9 8

9 PERFORMANCE Institutional Income Units 1 Apr 2015 to 31 Mar Apr 2014 to 31 Mar Apr 2013 to 31 Mar 2014 Change in net assets per unit Opening net asset value per unit Return before operating charges* (0.18) Operating charges (0.42) (0.40) (0.45) Return after operating charges* (0.60) Distributions on income units (0.98) (1.13) (0.92) Closing net asset value per unit *after direct transaction costs of: Performance Return after charges (1.08)% 10.54% 4.94% Other Information Closing net asset value 20,836,519 21,032,341 19,374,252 Closing number of units 38,727,334 37,981,411 37,900,441 Operating charges (p.a.) 1.48% 1.52% 1.49% Direct transaction costs (p.a.) 0.01% 0.01% 0.01% Prices Highest published unit price Lowest published unit price Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. 9

10 Institutional Accumulation Units 1 Apr 2015 to 31 Mar Apr 2014 to 31 Mar Apr 2013 to 31 Mar 2014 Change in net assets per unit Opening net asset value per unit Return before operating charges* (0.20) Operating charges (0.52) (0.49) (0.54) Return after operating charges* (0.72) Closing net asset value per unit Retained distributions on accumulation units *after direct transaction costs of: Performance Return after charges (1.06)% 10.67% 5.00% Other Information Closing net asset value 22,102,249 1,635,341 1,291,316 Closing number of units 32,826,738 2,403,231 2,100,174 Operating charges (p.a.) 1.48% 1.52% 1.49% Direct transaction costs (p.a.) 0.01% 0.01% 0.01% Prices Highest published unit price Lowest published unit price Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. 10

11 Retail Income Units 1 Apr 2015 to 31 Mar Apr 2014 to 31 Mar Apr 2013 to 31 Mar 2014 Change in net assets per unit Opening net asset value per unit Return before operating charges* (0.16) Operating charges (0.85) (0.82) (0.79) Return after operating charges* (1.01) Distributions on income units (0.96) (1.07) (0.88) Closing net asset value per unit *after direct transaction costs of: Performance Return after charges (1.96)% 9.56% 4.12% Other Information Closing net asset value 427,330 1,297,009 1,560,023 Closing number of units 859,953 2,510,806 3,241,458 Operating charges (p.a.) 2.38% 2.42% 2.39% Direct transaction costs (p.a.) 0.01% 0.01% 0.01% Prices Highest published unit price Lowest published unit price Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. 11

12 Retail Accumulation Units 1 Apr 2015 to 31 Mar Apr 2014 to 31 Mar Apr 2013 to 31 Mar 2014 Change in net assets per unit Opening net asset value per unit Return before operating charges* (0.19) Operating charges (1.06) (1.00) (0.95) Return after operating charges* (1.25) Closing net asset value per unit Retained distributions on accumulation units *after direct transaction costs of: Performance Return after charges (1.96)% 9.68% 4.20% Other Information Closing net asset value 2,155,192 3,053,411 3,489,514 Closing number of units 3,451,461 4,794,497 6,009,425 Operating charges (p.a.) 2.38% 2.42% 2.39% Direct transaction costs (p.a.) 0.01% 0.01% 0.01% Prices Highest published unit price Lowest published unit price Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. 12

13 Dividend Distributions/Accumulations for the Year Ended 31 March 2016 Quarter Ended Unit Class 30 June September December March 2016 Institutional Income Retail Income Institutional Accumulation Retail Accumulation Past performance is not a reliable indicator of future results. Investors are reminded that the price of units and the revenue derived from them is not guaranteed and may go down as well as up. 13

14 RISK PROFILE The value of investments may go down as well as up in response to general market conditions and the performance of the assets held. Investors may not get back the money which they invested. There is no guarantee that the Fund will meet its stated objectives. The Fund invests in global shares (via collective investment schemes), with some regions being regarded as more risky. The movements of exchange rates may lead to further changes in the value of investments and the income from them. There is a risk that any company providing services such as safe keeping of assets or acting as counterparty to derivatives may become insolvent, which may cause losses to the Fund. 14

15 OTHER INFORMATION Authorised Fund Manager T. Bailey Fund Services Limited 64 St. James s Street Nottingham NG1 6FJ Tel: Fax: Dealing line: Website: t-bailey-funds Authorised and regulated by the Financial Conduct Authority. Investment Manager T. Bailey Asset Management Limited 64 St. James s Street Nottingham NG1 6FJ Tel: Website: Trustee National Westminster Bank Plc Trustee & Depositary Services 135 Bishopsgate London EC2M 3UR Authorised and regulated by the Financial Conduct Authority and by the Prudential Regulation Authority. Auditors Deloitte LLP 4 Brindleyplace Birmingham B1 2HZ Registered to carry out audit work by the Institute of Chartered Accountants in England and Wales. Authorised and regulated by the Financial Conduct Authority. Further information regarding the activities and performance of the Fund for this period and previous periods is available on request from the Authorised Fund Manager as are copies of the Annual and Interim Report and Financial Statements. 15

16 Issued by T. Bailey Fund Services Limited ( TBFS ). TBFS is a Regulated Collective Investment Scheme Manager and is authorised and regulated by the Financial Conduct Authority. Registered in England No: