Smith & Williamson Managed Portfolio Service

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1 Smith & Williamson Managed Portfolio Service OE Range Investment Review Q For professional advisers use only not for use by or distribution to retail clients

2 Investment outlook There was a noticeable divergence in the performance of major currencies during the month; the euro appreciated versus the US dollar and sterling, and the yen weakened Bond yields across developed markets spiked in June driven by a reassessment of interest rate expectations following hawkish comments from major central banks The Bank of England s 2% GDP forecast may be too optimistic given headwinds to consumption growth Global equity markets saw a rotation out of Growth stocks into Value stocks led by the buying of Financials; Technology stocks performed especially poorly Japanese equities were the standout performer in the first half of the year, buoyed by the weaker currency Oil prices fell 4.4% during the month thanks to rising US supply; we expect prices to continue to trade within their current range 2 Source: and Bloomberg as at

3 Performance Portfolio profile Distribution Technology Risk score 3 months (%) 3 months Multi-Asset Composite Benchmark (%) 6 months (%) 6 months Multi-Asset Composite Benchmark (%) 1 Year (%) 1 Year Multi-Asset Composite Benchmark (%) Since launch (%)* Since launch Multi-Asset Composite Benchmark (%) Defensive Income (OE) Balanced Income (OE) Balanced Growth (OE) Growth (OE) Source: as at All figures total return only. * Launch date Benchmark: Smith & Williamson Multi-Asset Composite Benchmark. 3

4 Investment process The MPS team The Process The Result Your Smith & Williamson Portfolio James Burns Head of Investment Companies Research Strategic Asset Allocation Distribution Technology Risk Graded Tactical Asset Allocation Smith & Williamson research 100% 90% 80% 70% Genevra Banszky von Ambroz Open Ended Funds and Investment Companies Analyst David Amphlett-Lewis Head of Passive Research Supported by a network of over 55 investment professionals responsible for investment research. Security Selection Open Ended Funds Passives 60% 50% 40% 30% 20% 10% 0% Defensive Income (OE) Property Equities - Developed UK Balanced Income (OE) Equities - Developing International Credit Bonds Bonds - Sovereign Balanced Growth (OE) Other Alt Growth (OE) Equities - Developed International Global High Yield Bonds - Index Linked Cash Source: and StatPro as at

5 Defensive Income (OE) Portfolio Profile The strategy aims to deliver defensive total returns with an emphasis on also offering higher than average income. The portfolio may invest between 35% and 60% in global stock market investments subject to market conditions with the remainder in defensive asset classes. Asset breakdown Product mix S&W 4 - Defensive Income portfolio profile* Asset Class Portfolio (%) Benchmark (%) Active (%) Cash UK Bonds International Bonds Index Linked Global High Yield Gilts UK Europe North America Japan Pacific Property Other Alt Estimated yield** 2.7% Portfolio expense estimate** 0.8% Note with a view to ensuring volatility remains consistent with the risk level. The asset allocation is likely to change in order to offer exposure to favoured asset classes and regions in line with Smith & Williamson s strategic views, and with the risk levels associated with the portfolio s objective. As a result the current mix of defensive and growth investments within the portfolio will change and therefore differ significantly over time. *Source: Smith & Williamson Investment Management as at Benchmark updated as at Benchmark: Smith & Williamson Multi-Asset Composite Benchmark. **Estimated yield and Portfolio expense estimate (%) as at Pie chart data as at

6 Balanced Income (OE) Portfolio Profile The strategy aims to deliver balanced returns through a combination of investment income and capital growth. The portfolio is diversified across major asset classes and may invest between 55% and 70% in global stock market investments subject to market conditions. Asset breakdown Product mix S&W 5 Balanced Income portfolio profile* Asset Class Portfolio (%) Benchmark (%) Active (%) Cash UK Bonds Index Linked Global High Yield Gilts UK Europe North America Japan Pacific Emerging Markets Property Other Alt Estimated yield** 2.6% Portfolio expense estimate** 0.8% Note: Investors should note that this discretionary strategy is actively managed with a view to ensuring volatility remains consistent with the risk level. The asset allocation is likely to change in order to offer exposure to favoured asset classes and regions in line with Smith & Williamson s strategic views, and with the risk levels associated with the portfolio s objective. As a result the current mix of defensive and growth investments within the portfolio will change and therefore differ significantly over time. *Source: Smith & Williamson Investment Management as at Benchmark updated as at Benchmark: Smith & Williamson Multi-Asset Composite Benchmark. **Estimated yield and Portfolio expense estimate (%) as at Pie chart data as at

7 Balanced Growth (OE) Portfolio Profile The strategy aims to deliver balanced growth through investing actively across defensive and riskier asset classes. The portfolio is biased towards global stock market investments and may invest between 65% and 85% in equities with the remainder diversified across defensive asset classes. Asset breakdown Product mix S&W 6 Balanced Growth portfolio profile* Asset Class Portfolio (%) Benchmark (%) Active (%) Cash UK Bonds Global High Yield UK Europe North America Japan Pacific Emerging Markets Property Other Alt Estimated yield** 2.4% Portfolio expense estimate** 0.9% Note: Investors should note that this discretionary strategy is actively managed with a view to ensuring volatility remains consistent with the risk level. The asset allocation is likely to change in order to offer exposure to favoured asset classes and regions in line with Smith & Williamson s strategic views, and with the risk levels associated with the portfolio s objective. As a result the current mix of defensive and growth investments within the portfolio will change and therefore differ significantly over time. *Source: Smith & Williamson Investment Management as at Benchmarks updated as at Benchmark: Smith & Williamson Multi-Asset Composite Benchmark. **Estimated yield and Portfolio expense estimate (%) as at Pie chart data as at

8 Growth (OE) Portfolio Profile The strategy aims to deliver long-term growth by investing predominantly in stock markets across a wide range of geographic regions. The portfolio will always retain an emphasis on developed markets, and in particular investments in UK company shares. The portfolio will normally be more than 90% invested in stock markets but may be up to 15% in defensive asset classes. S&W 7 Growth portfolio profile* Asset Class Portfolio (%) Benchmark (%) Active (%) Cash UK Bonds Global High Yield UK Europe North America Japan Pacific Emerging Markets Property Other Alt Asset breakdown Product mix Estimated yield** 2.0% Portfolio expense estimate** 0.9% Note: Investors should note that this discretionary strategy is actively managed with a view to ensuring volatility remains consistent with the risk level. The asset allocation is likely to change in order to offer exposure to favoured asset classes and regions in line with Smith & Williamson s strategic views, and with the risk levels associated with the portfolio s objective. As a result the current mix of defensive and growth investments within the portfolio will change and therefore differ significantly over time. *Source: Smith & Williamson Investment Management as at Benchmark updated as at Benchmark: Smith & Williamson Multi-Asset Composite Benchmark. **Estimated yield and Portfolio expense estimate (%) as at Pie chart data as at

9 S&W Range activity highlights past 12 months Name Reasons for trade Rationale Driver Jul 16 Sold FP Argonaut European Alpha Reducing exposure and switching into hedged class due to currency concerns Jul 16 Bought FP Argonaut European Alpha (Hedged) Adopting hedged exposure to European equities Allocation Macro Jul 16 Sold Liontrust Macro UK Growth Reducing exposure to manager following period of poor performance Switch Jul 16 Bought Artemis UK Select Increasing exposure to growth themes through proven manager at new house Style Manager Sep 16 Reduced AXA US Short Duration High Yield Trimming exposure to high yield following good performance Valuation Macro Sep 16 Increased Hermes Global Emerging Markets Increasing Emerging Market weighting towards benchmark level Allocation Macro Dec 16 Sold Fidelity Enhanced Income Switching to manager with historically lower beta Switch Dec 16 Bought RWC Enhanced Income Introducing a manager with historically lower beta Style Manager Dec 16 Reduced Vanguard US Equity Index Profit taking from US allocation following strong performance Allocation Valuation Feb 17 Sold Marlborough Multi-Cap Income Reducing UK small cap exposure Feb 17 Increased IP UK Strategic Income Increasing favoured manager following an atypical period of softer performance Allocation Macro Feb 17 Increased RWC Enhanced Income Increasing large cap UK exposure, whilst maintaining portfolio yield Jun 17 Sold Invesco Perpetual Tactical Bond Increasing maturity of bond allocation by reducing short-dated funds Jun 17 Increased Royal London Corporate Bond Increasing maturity of bond allocation by adding to manager with more duration Allocation Macro Jun 17 Sold JP Morgan Japan (H) Removing Yen hedge on Japanese equity exposure Jun 17 Bought JP Morgan Japan Switching into Yen exposed class of growth focused Japanese manager Allocation Macro Jun 17 Sold FP Argonaut European Alpha (H) Sold following disappointing performance from the manager Switch Jun 17 Bought BlackRock European Dynamic (H) Increased European equities using a manager with a stock focused approach Style Manager Note: The above is representative of transactions widely executed across the S&W range and should not be construed as comprehensive of all transactions in all models. Individual holdings changes in specific S&W strategies may therefore not be detailed. Those shown will be those which have been applied across more than one of the S&W strategies and seek to capture the direction of travel of asset allocation of the S&W range over the period shown. Source: as at

10 Stock stories Legal & General High Income Trust This open-ended fund adopts a well-diversified approach to investing in bonds issued by companies assessed as less able to guarantee repayment of their debts, and which therefore offer much higher income than traditional investment grade debt securities. Managed since 2011 by Martin Reeves, previously of Alliance Bernstein, the fund looks to avoid the debt of complex financial companies such as banks, instead focusing on those where their bottom up industry research can deliver value through avoiding insolvencies, and maintaining the income profile. HSBC FTSE 100 Index This open-ended fund seeks to deliver consistent benchmark returns by replicating the performance of the largest 100 companies in the UK market. The fund provides a relatively low cost way of tracking the FTSE 100 with an ongoing charge ratio of 0.18%. It takes a full physical replication approach and will generally invest in companies in the same proportions as their weighting in the index. Man GLG Undervalued Assets BlackRock European Dynamic (H) Fidelity Asia An open-ended fund run by Henry Dixon and Jack Barratt since inception in October 2013, although they had previously managed a similar value orientated approach at Matterley. The process seeks to identify undervalued and unloved companies that have the potential for recovery in the longer term through thorough analysis of their balance sheets. This differentiated approach aims to discover attractively priced investments in all market conditions such that their portfolio should always be better value than the market. This open-ended fund is managed by long serving and highly regarded manager Alister Hibbert. He aims to achieve longterm capital growth by taking a flexible all-cap approach that will invest in a focused portfolio of between 35 and 65 stocks. The process is primarily bottom-up, but top-down views form trends and drivers which help to prioritise team research. Turnover can be high and significant over and underweight positions can arise. We currently hold the hedged share class of the fund meaning we are not disadvantaged should the euro weaken against sterling. The fund manager is the experienced Teera Chanpongsang, who has been running Asian equities at Fidelity since 1994 and this fund since January He is not restricted in the choice of company either by size or industry, or in terms of the geographical split of the portfolio, which is largely determined by the availability of attractive investment opportunities, rather than the outlook for each market. The result is a blended list of growth and value stocks and one of the most diversified funds in the Asia Ex. Japan sector. 10

11 Appendix

12 Awards We have been recognised by various industry experts, judging panels and awarding bodies for our investment performance and client service. We are proud of these achievements, and outlined below are a number of industry awards we have recently won including: STEP award 2014/15: Winner of the Private Client Multi-Family Office Team of the Year STEP awards 2013/14: Winner of Investment Team of the Year PAM awards 2013 : Winner of Investment Performance for Defensive Portfolios (2013) Citywire Wealth Manager awards 2012 and 2013: Winner of Best Overall Large Firm (2012) and Winner of Best Steady Growth Portfolio (2013) Spear s Wealth Management awards 2012 and 2013: Winner Asset Management Firm of the Year for High Net Worth Portfolio Adviser Wealth Management awards 2014 (Large Firm): Platinum Winner Best Absolute Return Portfolio Manager. Gold Winner - Best Aggressive and Best Cautious Portfolio Manager Portfolio Adviser Wealth Management awards 2015 (Large Firm): Platinum Winners Best Balanced Portfolio Manager and Best Aggressive Portfolio Manager Past performance is not a guide to future performance. 12

13 MPS Range characteristics 4 Defensive Income 5 Balanced Income 6 Balanced Growth 7 Growth To deliver defensive total returns with an emphasis on also offering higher than average income. The portfolio may invest between 35% and 60% in global stock market investments subject to market conditions with the remainder in defensive asset classes. To deliver balanced returns through a combination of investment income and capital growth. The portfolio is diversified across major asset classes and may invest between 55% and 70% in global stock market investments subject to market conditions. To deliver balanced growth through investing actively across defensive and riskier asset classes. The portfolio is biased towards global stock market investments and may invest between 65% and 85% in equities with the remainder diversified across defensive asset classes. To deliver long-term growth by investing predominantly in stock markets across a wide range of geographic regions. The portfolio has an emphasis on developed markets, and in particular investments in UK company shares. The portfolio may be up to 15% in defensive asset classes. DT allocation equity weight(%) DT long-term volatility estimate (%) 1 Multi-Asset Composite volatility (since launch) (%) S&W volatility (since launch) (%) Multi-Asset Composite volatility (1 Year) (%) 2 S&W portfolio volatility (1 year) (%) Underlying portfolio yield estimate (%) Portfolio expense estimate (%) Portfolio security count Distribution Technology; Q Capital Markets Assumption Update 2 (unaudited), Bloomberg and Morningstar as at All figures total return. The estimated yield is for historic 12 months, as at Source: Underlying holdings charges are estimated using platform information where possible, and represent the weighted average of historic costs charged within the underlying collective investment scheme. 13

14 Contact us Mickey Morrissey Partner, Head of UK Retail Sales t: e: Mickey joined Smith & Williamson in December 2012 as Head of UK IFA Sales and was appointed Head of Distribution in July He is responsible for growing intermediated sales into the DFM, Managed Portfolio Service and MultiManager business lines. Previously, Mickey was Head of Distribution at Liontrust Asset Management for ten years and prior to that worked at Merrill Lynch Investment Managers for twelve years. Julian Polnik DFM Business Development t: e: Julian joined Smith and Williamson Investment Management in November 2011 as Head of Broker Desk. Julian has a BA Honours degree in Politics and Social Psychology from Loughborough University and a Diploma in Management Studies from the University of Westminster. He is a Chartered Fellow of the Chartered Institute for Securities and Investment. Lucy Mitchell Associate Director t: e: lucy.mitchell@smithandwilliamson.com Lucy joined Smith & Williamson in April 2015 as Associate Director primarily to develop further the Managed Portfolio Service via platforms as well as the Bespoke DFM offering for the intermediary market. Lucy graduated from the University of Birmingham with a BSc in Economics and Political Science. She has also completed the IMC and Investment Advice Diploma (IAD). 14

15 Disclaimer The value of investments can go down as well as up and investors may not receive back the original amount invested. Past performance is not a guide to future performance. There can be no assurance that any portfolio will achieve its investment objective, the target return or any volatility target. Any target return or volatility target shown is neither guaranteed nor binding on the Manager. When investments are made in overseas securities, movements in exchange rates may have an effect on the value of that investment. The effect may be favourable or unfavourable. Investing in alternative assets involves higher risks than traditional investments and may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain. Investments in emerging markets may involve a higher element of risk due to political and economic instability and underdeveloped markets and systems. Please note that bond funds may not behave like direct investments in the underlying bonds themselves. By investing in bond funds the certainty of a fixed income for a fixed period with a fixed return of capital are lost. These profiles are tailored to the output of a Distribution Technology (DT) risk profiling process which is complex and not for use without assistance from a financial adviser. Performance outcomes will depend on the rebalancing and timing of entry and exit to the strategy on the platform. This document contains information believed to be reliable but no guarantee, warranty or representation, express or implied, is given as to their accuracy or completeness. This is neither an offer nor a solicitation to buy or sell any investment referred to in this document. documents may contain future statements which are based on our current opinions, expectations and projections. does not undertake any obligation to update or revise any future statements. Actual results could differ materially from those anticipated. Appropriate advice should be taken before entering into transactions. No responsibility can be accepted for any loss arising from action taken or refrained from based on this publication. In relation to these Smith & Williamson s portfolio profiles, is unable to assess or provide advice on the suitability of this profile for individual circumstances. No consideration has been given to the suitability of any investment profile for the particular needs of any recipient. SWIM will not be responsible to any other person for providing the protections afforded to retail investors or for advising on any investment, as a result of using this information. Issued by which is a trading name of LLP. Authorised and regulated by the Financial Conduct Authority (registration number is ). Ref: sb 15