For investment professionals only October 2017 MPS Q3 2017 Review & Q4 Strategy Positioning Presented by: Simon Doherty, Lead MPS Portfolio Manager Hosted by: Scott Stevens, Head of Business Development
Q3 2017 A(NOTHER!) POSITIVE PERIOD FOR RISK ASSETS Source: Quilter Cheviot, Financial Express, 18 October 2017. All figures to 30 September 2017. Past performance is not a guarantee of future results. 2
2017 YEAR-TO-DATE (YTD) RETURNS Source: Quilter Cheviot, Financial Express, 18 October 2017. All figures to 30 September 2017. Past performance is not a guarantee of future results. 3
MPS PERFORMANCE REVIEW TO 30 SEPTEMBER 2017 PERFORMANCE TAKEAWAYS Strategy / Benchmark / IA Sector 3 Months (%) YTD (%) 1 Year (%) 30/06/2017 to 30/09/2017 31/12/2016 to 30/09/2017 30/09/2016 to 30/09/2017 1) Global equity markets advanced in Q3 2017 2) Gilts fell in September to post negative quarter 3) Q3 MPS returns positive on absolute basis 4) Q3 MPS performance negative on relative basis 5) YTD returns remain positive across strategies 6) No changes made to strategies in Q3 Quilter Cheviot MPS Global Growth (Platform) 1.5 6.9 14.4 FTSE UK Private Investor Global Growth 1.9 8.4 15.6 IA Global 1.5 8.7 14.9 Quilter Cheviot MPS Growth (Platform) 1.3 6.4 11.1 FTSE UK Private Investor Growth 1.7 6.7 11.1 IA Flexible Investment 1.1 7.3 10.5 Quilter Cheviot MPS Balanced (Platform) 1.1 5.7 9.0 FTSE UK Private Investor Balanced 1.3 5.6 8.8 IA Mixed Investment 40%-85% Shares 0.9 6.4 9.1 Quilter Cheviot MPS Global Income (Platform) 0.8 5.7 9.5 MPS Global Income Composite Index 1.4 6.3 10.1 IA Mixed Investment 40%-85% Shares 0.9 6.4 9.1 Quilter Cheviot MPS Income (Platform) 0.9 4.9 6.5 FTSE UK Private Investor Income 1.1 4.8 6.7 IA Mixed Investment 20%-60% Shares 0.6 4.8 6.2 Quilter Cheviot MPS Conservative (Platform) 0.6 3.7 3.5 FTSE UK Private Investor Conservative 0.7 3.4 4.1 IA Mixed Investment 20%-60% Shares 0.6 4.8 6.2 Source: Quilter Cheviot, Financial Express, 17 October 2017. All figures to 30 September 2017. Strategy performance is shown gross of management fees with all income reinvested, real returns may vary. IA Sector returns are net of the underlying fund charges whilst benchmarks will not include any charges. Past performance is not a guarantee of future results. 4
RELATIVE CONTRIBUTORS Q3 2017 UK Equity Old Mutual UK Alpha River & Mercantile UK Equity Smaller Companies Europe ex UK Equity JOHCM Continental European Japan Equity Schroder Tokyo Fixed Interest Allianz Gilt Yield PIMCO Global Investment Grade Credit Hedge / Absolute Return Old Mutual Global Equity Absolute Return 5
RELATIVE DETRACTORS Q3 2017 UK Equity CF Woodford Equity Income Investec UK Alpha North America Equity Schroder US Mid Cap Europe ex UK Equity Henderson European Selected Opportunities Asia Pacific ex Japan Equity Stewart Investors Asia Pacific Leaders Emerging Markets Equity Henderson Emerging Markets Opportunities Lazard Emerging Markets 6
FUND FOCUS: CF WOODFORD EQUITY INCOME Significant change to fund positioning in 2017 but change to investment process as well? Fund lagged considerably in Q3 Joint-smallest holding in UK Equity exposure Source: Quilter Cheviot, Style Research Limited. 7
MPS REBALANCE OCTOBER 2017: KEY TAKEAWAYS No changes made to the MPS strategies in Q3 In October: Latest QC Tactical Asset Allocation changes implemented across core strategies North America Equity exposure marginally increased (adding to overweight position) Some profits taken on Europe ex UK Equity exposure (whilst retaining overweight position) At the fund selection level: BNY Mellon US Equity Income introduced in MPS Global Income strategy 8
EUROPE REVISITED: HENDERSON EUROPEAN SELECTED OPPORTUNITIES QC outlook on Europe ex UK equities remains positive John Bennett (manager of fund) retains excellent long-term track record, but underperformed in 2016 Fund Positioning August 2016 2017 OUTLOOK In 2017 Manager became more positive in his outlook, reflected in fund positioning: Reduced Healthcare Added to Banks Sold Growth Bought Value Fund Positioning June 2017 Fund Positioning August 2017 2017 OUTLOOK fund added within strategies in June 2017 Source: Quilter Cheviot, Style Research Limited. 9
EUROPE REVISITED: JOHCM CONTINENTAL EUROPEAN Fund managed by Paul Wild since 2007 Paired alongside Henderson European Selected Opportunities on an equal-weighted basis Two core managers positive in their outlook and positioning Complementary in terms of coverage and sector distribution (see below) The funds align with QC s constructive outlook and overweight allocation to the region JOHCM positioning relative to market 2017 OUTLOOK JOHCM positioning relative to Henderson 2017 OUTLOOK Source: Quilter Cheviot, Style Research Limited. 10
SUMMARY OCTOBER 2017 Global growth modest synchronised recovery All regions surprising on the upside Manufacturing PMI s and global trade suggest expansion will continue Growth momentum to increase in US Monetary policy central banks removing accommodation Increasing chance of UK rise in November US Fed to commence balance sheet reduction, one more rate hike this year ECB, BoJ and UK all likely to rein in QE Inflation temporary pressures due to commodity price normalisation Assumption energy costs/inflation uptick temporary, but Reversal of foreign worker flow to US, Eurozone and UK could lead to higher inflation Fiscal sustainability and deleveraging Structural reforms remain gradual and incremental Austerity abandoned but high public debt/gdp means debt servicing burdensome Financial assets Sovereign bonds yields face normalisation of the term premia = expectation for higher yields Equities to benefit from rising nominal GDP and higher corporate earnings (rising yields usually means derating) 11
FORWARD RETURNS LIKELY TO BE LOWER 12
EQUITIES SENTIMENT, INVESTORS NOT OVER OPTIMISTIC Source: Citi Group, Pulse, 8 September 2017 13
MPS BALANCED TACTICAL POSITIONING OCTOBER 17 Source: Quilter Cheviot. All data to 16 October 2017. 14
ANY QUESTIONS? Thank you for joining us 15
FOR THE LATEST INFORMATION We issue a broad range of communications for advisers and their clients, providing you with our views on current investment themes: MPS factsheets / Market & Rebalance Commentaries sent via email and available online; IFA Newsletter monthly issue via email with focused topics of interest to our IFA connections; Weekly, Monthly and Quarterly Market Commentaries, sent via email and available online; Daily Morning Note an update on the markets, available every morning via email and online; Social media: Website:https://www.quiltercheviot.com/uk/financial -adviser/our-investment-solutions/managedportfolio-service-on-platform/ Contact us: marketing@quiltercheviot.com 16
DISCLAIMER This document is directed at and is intended to be viewed by investment professionals only; it should not be disseminated to or relied upon by any other person. Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future return. You may not recover what you invest. Inclusion of performance figures for less than a complete 12 month period is therefore intended for investment professionals for their information purposes only and should not be utilised beyond this document for any other purpose. To this effect, Quilter Cheviot Limited recommends that performance information shown to any other person is based on and shows complete 12 month periods. This presentation has been prepared for information purposes only and is not a solicitation or an offer to buy or sell any security. It does not purport to be a complete description of our investment policy, markets or any securities referred to in the material. The information on which the presentation is based is deemed to be reliable, but we have not independently verified such information and we do not guarantee its accuracy or completeness. You may not recover what you invest. Changes in exchange rates may have an adverse effect on the value, price or income of foreign currency denominated securities. The level of yield actually achieved on your investment will be dependent on the tax treatment of the product you have invested in and your personal tax circumstances. Levels and bases of taxation can change. Investments or investment services referred to may not be suitable for all recipients. Strategy returns are calculated as total returns excluding Quilter Cheviot Limited annual/initial charges and inclusive of underlying fund charges with all income reinvested. As Strategy performance is based on all income being reinvested, real portfolio performance may vary from Strategy performance. Prices for the purpose of calculating Strategy performance are obtained on a best endeavours basis and may vary depending on actual dealing dates. IA Sector returns are net of the underlying manager fund charges whilst benchmarks will not include any charges. Quilter Cheviot Limited is registered in England with number 01923571, registered office at One Kingsway, London WC2B 6AN. Quilter Cheviot Limited is a member of the London Stock Exchange, authorised and regulated by the UK Financial Conduct Authority; and regulated under the Financial Services (Jersey) Law 1998 by the Jersey Financial Services Commission for the conduct of investment business in Jersey and by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law 1987 to carry on investment business in the Bailiwick of Guernsey; is regulated by the Dubai Financial Services Authority as a Representative Office (and its business name in Dubai is Quilter Cheviot Limited (DIFC Representative Office)); and has established a branch in Dublin, Ireland with number 904906 and is regulated by the Central Bank of Ireland for conduct of business rules. Accordingly, in some respects the regulatory system that applies will be different from that of the United Kingdom. This document is intended solely for the addressee and may contain confidential or privileged information. If you have received this document in error, please permanently destroy it and do not use, copy or disclose it. 17