How (if at all) are you repositioning your clients’ portfolios following the result of the EU referendum?
We have actually done very little since the vote as we had already positioned our portfolios towards the lower end of our equity ranges and had reduced our exposure to UK funds somewhat and leant towards global funds, real return and those which held companies with higher overseas earnings to take advantage of any depreciation of Sterling. We had also previously reduced our weighting in property funds which as we suspected would turn out to be big losers upon a Brexit vote.
It has always been our belief that good managers will protect on the downside as well as deliver on the upside and this has yet again proven to be the case with most of our chosen managers.
Whilst we obviously saw some funds fall we also had funds which fared well due to their holdings. Fundsmith (+6.2%), Veritas (+6.6%), Newton (+5.8%) and Lindsell Trian Global (+3.1%) all had good absolute days, although this was mostly currency driven. However our equity funds also had a good relative day with Evenlode, Woodford, Lindsell Train, Troy Trojan, City of London IT, JPM Equity Income, Jupiter European, Stewart Asia Pac Leaders, Fundsmith, Veritas, and Newton Global all outperforming.
Of particular interest is how our absolute return funds fared. Absolute Insight Equity Market Neutral was up 0.23%. Trojan gained over 2%, but this is not surprising given its very large gold weighting, and Invesco GTR (0.12%) provided positive returns as well. It was pleasing to see them protecting us from volatility.
Our Bond funds didn’t participate in the extraordinary movements in Gilts as credit, and in particular High Yield got sold off on Friday. M&G UK Inflation linked was down 0.87% as was M&G Optimal Income. Kames and Threadneedle High Yield funds were down 0.26% and 1.47% respectively. Not brilliant but not nearly as bad as one might have suspected.
We continue to believe that for our investors a long term investment approach which seeks excellent managers with strong processes will continue to deliver the outcomes they are seeking. Whilst the Brexit result will continue to dominate the headlines for a while yet and there will continue to be volatility in reaction to news from Europe and the Credit Ratings Agencies this is just yet one more bump on a long road for our clients. They are still faced with the same issues they were pre-referendum such as retirement, educating their children, passing wealth through the generations and all of the other financial planning topics we assist them with.