Investment Governance Meeting Summary – 29 August 2018

The Investment Advisory Committee (IAC) meet every quarter to review our Governed Range and funds.
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Strategic asset allocation

  • No SAA changes were recommended for the Governed Portfolios or GRIPs.

Tactical asset allocation

  • Last change made on 20th September 2018.
  • Underweight positioning in index linked government bonds were retained through the quarter but increased allocation brought this closer to benchmark.
  • After capitalising on weak markets in the first quarter to increase equity exposures, we took profits on our overweight position as prices recovered.
  • Long-term we remain positive on stocks and cautious on government bonds

Fund review

  • 16 RLAM funds on watch
  • 3 Funds under review
  • 11 Matrix funds on watch

Governed Portfolios

Number of Governed Portfolios outperforming benchmark 1 year 8/9
3 years 4/9
5 years 9/9
Number of Governed Portfolios within target volatility ranges 9/9
  • All of the Governed Portfolios are outperforming over five years.
  • Long term returns remain very strong.

Governed Retirement Income Portfolios

Number of GRIPs outperforming benchmark 1 year 5/5
3 years 5/5
Since launch 5/5
Number of GRIPs within short-term risk measure 5/5
Number of GRIPS within long-term risk measure 5/5

All GRIPs were within the tolerances for their income and fund value risk metrics.

*For more information on the risk metrics please see leaflet Managing Risk in GRIPs.

Tactical strategy

Equities down arrow    
Property     up arrow
Commodities no change    
High Yield no change    
Gilts     no change
Index Linked     no change
Corporate Bonds no change    
Absolute Return Strategies (including cash)     up arrow

Source: Tactical change – 7 June 2018, Royal London

  • Overweight positioning in equities were reduced throughout Q2, taking profits on our tactical allocations following market volatility in the first quarter. At the end of Q2 we remained positive on stocks but more cautious on government bonds due to ongoing concerns regarding inflation and interest rate increases. Moderate overweight allocations in equities and commodities have been maintained at the end of Q2.
  • At the regional equity level, we were overweight US and subsequently overweight Japanese equities which tend to benefit from a strong dollar. As emerging markets have difficulty in servicing dollar-denominated debt when the US currency strengthens, this allocation was moved from overweight to underweight. We maintained underweight positions in Asia Pacific (excluding Japan), UK and continental Europe.

The following funds were subject to action at the latest IAC meeting (29th August):

Stewart Investors Emerging Market Leaders Fund

  • The fund had a good quarter, outperforming the benchmark by 4.8%. The fund is minimally below benchmark over 1, 3 and 5 years. Morningstar have recently upgraded the fund from bronze to silver. We recommended maintaining the Stewart Investors Emerging Market Leaders Fund as our Emerging Market Specialist category choice within the Matrix. We will continue to closely monitor the performance of this fund with particular emphasis on the recent improvement in performance, and how successful management are in maintaining this turnaround into the longer term.

Stewart Investors Asia Pacific Leaders

  • The fund outperformed benchmark over the quarter and is only underperforming benchmark over 3 years. We recommended maintaining the Stewart Investors Asia Pacific Leaders Fund as an Asia Pacific Core Plus proposition.
  • Angus Tulloch retired from Stewart Investors in September 2017. In the years leading up to his retirement, Angus handed all of his portfolio management responsibilities, including management of the Asia Pacific Leaders Fund which has been ran by David Gait since April 2016. The investment philosophy and process which Angus established in 1988 remains largely the same now as it did then, though it has naturally evolved over the years. Stewart Investors emphasize a team approach and reiterate the belief that regardless of who is managing their funds, a consistent investment philosophy and process remains in place.
  • Angus maintains a connection with Stewart Investors through his position as a non-independent director for a recently launched investment trust.

Rathbones Global Alpha

  • The fund finished ahead of the benchmark over Q2 2018, 1 and 5 years, but remains marginally behind over three years. Positive contributors over the quarter include the funds positioning in US equity markets with the Edgewood Select US Select Growth Fund performing particularly strongly. Investment Trust selection was also positive for relative performance, particularly the US and Japanese selection. However, UK equity positioning, Emerging Markets equities and Equity Investment Trusts were the main detractors.

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