Spring Investment Review
Thank you for your continued support which has helped us to become even more widely recognised in recent months. Not only have we recently appeared on the cover of Wealth Manager, a well read and highly respected industry magazine, but we were also delighted to win an award at the Citywire Regional Stars event in March where we were awarded ‘Best DFM (Discretionary Fund Manager) in the South West’. Whilst we were thrilled to win, we will not rest on our laurels and will continue to work hard to achieve your financial aims and objectives.
As per our previous correspondence we now report to you on a quarterly basis and that report is subject to a number of checks before it is sent out, a month after the strike date. I propose to make this a shorter interim letter and continue with a longer summary at the half year, particularly as you may feel there’s been quite enough correspondence over the last few weeks and months.
To encapsulate the trials and tribulations of the last few months, it’s been such a long time since we had a significant correction in markets that even though we were not surprised and had cash for investment, the reality was far from comfortable. We had the initial fall in all assets in February and then a more specific pull back in equity markets, particularly the US and its dominant mega cap tech companies in March. The negative influence of rising inflation and the consequent interest rate rises, beyond that which was expected, further fuelled by the US and China squaring off over their trade relationships, led to a general ‘risk off’ environment and sharp falls in equities. Since the 31st of March we’ve had a strong recovery in valuations, making the enclosed report less than contemporaneous; please refer to your online valuation or contact your IFA for a more up to date figure.
Our apolitical investment themes include sustainable global growth, rising interest rates, an aging global consumer with a lagging UK local economy as Brexit, has a negative influence on sentiment towards our currency; weakening GBP sterling versus the US dollar. We are positive on risk assets after the recent pull back and have actively added to equities, during the falls in February and March which puts us more closely in line with the benchmark allocation to equities. Our collective mandates are invested on an asset allocation basis in common with our direct equity models although the direct equity models have greater clarity as to stock selection. Thus, when our house view as to economic circumstances is more accurate, the direct equity portfolios better reflect that view and perform well. In short, we don’t slavishly follow a benchmark, we invest for the long term, which means the performance won’t always have been in line. Since the 31st of March there’s been a recovery in asset values, specifically in the areas we have been invested within, such as infrastructure, UK overseas earning companies and overseas equities.
We have added to Asia/Emerging Markets and to Global Financials, reflecting our global growth and rising interest rates themes; we have tactical exposure to UK equities via our passive FTSE 100 holdings, as the fall in our currency puts upward pressure on our stock market (If you are buying UK shares from US Dollars the fall from $1.42 to $1.37 per pound makes buying UK shares cheaper in currency terms). We retain holdings listed in US Dollars and other overseas currencies as part of our long-term hedge against a falling GBP sterling, as Brexit’s practical realities become perhaps, problematic. Mr Carney’s pouring of cold water on the likelihood of a May interest rate rise and then the subsequent disappointing UK GDP (economic growth) numbers are both examples of news flow/statistics that support our investment themes.
We are happy that we are maintaining natural incomes supporting portfolio returns and we now hold historically low levels of cash, invested in February and March in the face of challenging market conditions. We kept to our process and will continue to do so; only in the event of a return to the ‘effervescence’ in equity markets we saw earlier this year, will we look to take profits – we want to be invested.
Important notice: This “Marketing Communication” is not an official research report or a product of the Casterbridge Wealth Investments Research Department. Unless indicated, all views expressed in this document are the views of the author(s). There is no assurance the trends mentioned will continue or that the forecasts discussed will be realised. Past performance may not be indicative of future results. With investing, your capital is at risk.