Adventurous Portfolio Update - Autumn 2018
Third quarter performance analysis for the St. James's Place Adventurous Portfolio.
The Adventurous Portfolio delivered a marginally negative return over the period, as high exposure to emerging markets and an underweight to US equities weighed on performance.
It has been a difficult year for investors in emerging markets (EMs). The White House’s imposition of tariffs on a range of imports – mostly from China – has hit sentiment while a rising dollar has made it harder for companies in emerging markets to service their debt, much of which is denominated in dollars. These trends have hit investor sentiment towards EMs.
The Emerging Markets Equity fund, managed by Wasatch, was the largest detractor from Portfolio performance over the period, suffering from its allocation to technology stocks. Silergy Corp, a Chinese manufacturer of integrated circuits, particularly struggled, as did 51job, a human resources company. The Asia Pacific fund also detracted, albeit more marginally, due to its allocation to financials. Kotak Mahindra, an Indian bank, particularly weighed on returns, albeit after a strong second quarter.
Beyond a few broader trends, however, indicators in EMs were more varied; political and financial crises in Brazil, Argentina, and Turkey were matched by sustained growth in India, China and Indonesia, and by tailwinds for major oil producers. The Emerging Markets fund benefited from its holding in Page Industries, an Indian undergarments company whose quarterly net profits surged 46%. Indeed, there were signs of investor sentiment towards EMs turning by quarter-end.
Short-term underperformance by the Portfolio also reflected its relatively low exposure to the US market. The North American fund, managed by Aristotle, was the largest contributor to Portfolio returns, gaining in part due to its holdings in the healthcare sector. Among these was Medtronic, where second quarter results outperformed expectations thanks to strong sales of its diabetes and heart devices.
The Japan fund was the other significant positive contributor to Portfolio returns. Positive growth momentum and a third election victory for Shinzo Abe were both good for confidence, and Japanese stocks enjoyed a strong period. Kato Works and Namura Shipbuilding were among the industrial holdings to benefit.
The UK & General Progressive fund, co-managed by Majedie and Blackrock, struggled through the period. GVC holdings, held by Majedie, and Easyjet, held by Blackrock, weighed on performance. The Global Smaller Companies fund, managed by Paradice, also detracted, with consumer staples a particular lowlight – Pioneer Food Group and Tata Global Beverages both fell over the quarter.
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The price of funds and the income from them may go down as well as up. You may get back less than the amount invested.
Portfolio fund allocations are not rebalanced automatically. Thus Client Portfolios may not include all of the stocks mentioned in the commentary, as fund allocations may vary between clients, leading to different investment experiences.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.