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Balanced Income Portfolio Update - Summer 2018

20 July 2018

Second quarter performance analysis for the St. James's Place Balanced Income Portfolio.

The Balanced Income delivered positive returns over the quarter, benefiting especially from its equity exposure.

In the UK, sterling depreciated 5.7% against the dollar, as discussions over Brexit stalled, inflation slipped, and GDP growth continued to disappoint – figures for the first three months of the year showed it had been the fifth consecutive quarter in which the UK grew more slowly than the eurozone. Yet the falling pound buoyed equities, and the FTSE 100 posted its strongest quarterly returns in five years. Other factors also boosted FTSE 100 returns, not least the high oil price – the index has a heavy weighting towards energy companies.

The Equity Income fund, managed by RWC Partners, benefited from this trend, but also from positive stock selection. The fund has a significant holding in BP, which rose rapidly over the period. In April, the company reported a 71% surge in profits. Yet Tesco, another holding in the fund, performed still more strongly over the period. Its share price rose almost 30%, despite the ongoing pressures faced by the UK supermarket sector. The UK’s largest supermarket chain is on track for its tenth consecutive quarter of rising sales, having simplified its offering to focus more on its core services – the closure of Tesco Direct was announced during the quarter.

“Tesco is working far better with its suppliers than it used to,” said Nick Purves of RWC. “It used to set very tight criteria for its suppliers, allowing competitors to access anything that fell short of those criteria at a much lower price. Now, however, it’s cutting off the discounters’ ready source of cheaper goods. Operationally, Tesco has changed dramatically to match Aldi and Lidl’s 3,000-product businesses.”

The UK & International Income fund, managed by Artemis, also achieved strong returns over the period. Among its best-performing stocks was Drax, a UK electrical power company that rose by more than 10% through the quarter. Sentiment among analysts towards the company improved markedly; a report by Bank of America Merrill Lynch released in April lauded Drax’s £50 million share buyback, and emphasised that most of the company’s profits are underpinned by government support.

The UK High Income fund, managed by Woodford Investment Management, also boosted overall Portfolio returns.

Bonds were a relative drag on Portfolio performance, but actual losses were fairly marginal. The Investment Grade Corporate Bond and Diversified Bond funds fell only very slightly, while the Strategic Income fund slipped a little further.

You may also like to access the full Balanced Income Portfolio Update.


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.

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