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Deferred Income Portfolio Update

25 January 2018

Winter Review: Fourth quarter performance analysis for the Deferred Income Portfolio.

The Deferred Income Portfolio benefited from exposure to equities, and posted a positive return over the quarter.

After a mixed year, the FTSE 100 gained more than 4% in the final quarter, spurred on by improving growth figures, as well as by political developments. The UK & International Income fund was a major contributor to Portfolio performance. “Part of the equity rise in the final quarter was down to progress in Brexit and chimed in with our view that it would only take a little good news to help the UK market out of its relative malaise,” said Adrian Frost of Artemis. “Predicting sunnier times for Brexit and politics would take courage; nevertheless, it wouldn’t take much for UK equities to extend the outperformance seen in December.”

One of the turnaround stories of the year was the UK High Income fund, which made a significant contribution to returns in the final three months of the year, following a tough third quarter.  The fund was hit earlier in the year due to stockspecific issues, but benefited late in the year from its overweight to real estate. British Land Company, one of the UK’s biggest property developers, is a significant holding within the fund, and rose more than 10% over the period, buoyed by a positive property leasing report.

The Worldwide Income fund likewise rebounded from a weak third quarter, in which it had been hit by overweight exposure to consumer staples (notably tobacco), to finish the year well. In part, this was due to a turnaround for the consumer staples sector, but performance was also helped by its holding in 20th Century Fox, Microsoft and Nike.

It was a good period for high-yield bonds, as investors sought out new opportunities and were willing to take on risk.  The Strategic Income fund made a significant contribution to returns. MidOcean, which runs the US high-yield bond segment of the fund, benefited from the broader market rally that accompanied passage of the tax-reform bill through Congress and the Federal Reserve decision to raise interest rates by 0.25% in December. “We initiated several new positions in November,” said Jim Wiant of MidOcean. “One of the names was Envision, a leading provider of outsourced physician staffing and an operator of ambulatory [outpatient] surgery centres.  The bonds have traded up since we bought them.”

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


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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