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Deferred Income Portfolio Update - Spring 2018

20 April 2018

First quarter performance analysis for the St. James's Place Deferred Income Portfolio.

The Deferred Income Portfolio fell over the quarter.

The Portfolio includes a mix of bond and equity funds, but has a bias towards equities. This emphasis makes it more vulnerable to short-term market corrections and, against a volatile backdrop, it suffered over the first quarter.

Equity markets worldwide suffered their worst quarter since 2015, as worries over rising interest rates gave way to concerns over trade protectionism.  The resulting correction was relatively indiscriminate, although telecoms was one of the more adversely-affected sectors on markets.  The Equity Income fund, managed by RWC, posted losses due largely to its exposure to Vodafone and BT, both of which fell by more than 15% over the quarter.

Concerns about rising competition within the industry affected the share prices of both companies, while investors worried that Vodafone’s acquisition plans might lead the company to cut its dividend. BT suffered from longer-standing issues – its share price has been falling since news broke of “improper accounting practices” in its Italian unit last year.  The company has also been altering its business model, leading some investors to question its near-term trading outlook.

Despite larger falls in some of the equity-based funds, overall Portfolio losses were somewhat mitigated by exposure to fixed income investments. The Corporate Bond fund slipped slightly over the period, but benefited from lower duration (the sensitivity to changes – or expected changes – to interest rates).

The UK High Income fund, managed by Woodford Investment Management, endured a difficult quarter on price falls in the IT sector.  The Worldwide Income fund, managed by Investec, also suffered, partly due to holdings in Imperial Brands, British American Tobacco and Japan Tobacco; as consumer staples felt the full force of the equity market correction over the period. Nevertheless, other holdings stemmed losses, among them 21st Century Fox, which was the subject of takeover interest from Disney.

The Strategic Income fund, a multi-manager mandate with investments across equities and bonds, also fell over the period, although losses were relatively muted. The UK & International Income fund was a more significant detractor; energy exposures were costly during the period – the fund has significant holdings in both BP and Shell.

You may also like to access the full Deferred 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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