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Deferred Income Portfolio Update - Winter 2018

23 January 2019

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

The Deferred Income Portfolio declined over the quarter due to greater exposure to risk assets.

While there was no definitive cause of the fourth quarter downturn for global risk assets, many proximate causes were apparent, from slowing growth in China to the Federal Reserve’s continuing programme of quantitative tightening. Earlier in the year, the S&P 500 had continued on its historic bull run, leaving indices in other leading economies far behind. In the fourth quarter, however, it took the world’s equity markets down with it, including the FTSE All-Share. The falls buffeted the UK & International Income fund, managed by Artemis, leaving it down for the year.

“The UK remained a truly domestic affair and international investors continued to give our market a wide berth, as the cocktail of Brexit and politics continued to lack appeal, notwithstanding that it is a very cheap cocktail!” reported Artemis. “Within this difficult market, unsurprisingly, the more defensive shares such as pharmaceuticals and consumer staples proved more resilient.”

Another fund to suffer as a result of political uncertainty and market volatility in Britain was the UK High Income fund, managed by Woodford Investment Management. A range of holdings fell victim to negative investor sentiment towards the UK over the period. There were also stock-specific issues, among them a combination of rising regulatory pressure and upstart e-cigarette competitors for Bristol-based Imperial Brands, one of the world’s largest tobacco companies.

“The UK economy is doing fine, with a strong labour market, the return of real wage growth and improved government finances all important ingredients for a benign backdrop,” Woodford Investment Management reported in January. “However, these benefits have been overshadowed by continued negativity towards UK-exposed stocks. Most of the domestically-focused businesses we invested in did nothing wrong during the quarter … but this, of course, is exactly the sort of market inefficiency that we exist to exploit. We remain convinced we will ultimately be rewarded.”

The Equity Income fund, managed by RWC Partners, also suffered from negative sentiment towards the UK, and detracted from broader Portfolio performance. In October, RWC was obliged to sell Sky, which accounted for 5.5% of the fund. The largest detractor, however, was Capita, the outsourcing company. Oil majors also weighed on the fund.

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.

FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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.

The opinions expressed by fund managers are subject to change at any time due to changes in market or economic conditions. This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any strategy. Third party views are not necessarily shared by other investment managers or St. James's Place Wealth Management.


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