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Immediate Income Portfolio Update - Spring 2018

20 April 2018

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

The Immediate Income Portfolio recorded negative growth over the quarter.

The year opened with markets in parabolic mode, as investor enthusiasm continued on the back of Donald Trump’s tax cuts package and encouraging corporate earnings – not to mention coordinated global growth. Yet many investors focused on the 10-year US Treasury yield, which acts as a gauge of interest rate expectations. Rising inflation tends to precipitate an accelerating pace of interest rate rises – which can act as a brake on the prices of assets, including equities. As the yield moved ever closer to 3% (albeit without quite getting there), investor nerves were set on edge. The ensuing market correction was felt around the world.

Equity markets were the primary conduit of the sell-off. The Global Equity Income fund, managed by Manulife, fell significantly over the quarter. Fund performance suffered, primarily due to exposure to the telecoms sector, one of the most notable laggards.

Among its holdings, Verizon Communications, a US-listed, multinational telecoms giant, lost more than 15% of its market value. In fact, the company posted respectable fourth quarter revenue figures at the end of January, but its purchase of Yahoo last year had a big impact on the bottom line. At least part of the share price fall stemmed from short sellers betting that rising interest rates would put the company under increasing pressure to service larger debt liabilities as a result of last year’s acquisition.

It was a similarly tough quarter for the Worldwide Income fund, managed by Investec. Allocation to consumer staples and, specifically, a significant holding in Imperial Brands, the Bristol-based tobacco major founded in 1901, harmed the fund’s performance.  The company’s share price declined progressively over the period, as investors rotated out of ‘bond proxies’ like tobacco stocks – those companies reckoned to carry the lower risk profile of bonds and to provide a sustainable, steady income.

Indeed, although equities felt the full force of the market correction, bonds were not unaffected.  The Portfolio includes the Corporate Bond, Diversified Bond, Gilts, International Corporate Bond and Investment Grade Corporate Bond funds.  These funds account for more than half of the Portfolio, and each one lost ground over the period. However, losses were muted, reflecting the lower-risk profile of fixed income investments, and provided welcome protection for the Portfolio overall.

You may also like to access the full Immediate 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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