Managed Funds Portfolio Update - Winter 2018
Fourth quarter performance analysis for the St. James's Place Managed Funds Portfolio.
The Managed Funds Portfolio provided a negative return over the quarter.
Several fears weighed on markets over the quarter, and China ranked high among them. Whatever the accuracy of the official growth figures, there was no debating the direction of travel – growth slowed over the course of the year, adding yet another dip to the prolonged growth rate decline the Chinese economy has witnessed since 2010. The Shanghai Composite index fell 25% over the course of the year, reflecting fears over the decline in the growth rate and the rise in trade tensions with the US.
Concerns over China buffeted performance in Edgepoint’s sleeve of the Global Equity fund, even though the businesses concerned are not headquartered in China itself. TE Connectivity, a US-listed company that manufactures sensor and connectivity products for harsh environments, has direct exposure to China and saw its stock price decline more than 10% over the fourth quarter.
The rising temperature of the US-China trade spat created plenty of fallout on markets. Tensions were raised to new heights when Canadian authorities arrested the chief financial officer of Huawei, the Chinese technology giant, early in December, due to a US extradition request. Technology stocks suffered on both sides of the Pacific, detracting from the performance of the Balanced Managed fund, which is co-managed by GMO and Jennison Associates. Within the Jennison sleeve, a high allocation to technology majors hurt performance, although Jennison did sell out of ASOS, the UK online clothing retailer, in advance of its rapid share price fall in December. The GMO sleeve of the fund, which invests in both equities and bonds, held fund losses in check. GMO benefited from credit selection via bond holdings with low sensitivity to interest rates and a bias towards high-quality names – high yield bonds suffered a sell-off over the period.
The International Equity fund, managed by Magellan, also detracted from fourth quarter performance. However, the fund posted positive returns over the calendar year, benefiting from holdings in Starbucks, HCA Healthcare and Microsoft. The latter’s dominance of the enterprise software market and number two position in cloud computing provided stability.
The Strategic Managed fund, managed by Columbia Threadneedle, saw losses due to significant exposure to the support services, aerospace and defence sectors. Losses were partly held in check by positive stock selection, such as Deutsche Telekom and Altria.
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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.