Investment Report for March 2015

OVERVIEW

 

Markets were mixed in March with most main (and many developing) markets posting losses. European markets were the notable exception and enjoyed another good month.

 

This the FTSE 100 share index was down -2.0%, the S&P500 index fell-1.6% but the MSCI European Index grew by +1.8%. We are glad that we quit the Brazilian market over a year ago as the market there fell by 10% last month.

 

The divergence reflects differing monetary policy either side of the Atlantic with the US getting close to the point where they tighten monetary policy by raising interest rates but the EU doing the opposite, having embarked on Quantitative Easing.

 

In the UK the budget added little in the way of market support with there being no “budget giveaways” of significance. However, markets are starting to fret about the forthcoming election and the prospect of a hung parliament.

 

UK commercial property and fixed income securities made modest gains over the month.

 

Here is the chart of the FTSE 100 index for the last six months;

…and the last five years, which puts this into perspective;

 

FUND PERFORMANCE

 

I enclose tables showing the performance of the portfolios over various time periods to the end of March;

 

Short-term Performance

 

 

Long-term Performance

 

(Source; Parmenion Capital Partners LLP)

 

PORTFOLIO REVIEW

 

All Portfolios

 

Our portfolios turned in modest gains during the month, which was rather surprising when both the UK and US markets fell in March. The reason was due to currency issues, with Sterling weakening on the foreign exchanges as this boosts the value of overseas investments.

Income Portfolio

The Income portfolio gained +0.6% in March, under-performing its benchmark (the average mixed investment (20-60% shares) fund) which gained +1.1%. The main reason is that the fund is relatively underweight in European equities as we prefer the US for currency reasons.

 

No changes were made to the portfolio this month.

 

Balanced Portfolio

 

The Balanced portfolio gained +1.4% in March, marginally under-performing its benchmark (the average mixed investment (40-80% shares) fund) which gained +1.5%.

 

The portfolio suffered a little due to an under-weight in Europe but strong gains in Japan and Asia help offset this.

 

No changes were made to the portfolio this month.

 

Tactical Portfolio

 

The Tactical portfolio gained +1.5% in March, under-performing its benchmark (the average flexible fund) which gained +2.0%.

 

Our investments in Europe, Asia and Japan contributed to gains but the fund lagged a little due to our under-weight in Europe.

 

No changes were made to the portfolio this month.

 

OUTLOOK

 

There is now a divergence occurring with the paths of US and European monetary policy being quite different.

 

The US called time on its bond buying programme last year, and its steadily growing economy is now paving the way for a much-expected interest rate hike. The unemployment rate has now fallen to a level that many economists consider to be close to “full employment”. Such an environment is known to trigger inflationary periods, leading to some market observers calling for the US Federal Reserve (Fed) to raise interest rates.

 

Europe, on the other hand, has just deployed its large scale bond-buying programme during the month in an effort to aid economic recovery, whilst interest rates remain at record lows. The euro fell over 25% against the US dollar in less than a year, exacerbated by the willingness of large investors to move their assets out of the Eurozone currency in search of returns. Even as the month drew to a close, the US dollar continued to firm against the Euro.

 

We are contemplating buying more European equities now that the Euro has weakened, maybe moving assets out of the UK.