OVERVIEW
November was a lack-luster month with most markets easing a little. The reason was that long-term interest rates are on the rise, especially in the United States. The cost of borrowing money, especially over the longer term, has an impact on investment values generally.
The US Government now has to pay interest at around 2.5% to borrow money over a ten-year period. This the highest it has been for many years and reflects a belief that inflation, interest rates and business activity are all on the rise, along with a probable increase in government debt.
Here in the UK, our market eased a little with the FTSE 100 share index falling around -1.6% due to Brexit uncertainty.
Asian and Emerging markets were especially weak as the impact of higher ‘rates in the US translated into a stronger US$ – this is bad news for countries that either borrow is US$’s or sell into the US – typically emerging markets.
The UK commercial property market continued its recovery.
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
The tables below show the performance of the portfolios over various time periods to the end of November;
Short-term Performance
| Parmenion Portfolio/Index |
One month Performance to 30 November 2016 |
One year Performance to 30 November 2016 |
| Income Portfolio |
-1.2% |
+3.6% |
| Average Mixed Investment fund (20-60% shares) |
-1.5% |
+7.4% |
| Balanced Portfolio |
-1.6% |
+6.4% |
| Average Mixed Investment fund (40-85% shares) |
-1.5% |
+9.6% |
| Tactical Portfolio |
-2.2% |
+12.7% |
| Average Flexible Investment Fund |
-1.8% |
+10.7% |
| FTSE all share index |
-1.6% |
+9.7% |
| FTSE world index exUK (£) |
-1.2% |
+26.7% |
| IBOX Gilt Index |
-1.3% |
+7.3% |
Long-term Performance
| Parmenion Portfolio/Index |
Three year Performance to 30 November 2016 |
Five year Performance to 30 November 2016 |
| Income Portfolio |
+18.3% |
+51.5% |
| Average Mixed Investment fund (20-60% shares) |
+15.1% |
+36.9% |
| Balanced Portfolio |
+23.4% |
+56.4% |
| Average Mixed Investment fund (40-85% shares) |
+19.3% |
+51.8% |
| Tactical Portfolio |
+31.4% |
+69.6% |
| Average Flexible Investment Fund |
+19.5% |
+52.2% |
| FTSE all share index |
+15.6% |
+55.4% |
| FTSE world index ex UK (£) |
+49.3% |
+105.7% |
| IBOX Gilt Index |
+23.5% |
+25.3% |
(Source; Parmenion Capital Partners LLP)
PORTFOLIO REVIEW
All Portfolios
All portfolios weakened in November as long-term interest rates increased in the US & UK.
Income Portfolio
The Income Portfolio fell by -1.2% out-performing the benchmark (the average mixed investment (20-60% shares) fund) which fell by -1.5%. Our Asian investments were weak but UK exposure added to returns with some funds performing well.
No changes were made to the portfolio this month.
Balanced Portfolio
The Balanced Portfolio fell by -1.6% in November, just under-performing the benchmark (the average mixed investment (40-80% shares) fund) which fell by -1.5%.
Our Asian and emerging market investments were weak, but UK exposure added to returns with some funds performing well.
No changes were made to the portfolio this month.
Tactical Portfolio
The Tactical Portfolio fell by -2.2% in November, under-performing the benchmark (the average Flexible fund) which fell by -1.8%.
Our exposure to UK smaller companies was a drag on returns this month.
No changes were made to the portfolio this month.
OUTLOOK
The global outlook is now very difficult to call as geopolitical risks abound. There is so much uncertainty in the UK, Europe, many emerging countries and the middle east and arguably, even in the US.
For this reason, many investment managers are not prepared to take strong positions preferring to track indices and to focus on finding quality companies to invest in. We intend to take a similar view for the time being until the world becomes a more predictable place.
