Investment Report – September 2016

OVERVIEW

September was a fairly positive month for most markets and in the UK investors digested the chunky gains made over the summer. The UK FTSE 100 share index put on a useful +1.7% with little occurring of note.

Globally shares produced similar returns with the FTSE World index adding +1.3%. Investor attention was focused on presentations by the Fed’ regarding the timing and scale of interest rate rises in the US. The outcome was that interest rates in the US are on the cusp of increasing, but everyone knows this so hopefully this news is “in the price”, so to speak.

Here in the UK most of the frozen property funds have thawed with all but two now open for business again. Valuer’s concluded that Brexit reduced most property prices by around 5.0%.

 

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 September;

 

Short-term Performance

Long-term Performance

(Source; Parmenion Capital Partners LLP)

 

PORTFOLIO REVIEW

All Portfolios

All portfolios made further modest gains in September, consolidating the strong gains made since “Brexit”.

 

Income Portfolio

The Income Portfolio gained +0.1% in September marginally under-performing the benchmark (the average mixed investment (20-60% shares) fund) which gained +0.2%.

No changes were made to the portfolio this month.

 

Balanced Portfolio

The Balanced Portfolio gained +0.3% in September, just under-performing the benchmark (the average mixed investment (40-80% shares) fund) which gained +0.4%.

No changes were made to the portfolio this month.

 

Tactical Portfolio

The Tactical Portfolio gained +0.8% in September, in-line with the benchmark (the average Flexible fund) which also gained +0.8%.

No changes were made to the portfolio this month.

 

INCOME PORTFOLIO

We regret to advise that the yield on our income portfolio has now dropped and currently is only a little over 3.0%. The fall reflects economic and financial factors which makes finding anything that pays what one could describe as a “reasonable income” very difficult.

We could chase yield and push the level of income up, but to do so would mean that we would have to take an unacceptable move into riskier investments.

If the reduction in yield causes any investor problems, please speak to your adviser at HA&W. It’s easy to switch to a fixed monthly payment, which includes an element of capital as well as income, in order to maintain a decent regular pay-out.

 

OUTLOOK

The UK market continues to make outstanding progress, confounding the “Remain camp” who thought Brexit would spell economic disaster. The IMF forecast this week that the UK would be the fastest growing economy in the G7. So far, so good.

Sterling continues to fall on the foreign exchanges. We are concerned that if this continues the point will come where it is regarded as a bad thing instead of being a good thing. Why? If the falls become severe the Bank of England may be forced to act in order to protect the value of Sterling. This could involve an increase in interest rates, which is bad for the economy.

We don’t want a drama to turn into a crisis.

PS Don’t forget the usual risk warning for all long-term investments: “The value of units can fall as well as rise, and past performance is no guarantee of future performance. The value of income payments from investment funds is not guaranteed and can fall as well as rise”.