News Summary - September 2017

Portfolio Summary – September 2017

September was dominated by political events: The German Bundestag elections, Brexit, the calling of a snap election in Japan and the ebb and flow of US/North Korean tensions. Theresa May made her all-important speech in Florence to try to re-start the stalled Brexit negotiations, whilst, elsewhere in Europe, Germany became the latest EU nation to see an increase in the populist/nationalist vote, although Angela Merkel’s CDU did retain its position as the largest party. Sorting out a new coalition without the SDP, CDU’s former partner, may be a long job, and may introduce some uncertainty into German politics. Japanese centre-right Prime Minister, Shinzo Abe, saw a sharp bounce in his hitherto poor approval rating as the opposition fell into disarray, and took the opportunity to call a snap election on 22nd October. Equity markets across the world were mostly positive, with the notable exception of the UK, where sentiment is increasingly being affected by the weak position of Theresa May as Prime Minister and the lack of progress over Brexit, with the uncertainty that this generates for businesses. Meanwhile, a generally more hawkish tone from central banks saw fixed income markets weaker during the month.

The Affinity passive portfolios ranged from -0.65% (RP1) to -1.86% (RP7) The BGL active portfolios ranged from 0.00% (RP1) to -0.60% (RP7) and the Growth Strategy returned -0.50%.

Benchmark Returns:
FTSE World -1.95%
Barclays Global Aggregate -4.82%

The portfolio returns were fairly mixed during the month of September, with the Affinity Active models outperforming the benchmarks. In particular the Core portfolio gained 0.05% whereas the Barclays Global Aggregate index was down 4.8%.

The Active satellite segment also performed well in comparison to the FTSE world benchmark (-1.95% return), whereas the passive range was in line with market expectations. The key funds that contributed to portfolio returns were the Neptune Japan Opportunities fund (5.85% return), Legg Mason Opportunity X fund (4.37% return) and Schroder European Alpha Income Hedged fund (2.75% return).

These funds ability to hedge against currency movements has worked favourably last month, as Sterling gained over 5% against the yen, 3.5% against US Dollar and 4% Euro. Overall equities within those regions had a strong positive month, however unhedged share classes had been significantly impacted.

The main portfolio detractors impacted by the above were the iShares Emerging Markets Equity Index (-4.84% return), HSBC Pacific Index Accumulation fund (-4.02% return), L&G Global Tech Index fund (-3.33% return).