Active passive strategy - progressive portfolio
APPROXIMATE CURRENT ASSET SPLIT
CHOOSE THIS PORTFOLIO IF ...
• You are searching for meaningful returns ahead of inflation and you
understand and accept that this strategy carries a modest bias towards
higher risk assets and you recognise that this may result in the value of
your portfolio fluctuating, possibly significantly, in the short to medium
term.
• You are comfortable, given the term for investment and allocations to
other mor secure assets, that you can tolerate losses which may be
prolonged in nature.
R EAL
This portfolio seeks to produce returns ahead of those available from cash
deposits and modestly ahead of inflation in the medium to long term. There
is a small general bias to equities and real assets that can be between 27.572.5% of the portfolio composition although nominal lower risk assets can
also be held in that proportion. This portfolio strategy is likely to show
fluctuations in capital value that could be significant, particularly in the short
to medium term. Where the progressive income strategy is chosen there will
be increased bias to income producing assets.
Global equities 47.7%
Property 4.6%
Commodities 2.3%
NOMI NAL
PORTFOLIO GOAL
September 2016
Global fixed income 23.1%
Alternatives 12.4%
Cash 9.9%
These weightings are as at 30 September 2016 and are subject to change.
KEY FACTS
Launched
1 August 2015
Risk rating
SPW positive
• You accept that the portfolio strategy includes mostly passive funds
which have a lower cost structure. These aim to match an index return.
Actively managed funds, by contrast, aim to beat their benchmark but
have higher charges. .
Minimum investment
£50,000
Estimated gross yield
1.9%
Benchmark
SPW progressive composite benchmark
PORTFOLIO COMPOSITION AND STOCK SELECTION
KEY INFORMATION
The portfolio construction is based on the global asset allocation as
determined by the Chief Investment Officer and the Asset Allocation
Committee monthly. This allocation is then filtered to match the risk setting
chosen by clients and their advisers.
The funds chosen to meet this allocation are generally low cost tracker funds
or market traded Exchange Traded Funds (ETFs). In some areas such as
commercial property it is more difficult to find suitable passive options and
higher cost actively managed funds will be selected.
The advantage of passive funds lies in their liquidity and low cost which
helps to keep overall charges as low as possible.
The alternatives element of the portfolio consists of core positions in
vehicles that aim to provide low correlation to other markets, low volatility
and absolute, positive returns. Structured products are used to further
diversify and augment the portfolio’s potential return.
AWARDS
RISK PROFILERS
Available asset classesA typical active passive portfolio has 15–20 holdings in
collective investment vehicles across fixed income, equities
and alternatives asset classes. Structured products may
also be used as complementary holdings to offer portfolio
diversification and enhanced returns.
Initial chargeSPW does not charge an initial fee. However, if under our
advisory service we recommend retail investment products
as part of your portfolio, an advice charge will apply. This will
be included within your portfolio management and dealing
fees as detailed below and will not be a higher overall fee.
Where applicable you may agree an initial charge with your
investment adviser.
Portfolio management fee
0.5% a year inclusive + VAT
Reporting periods
Half yearly
TOP TEN HOLDINGS
Legal & General Pacific Index Trust
Vanguard Global Bond Index
Vanguard US Equity Index
iShares II Barclays Index-Linked Gilts
iShares MSCI North America
iShares MSCI Europe Ex-UK
iShares Core Corporate Bond
HSBC Inv Fds (UK) Euro Idx
iShares Markit IBOXX Stg Corp Bond
DB X FTSE All-Share ETF
COMPOSITE BENCHMARK
Equity
MSCI World net of WHT TR Index (GBP)
Property
MSCI World TR Net Real Estate TR Index (GBP)
50.0%
Commodities
UBS/DJ Commodity TR Index (GBP)
Fixed income
Merrill Lynch Global Bond Hedged Index (GBP)
Alternatives
Bank of England base rate + 2.5%
11.0%
Cash
Bank of England base rate
2.0%
5.0%
2.5%
29.5%
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MARKET REVIEW
Since the UK voted to leave the European Union back in June, the world has been
waiting with bated breath for a glimpse of what the future will hold, but has so far
been rewarded with an information vacuum. With many unanswered questions, most
of which will remain unanswered until well after Article 50 is triggered towards the
end of March 2017, investors remain nervous, so we thought we would take a look at
what we do know about Brexit, and why we stand by our prediction that the future
doesn’t look as bad as the naysayers would have us believe.
In the immediate aftermath of the vote, the consensus view was that the UK economy
would fall back into recession. But many economists and forecasters are now reneging
on their overly cautious views. It’s probably too early to tell, as a recession is defined
as two quarters of negative GDP growth, and we haven’t even finished one quarter
since Brexit. But it is looking less likely. The fall in the value of sterling has proved to
be a significant advantage for the UK’s manufacturing and export-led companies.
Indeed, the seasonally adjusted UK manufacturing purchasing managers index (PMI)
recovered from a 41-month low in August – showing the biggest increase in 25 years,
and the highest reading since October last year. Output and incoming new orders
rebounded sharply, and employment rose for the first time this year.
Initially there were fears of a slowdown in inward-bound investment due to weak
sentiment. In reality, we have seen that the weak pound is a huge incentive for
overseas investment, which offsets the uncertainty. If anything, we have seen a slight
increase in inward-bound cross-border mergers and acquisitions, the continuation of
which is dependent on the outcome of the EU negotiations after triggering Article 50
next year.
A weak pound gives our exporters a sustainable economic advantage, and drives the
prospect of future inflation, which will eventually help to reduce all economic
participants’ debt pile in real terms. At the same time, the UK will be in a position to
benefit from a renewed focus on trade deals with non-EU partners.
RISKS ASSOCIATED WITH INVESTMENT
Investing involves risk and the value of investments and the income from them
may fall as well as rise and are not guaranteed. Investors may not get back the
original amount invested.
The value of fixed interest securities is affected by the risk of default by the issuer and
where an issuer does default you may lose some or all of your capital.
Investments in higher yielding bonds issued by borrowers with lower credit ratings
may result in a greater risk of default and have a negative impact on income and
capital value.
Some portfolios may include investment funds (including property funds and hedge
funds) that use gearing as part of their investment strategy. Such funds may be
subject to sudden and large falls in value, and you may get back nothing on this part
of your portfolio if the fall in value is sufficiently large. Hedge funds can employ a
variety of investment strategies and hence the risks can also vary. In certain
circumstances it may be difficult to liquidate such investments quickly.
Some hedge funds are not regulated by the FCA. Investment in property funds may not
be readily realisable because the underlying property concerned may not be readily
saleable. The value of property is a matter of the valuer’s opinion rather than fact.
The value of investments in overseas securities may rise and fall in sterling terms
purely as a result of exchange rate fluctuations.
Investments in emerging markets are likely to be more volatile and carry more risk
than investments in developed markets.
Investments in smaller companies can be more volatile and less liquid than those in
larger company shares.
Structured investment products carry risk. If the underlying investment or stockmarket
index breaches specified levels, or if the counterparty becomes insolvent, your capital
(and any income) may be lost in whole or in part.
Real assets
Real assets are investments based on a claim over physical or
tangible underlying assets. Since these assets have substance, they tend to retain their
value after inflation over time. Typical examples of such assets include equities,
property and commodities. Other less commonly used assets in this category, which
we do not include in portfolios, include art, fine wines, vintage cars and antiques.
The asset allocation bands described are for illustrative purposes based on our model
portfolio, and these may alter to take into account changes in markets and SPW’s
views. The actual allocation will depend on client specific circumstances and
requirements. Similarly, the estimated yield is not a targeted yield and is for illustrative
purposes only. The risk rating of the portfolio is in line with SPW’s standard definitions.
Nominal assets
Past performance is not a reliable indicator of future results.
Nominal assets are defined as investments based on a
promise derived from intangible assets. Since these assets have no substance, they
tend not to retain their value after inflation over time. Typical examples of such assets
include bonds, cash and currencies. In addition, for our purposes we include
alternatives amongst nominal assets, since the objective we seek from them in our
clients’ portfolios is a steady return in excess of cash.
CONTACT INFORMATION
Bath - 01225 460010
Kirkby Lonsdale - 015242 72941
Newcastle - 0191 300 9242
Sevenoaks - 01732 740700
Harrogate - 01423 701800
London - 020 7280 8700
Marlow - 01628 473298
Teesside - 01642 931200
E [email protected]
Email: [email protected] I www.sanlam.co.uk I +44 (0) 20 7280 8700
Sanlam Private Wealth is a trading name of Sanlam Private Investments (UK) Ltd which is authorised
and regulated by the Financial Conduct Authority. Registered in England and Wales 2041819.
Registered office: 16 South Park, Sevenoaks, Kent TN13 1AN.
www.sanlam.co.uk
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