Portfolio Update for July

Quality continues to shine…. another positive month for the Portfolios

The month of July started really well for the Sustainable Ethical Allocation portfolios, but the fears of a second wave of COVID19 impacting the economic recovery with the very real possibility of further lockdown restriction, plus further tensions with the US China relationship, the equity markets did see a considerable pullback in the last week.

Even with the end of month pullback, the Sustainable Ethical Allocation Portfolios still recorded a positive performance month with all 3 allocations outperforming their objective benchmarks.

Performance July 2020

A. Cautious Allocation
B. Balanced Allocation
C. Growth Allocation

This now results in the Portfolios returning +9% (Cautious Allocation), +13% (Balanced Allocation) and +17% (Growth Allocation) for this year to date. This compares to the FTSE All Share which is still down over 20% for 2020.

A. Cautious Allocation
B. Balanced Allocation
C. Growth Allocation
D. FTSE All Share Index

With the underlying funds held in the Sustainable Portfolios, it was only the UK Sustainable Equity fund held across all 3 allocations that was negative for the month…… and while we don’t like experiencing losses of any kind, this fund was down 1.5% for the month compared to the 3.5% loss experienced by the broader FTSE All Share Index.

However, this was countered by the outperformance of our holdings in the Baillie Gifford Positive Change fund that had another outperforming month with an 8.5% return. This fund is also held across all 3 of the Sustainable Allocation Portfolios.

Strategy Going Forward….

As part of our client management, we always encourage investors to maintain sufficient proceeds in cash (or very low risk, liquid assets) that can be called upon to cover their short-term income and / or capital purchase requirements. I strongly believe that this is even more imperative now due to the extremely uncertain and unprecedented economic and market conditions we are experiencing.    

While the Sustainable Ethical Allocation Portfolios have provided very solid positive returns so far this year, we only need to look back to February and especially March to see how quickly markets can turn and have a negative impact on an investor’s wealth.

What we want to try and avoid is the situation where investors are forced to draw out their required investment income at a time when markets are volatile and are falling in value…… 

By maintaining a reserve of 6 – 12 months of investment income requirements in cash, it ensures that you have the option of then drawing your current income requirements from a source that is not being affected by the short-term market conditions…………. If the markets are experiencing a March 2020 type pullback, drawing from the unaffected cash reserve then gives the main portfolio the opportunity to recover.

https://ethicaloffshoreinvestments.com/news/the-importance-of-investment-timeframe/

The other area that we encourage investors to look at is that of diversification…….. the Sustainable Allocation Portfolios are well diversified with not only asset type (equities, bonds, cash) but ensuring that there is also diversification of geographical region.

The underlying Fund Managers (Baillie Gifford, Royal London, Rathbones, Vanguard for example) will also take a different approach and style to their investment strategies and by blending these different managers and investments styles & strategies, potentially will result in lower volatility and more consistent overall portfolio returns.

Investors can also further diversify their portfolios through the use of Structured Notes. While Structured Notes are not our core investment offerings (we prefer the use of liquid, daily traded funds, ETF’s and direct shares), they can provide an opportunity to reduce short term volatility while receiving a pre-determined (conditional) investment return. But it must be stressed that Structured Notes are generally regarded as longer term investments so timeframe and whether access to capital is required needs to be seriously considered. 

Please click the below link to get information on the range of Structured Notes currently available via Ethical Offshore Investments. https://ethicaloffshoreinvestments.com/structured-notes/     

If you would like to receive further information on the Sustainable Ethical Allocation Portfolios or on the underlying individual Managed Funds, please click REQUEST INFORMATION.   

So how have the Sustainable Model Portfolios held up in 2020…..

 Sustainable Ethical Allocation Portfolios

The Sustainable Allocation portfolios are currently invested in 10 – 12 different managed funds, utlising the expertise of the following Fund Managers.

Cautious Allocation

The SUSTAINABLE ETHICAL CAUTIOUS ALLOCATION PORTFOLIO will generally have approx. 65% of the assets invested in various bond, fixed interest and cash type assets that are regarded as lower risk type assets. The remaining will be allocated in growth style of equities and infrastructure type assets.

The objective of this allocation is to achieve a net return of 5%-6%PA but with lower levels of short term volatility.

• A. Sustainable Ethical Cautious Allocation
• B. IA Mixed Investment 20-60% Share Index

Balanced Allocation

The SUSTAINABLE ETHICAL BALANCED ALLOCATION PORTFOLIO will have approx. 65% of the allocation invested in growth type assets such as equities and infrastructure with the remaining allocated to more cautious type assets such bonds, fixed interest and cash type assets.

The objective of this portfolio is to achieve similar type returns associated with direct equity investing, while experiencing lower levels of short term volatility, especially during negative market periods.

• A. Sustainable Ethical Balanced Allocation
• B. IA Global Index

Growth Allocation

The SUSTAINABLE ETHICAL GROWTH ALLOCATION PORTFOLIO will invest in a range of equity funds and is designed for the longer term investor that can accept higher levels of short term volatility.

The objective of this allocation is to achieve a net annual return of 10% – 12%pa but clients need to be aware and accept that there will be higher levels of short term volatility and periods of negative returns.

• A. Sustainable Ethical Growth Allocation
• B. IA Global Index