Our latest quarterly video provides an update on equities, asset allocation views and how portfolios have performed. In addition to the changes the team have made to portfolios over the quarter.
Learn more about our speakers and access a transcript below.
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Ronelle Hutchinson: Good morning and welcome to our MPS update for the 3rd quarter. My name is Ronelle Hutchinson, and I'm joined by Andrea Yung.
So how did markets perform during the 3rd quarter? Over the 3rd quarter, there were strong gains in global equities led by technology and emerging markets, and this was fuelled by the easing trade tensions. Chinese tech stocks rallied, driving the MSCI China index up 22%. Gold was up another 18%, bringing the year-to-date gains to an impressive 35%. Major indices like the S&P 500 up over 9% and the FTSE All Share up close to 7% reached record highs over the quarter. On the negative side, however UK gilts were down 0.5%. Guilts were weighed down by the higher inflation prints over the quarter. But overall, it's a positive quarter for equity returns and indeed for client portfolios.
If we zoom into the UK stock market returns for the year to date, Despite the negative newspaper headline, has delivered one of the best year to date returns in 30 years, up 15% and substantially benefiting client portfolios in a year where dollar weakness has offset the gains from US equities.
So, if we move to the next slide. Andrea, how have the models performed over the last quarter? Andrea Yung: So similar to markets, it's been a very strong quarter for portfolios. We can see our medium risk portfolios returning around 5% and that's just over the quarter alone. That's been driven by momentum in equity markets. AI stocks have driven returns, which has meant that our exposure to the US market has been a big contributor, as well as our exposure to Asia, most notably China, which has delivered double digit returns over the quarter.
Video transcription
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Now we aim to ensure that portfolios remain diversified and resilient across all market conditions. The protection that we embed into the portfolios means that sometimes when we see very strong markets, especially that are momentum driven, we won't outperform in the short term. However, we aim to provide a degree of protection to portfolios when markets fall or experience volatility. So therefore, we're pleased to see that we've kept pace with the wider benchmark this quarter.
Now if we move on to the next slide, we can reflect on how our portfolios have performed over the last 3 years since inception, and we can see that we've either been able to keep pace or beat the benchmark, and that's been net of fees. We've been able to do this while offering a smoother journey. So hopefully this consistency and performance just highlights how our risk management philosophy actually translates into real outcomes when it matters most.
Ronelle Hutchinson: So, what is the outlook for markets and asset classes going into the 4th quarter?
After the strong year to date gains in equity markets, we remain cautious on the outlook for risk assets. As a result, we have a neutral allocation to equities. Looking at the US, we have used the relative weakness of US equities in pounds to add to US equities in 2plan portfolios, bringing this to neutral and aligning closer with the two 2plan global asset allocation. We remain overweight, European equities, leaning into some of the positive developments in the region, such as the fiscal stimulus, the lower interest rates, and the relatively cheaper valuations that we're getting in this region. We remain overweight alternatives favouring relative value strategies that can mitigate volatility and limit drawdown risk. We remain overweight fixed income, but we are short duration. We are very much mindful of the heightened bond volatility that we've seen this year.
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Learn more about our speakers
Ronelle Hutchinson
Senior Investment Director
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Investment Director
Andrea Yung
Senior Investment Director
Ronelle Hutchinson
I am a Senior Investment Director at Rathbones.
I have over 20 years of industry experience. Most recently as a portfolio manager in Investec Wealth & Investment's South African office managing a range of multi-manager funds for our private clients. I am responsible for overseeing Rathbones' Managed Portfolio Service on platforms. My focus is to ensure that we deliver consistent investment performance & a proactive service to our advisory clients.
I am responsible for the portfolio management of Rathbones' MPS on Platforms service. Using a structured and disciplined investment framework, our primary focus is delivering outcomes that align with the objectives and risks associated with each MPS strategy.
Investment Director
Andrea Yung
2plan Wealth Management is authorised and regulated by the Financial Conduct Authority. It is entered on the Financial Services Register (www.fca.org.uk) under reference 461598. Registered address: 3rd Floor, Bridgewater Place, Water Lane, Leeds, LS11 5BZ. Registered in England and Wales Number: 05998270
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Andrea Yung: So, taking into account our asset allocation views, we've made a few adjustments to our portfolios over the past quarter, and that's to help strengthen diversification and support long-term resilience.
So firstly, we've broadened our European exposure. Our outlook for the region remains positive, and we can see the region benefiting from significant structural support, and that's thanks to the increases in defense and investment spending announced earlier this year. We believe that markets aren't pricing in a strong economic rebound just yet, which means that Europe is still offering value.
So, we've also increased our allocation to the US, bringing us closer to a more balanced position. This exposure remains well diversified, including a mix of high-quality companies across different sectors, so we're not just being concentrated in one particular area of the market. Lastly, to further strengthen the portfolio's resilience, we've added to a fund that focuses on capital preservation, and it's designed to perform well in a variety of market conditions, and it tends to behave differently from traditional equities.
So, this helps to cushion the portfolio drawing more volatile periods and supports more stable returns over the long term. So, with those changes, we believe as we move into the final quarter, we're well positioned to face any uncertainties or volatility in markets.
Ronelle Hutchinson: We’d like to thank everyone for joining us today and hopefully we'll see you at the next quarterly update.
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Bonds held up relatively well over the quarter as investors sought refuge in lower risk assets such as government bonds. This is why our lower risk models, which tend to have a larger allocation to bonds have held up better relative to our higher risk models.
However, what is reassuring is we have been able to provide a slightly higher degree of protection on the downside in these higher risk models, relative to the benchmark.
It’s important to remember than market corrections are common place in equity markets. We have seen this in recent years during the pandemic in 2020, we’ve seen it in 2022 when there has been increased inflation and interest rates. As history has proven, the long-term trend shows that markets recover and grow over time.
Looking at our performance over the long-term, despite the recent market downturn, our models have provided strong performance since inception. It’s important to remain diversified and this helps to manage risk and provide stability. We take an active and long-term active approach to investing and corrections like this can present good buying opportunities for investors.
Towards the end of last year, we cited concerns around the potential vulnerabilities of the mega cap US growth companies that have driven returns, we’ve reduced our exposure here in favour of quality companies that are more reasonably valued and we have continued to do so in recent months. This has led to us being better positioned to navigate through the turbulence that we have seen so far this year.
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pdf • 2.46MB
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