Quarterly portfolio update

Ronelle Hutchinson: Despite the market volatility, equities performed well with the MSCI All Country world up 20% in pounds. However, fixed income disappointed. This is despite interest rates falling. The UK gilt index returned -3%. The result of these returns is that our more defensive, lower risk profile portfolios once again trailed returns from our higher risk portfolios.

Andrea Yung: Looking at 2024, we’re really pleased with how our portfolios have performed. Especially our higher risk models and how they’ve outperformed the peer group. As we’ve seen, returns have been driven by the largest US companies and despite us taking less risk at the start of the year our portfolios have still participated in the market rally.

Although bonds have been disappointing for investors this year. Our fund selection and allocation to shorter data bonds have helped us to support returns in this area.

Looking at our performance since inception, our portfolio returns remain strong relative to the peer group across our full range, and we continue to take a long-term approach to investing with a focus on downside protection. We aim to limit drawdowns when markets are weak.

Ronelle Hutchinson: Policy uncertainty is likely to dominate in 2025. But if we focus on the fundamentals, the easing in interest rates and the prospects for deregulation combined with integration and the possible early adoption of AI, could lead to a broadening out of economic activity. Thus, in this new regime, it is likely that new winners will emerge.

Investors, therefore, should maintain diversification and remain invested in high quality fixed income assets that can provide the portfolio stability in the event of unanticipated shocks.

Andrea Yung: Over the quarter, we've reduced our allocation to emerging markets due to the economic concerns within China. The Trump administration, with their threat of tariffs and a potentially stronger dollar, are going to be a headwind for the region. Sentiment in China also looks weak as they continue to battle with a property crisis. We have reinvested this allocation to the US as we believe growth continues to look optimistic.

Economic data remains positive, and a Trump victory supports lower taxes and deregulation, which helps US companies, especially those that are domestically focused. Our preference here has been focused on high quality companies with strong fundamentals. We've also enhanced our exposure to UK government debt. This should provide us with some protection if we do see recessionary concerns creep up.