Managed Portfolio Service Monthly Newsletter

August 2020 Update Provided by Quilter Cheviot

Despite global equities gaining 5% in July, it was another challenging month for UK investors as the FTSE 100 fell 4.2% – still over 20% lower than the start of the year – and sterling strength reduced returns from international markets. This lead to negative returns across all the Prosser Knowles MPS strategies for the month.

Continue into August and we have seen the US equity market reaching new highs, exceeding the pre-COVID February peak. This milestone means March 23rd can now be officially recognised as the bottom of the bear market and beginning of a new bull market, and confirms the February 19th – March 23rd sell off as the shortest bear market in history. Any future downturn will be considered a separate event as far as bulls and bears are concerned.

“Two trillion” was in the headlines twice this month, first as Apple became the first company to reach a market valuation of $2tn. This points to the darlings of the recovery, tech companies. To demonstrate their divergence from the rest of the index, the S&P Information Technology index regained its pre-COVID high point by 10th June. The S&P 500 ex-IT index is yet to do so, and is therefore categorised as still being in a bear market.

Our tech analyst Ben Barringer covers some of the drivers of the tech rally in this week’s markets uncut podcast available here. To summarise, in a low yield and low growth environment, companies that can drive their own earnings growth are valued more highly, both in the qualitative and quantitative sense.

Low yields leads to our second “two trillion” headline figure this month – the announcement that UK Public Sector Net Debt (PSND) has exceeded £2tn for the first time. In last month’s newsletter we discussed how UK Government Bond yields are at record lows, and how renewed bond purchasing (QE) by the Bank of England has supported this. Whilst the Bank of England operates independently, it is in effect owned by the government. Since November 2009 the Bank of England have purchased £745bn of Government Bonds (including the £200bn this year). That means over a third of the £2tn National Debt is owned by the Bank of England and therefore is in essence, money that the government owes to itself.

It has been demonstrated in Japan that large national debts can be sustained when the central bank applies its “lender of last resort” role not just to private institutions but to the government too – 70% of Japanese Government Bonds are purchased by the Bank of Japan. But economically sustainable does not mean politically sustainable, so don’t expect this story to disappear quietly – it will likely become more and more of a talking point as the economy recovers, and Rishi Sunak will be tasked with plotting the course – Tokyo or bust!

MEET THE PROSSER KNOWLES MPS INVESTMENT TEAM

The Quilter Cheviot Managed Portfolio Service (MPS) team has an 18-year track record of delivering successful client outcomes, and a proud reputation for innovative partnership with financial advisers. The team comprises a dedicated Investment Management capability that sits at the heart of the Quilter Cheviot investment process as well as Platform & Services specialists focused on ensuring the smooth running of all aspects of the service.

From left to right:
Scott Wilcox, Platform Executive: Scott’s role incorporates two key areas – firstly, to ensure that both intermediaries and colleagues are provided with timely information relating to the overall MPS service; and secondly, to work closely with our platform partners to ensure the efficient running of the platforms. Scott previously worked at M&G Investments for 8 years and he has also undertaken contract roles at RBS Coutts, Mercer and Financial Express. Scott graduated from the University of Huddersfield with an honours degree in Law and has also completed the Investment Management Certificate (IMC).

Toni Adochitei, Administrator: Toni is the main point of contact for MPS and Platform operational and administrative queries. Toni’s primary role is to assist with production and oversight of MPS documentation and literature. Toni also produces and maintains MPS and third party platform management information, as well as providing support to the Investment Managers and Business Development Teams.

Antony Webb Chartered FCSI, Portfolio Manager: Antony joined Quilter Cheviot in 2010 having graduated from University College London with a BSc (Hons) degree in Economics. He is a portfolio manager on the Quilter Cheviot Managed Portfolio Service (MPS), and sits on the firm’s Investment Funds Committee. Antony has completed the Investment Management Certificate (IMC) and the CISI Masters in Wealth Management.

Simon Doherty Chartered FCSI, Lead Portfolio Manager: Simon joined Quilter Cheviot in 2007 and is lead portfolio manager of the Quilter Cheviot Managed Portfolio Service (MPS) and chair of the firm’s Investment Funds Committee. A graduate of Trinity College Dublin with a first class honours degree, Simon has completed the Investment Management Certificate (IMC), the CISI Masters in Wealth Management and has passed Level I of the CFA Program.

Olivia Wingrove, Investment Analyst: Olivia joined the MPS team in 2017, having graduated from the University of Exeter with a first class honours degree in Politics, Philosophy and Economics. Olivia supports the Managed Portfolio Service (MPS) Investment Managers with the ongoing management of the MPS strategies and is primarily responsible for monitoring the strategies’ allocations and risk profiles relative to their strategic benchmarks and assisting with the production of performance attribution data. Olivia has successfully passed Level I and II of the CFA program and has also completed the Investment Management Certificate (IMC).

Wayne Smith, Platform Manager: Wayne graduated from the University of Witwatersrand (South Africa) with an MSc in Botany. He came to the UK in 2000 and worked for investment management and research company, Allenbridge. In February 2011 as operations and IT Director, he transferred to Close Brothers Asset Management when they acquired the retail arm of Allenbridge and was made head of client services – self-directed. Wayne joined the Quilter Cheviot Managed Portfolio Service team in February 2013.

This financial promotion has been approved and issued by Quilter Cheviot. Investors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest. This document is for general information purposes only, is subject to change and should not be relied upon. Unauthorised dissemination or copying is prohibited.

Prosser Knowles Associates Limited is Authorised & Regulated by The Financial Conduct Authority.

Quilter Cheviot and Quilter Cheviot Investment Management are trading names of Quilter Cheviot Limited. Quilter Cheviot Limited is registered in England with number 01923571, registered office at One Kingsway, London WC2B 6AN. Quilter Cheviot Limited is a member of the London Stock Exchange, authorised and regulated by the UK Financial Conduct Authority, regulated under the Financial Services (Jersey) Law 1998 by the Jersey Financial Services Commission for the conduct of investment business and funds services business in Jersey and by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law 1987 to carry on investment business in the Bailiwick of Guernsey. Accordingly, in some respects the regulatory system that applies will be different from that of the United Kingdom.