July Performance


July Overview
Generally positive economic news as well as a weakening dollar provided the backdrop for investors in July. For UK investors, this meant strong positive returns from almost all asset classes. Politics and Central Bank messaging continued to influence markets, but in a slightly more subdued manner than had been the case throughout the rest of the year.

In the UK, consumer price inflation came in lower than expected, falling from 2.9% in May to 2.6% in June. It still remains well above its 2% target and looks likely to remain so for the next year or two. GDP for Q2 was in line with expectations at 0.3% over the quarter, up from 0.2% in Q1. Sterling was boosted to its highest level against the US dollar since September 2016 on news that the UK had finally accepted it would need to make some contribution to the EU upon Brexit – news markets took as indicating an increased chance of a sensible compromise in negotiations.

US politics continued in its state of mild chaos as Republicans’ attempts to repeal Obamacare collapsed and there was a spate of high profile firings and hirings within the Whitehouse. This didn’t seem to make much difference to markets as the Dow powered to new heights on the back of a very strong second-quarter earnings season, partly driven by a weaker dollar helping to boost earnings through increasing the value of overseas revenue. The US Federal Reserve also indicated it would soon begin cutting back its balance sheet by trimming the amount of bond redemptions it reinvests – a move construed as a sign of confidence in the US economy.

In the eurozone, ECB president Mario Draghi signalled continued easy monetary policy by playing down the chance of a near-term reduction of its programme of economic stimulus measures. Inflation in the euro area remained unchanged at 1.3% during June whilst unemployment fell to 9.1%, its lowest level since February 2009.

The pound had mixed fortunes over July, strengthening 1.5% against the US dollar and 2.2% against the South African rand. It weakened 1.8% against the euro, 0.2% against the yen, 2.5% against the Australian dollar and a hefty 4.3% against the Brazilian real.

Asset Classes
Sterling returns were positive for all major asset classes in July, with the exception of global inflation linked bonds. Emerging market equities was the biggest performer and commodities bounced slightly after some truly horrendous performance YTD. Japanese equities were very subdued.

In July, the FTSE 250, up 2.4%, strongly outperformed the FTSE 100, up only 0.9% (the below table shows the performance of the FTSE All Share which includes both).

Screen Shot 2017-08-08 at 12.02.18 PM.png

Robust asset class performance and good alpha generation by individual funds fed through into strong portfolio performance over the month.

Core Active and Absolute Oriented were very similar, with Core Active very slightly outperforming.

July 2017

Screen Shot 2017-08-08 at 12.03.48 PM

Relative Performance
Relative performance was extremely strong, with the 10 balanced funds we track regularly (see more info on these below) up on average only 0.8%, the best performing up 1.4% and the worst down 0.2%.

Select 6 outperformed all 10 of these 10 competitors.

Graph from the Past
In each monthly, under the heading “Relative Performance”, we reference 10 balance funds that we regularly track. But just what are these funds and how were they chosen?

On 7 March 2013, just two months into our live performance track record, we penned an email to the three advisers we were working with at the time with the following (Andrew, Nigel and Charlie – remember this?):

“A Note about Competitors
On page two, we have provisionally chosen 10 competitors to benchmark ourselves against. Our selection criteria were just size (we wanted bigger comparators like the $3bn Newton Balanced fund) and a more subjective assessment of how well known they are (hence the inclusion of the much smaller $84m St James Place balanced fund)….“

And on 31 March 2013, we produced our very first scatter chart relative to these competitors. I’ve reproduced it here:

Screen Shot 2017-08-08 at 12.03.56 PM.png

Source: PMX 31.03.2013 Performance Analytics sheet covering the period 10 Jan 2013 to 31 March 2013, data source FE Analytics

And we continue to reference these very same competitors in each monthly email, albeit now using clean share-classes from these managers wherever possible.

The scatter chart itself has been superseded by our more comprehensive quarterly scatter pack which you have access to in Dropbox, but I thought it would be interesting to update the graph above. I’ve also added one extra comparator, Vanguard LifeStrategy, which interestingly wasn’t even vaguely on the radar in 2013 but now is one of the biggest names out there in the multi-strategy space.

Screen Shot 2017-08-08 at 12.04.49 PM.png

Source: PMX, covering the period 10 Jan 2013 to 31 July 2017, data source FE Analytics

Pleasingly, the PortfolioMetrix portfolios (now called PMX Select 1-7 when run as model portfolios on platform) continue to ‘fly in formation’. And although there have been times when the odd competitor crept above the PMX Select range, I’m please to say that at the moment we’re flying clear.


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