Category: Financial Planning, Investment management

Minutes of the Clarion Investment Committee held 11am on 11 December 2019 at Overbank, 52 London Road, Alderley Edge, Cheshire.

Review of previous minutes and action points

Minutes from the previous meeting held on 20th November 2019 were agreed by the Committee as a true and accurate record.

Market Commentary and Economic Outlook.

Bearing in mind that this meeting was held the day before the UK General Election, the key elements discussed were as follows:

• Opinion polls have narrowed between the Labour and Conservative Party but the latter are still in the lead and an overall Conservative majority seems to be the most likely outcome.
• Brexit and US/China trade wars remain the two biggest events driving financial markets.
• The Committee were confident that whatever happened in the UK Election, client investment portfolios were well placed with a suitable balance between multinational funds which would benefit from sterling weakness in the event of a Labour victory and UK mid cap funds which would benefit in the event of a Conservative victory. Multinational Funds would also benefit in the event of a softening in the US/China Trade war.
• Brexit is also less of a structural risk for investment portfolios than might be expected because of the high exposure to multinational businesses and the benefit of sterling weakness on overseas earnings.
• If December ends with more clarity on Brexit and the Trade talks, there could be a meaningful rally in stock markets at which time it might be appropriate to consider reducing risk and the exposure to equities.
• Equities continue to look attractive compared to bonds, despite some areas trading on stretched valuations.
• Several UK property funds have stopped cash withdrawals in December following outflows leaving investors without access to their funds. For an article on this and the property market generally please click here.
• Investment themes and overall strategy remains unchanged with Equities favoured over cash and bonds. In fixed interest short duration is favoured over long duration. UK, Emerging Markets and Asia equities are favoured over US and Europe.
• Please click here to access our End of Year Commentary

Review Risk Management, Eligibility and Investment and Borrowing Powers

The Committee reviewed risk reports and confirmed that all Clarion funds have been run in line with expectations. The Committee confirmed that there have been no breaches recorded for any of the funds included in the Clarion range.

Management of the Clarion Funds

MGTS Clarion Prudence

Prudence was c.0.9 percentage points ahead of the sector over 3 months. The fund has benefited from an overweight allocation to the UK and short duration bias. An active allocation to Global funds detracted from relative returns, as the underlying holdings underperformed the UK over the period.

The Committee commented on the weaker performance of the Fundsmith Global Equity strategy, which has underperformed the IA Global sector over 12 weeks. The M&G Global Dividend fund has also underperformed but is expected to do better during a period of recovering value stocks.

The Committee were pleased with the performance of all underlying UK funds. There is a good mix of strategies with various exposures to large and mid-cap stocks as well as value and growth bias. The Man GLG UK Income fund was the strongest underlying holding over 12 weeks with c.4% return in absolute terms.

Overall, the Committee are happy with the performance of the Prudence fund and no changes have been proposed.

The Committee approved the strategy and confirmed it is in line with the mandate.

MGTS Clarion Meridian

Meridian was in line with the IA Mixed Investment 40-85% Shares sector over 12 weeks. The fund has benefited from a positive asset allocation effect and relatively strong fund selection.

In the UK, all but three underlying holdings have outperformed their respective sectors over 12 weeks. The CFP SDL Buffettology and Investec UK Special Situation funds were the two best performers in the portfolio over 12 weeks.

The Committee commented on the improving short-term performance of the Rathbone Income fund. This strategy struggled to outperform the IA UK Equity Income sector over 12 weeks and over 1 year but fared better over 1,2 and 4 weeks.

The Committee were pleased with the performance of the Artemis Global Select fund, which outperformed the Fundsmith Equity strategy over 12 weeks. The Committee has also commented on the strong relative performance of both underlying Asian funds.

Overall the Committee are happy with the performance of the Clarion Meridian fund and no changes have been proposed.

The Committee approved the strategy and confirmed it is in line with the mandate.

MGTS Clarion Explorer

Explorer lagged the IA Flexible Investment sector over 12 weeks. Compared to the sector, the fund is underweight to bonds and overweight to Asia and Emerging Markets, which detracted from relative returns.

The active allocation to the UK made a positive contribution to the fund’s performance. The L&G MID Cap Index strategy was the second best performing holding over 12 weeks with c.5% return in absolute terms. The Lindsell Train Japanese Equity Hedged strategy was the best performing underlying holding over 12 weeks with c.10.5% absolute return due to a significant rise in Sterling.

Some Asian strategies with overweight allocations to Australia and India have lagged the IA Asia Pacific ex Japan sector. Funds with a higher allocation to China have outperformed over the period.

The Committee were pleased with the performance of the underlying Emerging Markets funds, where all but one strategy outperformed the IA Global Emerging Markets sector. Both European funds have also outperformed.

The Committee are pleased with the overall performance of this strategy and no changes have been proposed.

The Committee approved the strategy and confirmed it is in line with the mandate.

Model Portfolios

No changes.

AOB

The Committee discussed and agreed new asset allocations for Clarion funds and Clarion models which will be implemented in the new year. AW and DK will work on the implementation of new strategies in January.

Action Points

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