Investment Newsletter - August 2012

Page 1

Investment Newsletter August 2012

“Whatever it Takes” Over the past couple of weeks we have seen a very strong and very welcome rally in equity markets. On 25 July, the FTSE 100 closed below 5,500. On 9 August, it closed above 5,850, a rally of over 6% in little more than two weeks. Much of this has been sparked by a change in rhetoric in Europe. The phrase “whatever it takes” has become the new European catchphrase from politicians and from the European Central Bank. Once again, it is what is being said as much as what is being done, that is driving markets.

Changes to discretionary portfolios With markets rising, we have taken the opportunity to make some changes to your portfolios.

Volatility Trading We have sold the FTSE tracker that we bought when markets initially fell back in April. For most discretionary clients, we bought the HSBC FTSE Allshare Index fund when markets were around 5,630. This was sold on 10 August at around 5,840. The actual gain on the fund in our standard portfolios was approximately 3.75%. We felt it was time to reduce risk as markets have moved upwards quite quickly, and we are concerned they could fall back again in the short term. This is the latest round of volatility trading we have carried out periodically over the past 18 months. The previous rounds are detailed below: 16/03/2011 - 03/08/2011 - 08/08/2011 - 25/11/2011 07/07/2011 21/02/2012 18/10/2011 01/12/2011

Return to date

HSBC FTSE All Share

7.81%

5.35%

-

-

13.16%

HSBS FTSE 100

-

-

3.97%

7.29%

11.26%

Just prior to our first purchase, the FTSE 100 was at over 6,000 (on 3 March 2011). This volatility trade has been a way to try and make money in a sideways (actually slightly falling) market, and we are pleased that it has worked well to date. Using the proceeds from this trade, in our model portfolios we are buying a new alternative equity fund, Troy Asset Management’s Trojan fund. This fund is relatively defensive and in the past has done well in falling markets, whilst providing some very good long term returns. The fund has made money in every calendar year since its launch. Of course, there is no guarantee they can continue this impressive track record, but this is the sort of consistency of returns we like to see in this asset class. We still hold around 5% in “tactical cash” for most clients, which means that if markets do drop back we are able to buy back into equities at a lower level. Equilibrium Asset Management LLP (a limited liability partnership) is authorised and regulated by the Financial Services Authority. Equilibrium Asset Management is entered on the FSA register under reference 452261. The FSA regulates advice which we provide on investment and insurance business; however it does not regulate advice which we provide purely in respect of taxation matters. Copyright Equilibrium Asset Management LLP. Not to be reproduced without permission


Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.