emery little core income portfolio 5 bi annual review draft

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  • Income Portfolio 5 1st Half, 2014

    Bi-Annual Income Portfolio Review

  • Emery Little Core Income Portfolio 5

    First Half, 2014 Page 2

    Contents

    Portfolio Outline ..................................................................... 3

    Market Review ....................................................................... 4

    Market Performance .............................................................. 5

    Core Portfolio Performance Summary ................................... 6

    Asset Allocation ...................................................................... 7

    IMA Sector Performance ........................................................ 8

    Notable Contributors ............................................................. 9

    Notable Detractors ............................................................... 10

    Portfolio Breakdown ............................................................ 11

    Asset Allocation Changes ..................................................... 12

    Activity ................................................................................. 13

    Notes .................................................................................... 14

  • Emery Little Core Income Portfolio 5

    First Half, 2014 Page 3

    Emery Little Income Portfolio 5 Outline

    Your Broader Portfolio Profile Income Portfolio Profile Portfolio Benchmark

    As we have discussed at length, Emery Little help

    you to consider your portfolio in the context of

    your broader financial situation. We refer you to

    your Investment Map that Emery Little update for

    you annually. The suitability of your core portfolio has been

    carefully selected when considering your risk

    outcomes in the context of your broader asset

    base (excluding your prime residence) when

    combined with your immediate needs and future

    goals and aspirations.

    This portfolio is suitable for investors requiring income

    either immediately or in the short term, from the

    whole of, or a proportion of their portfolio.

    Investors can expect most of their portfolio to be

    invested in growth assets, such as UK and global

    equities and a reasonable allocation to defensive

    assets, such as fixed interest and property.

    The portfolio is likely to exhibit short-term volatility

    due to the equity content and so is suitable for

    investors who can take a long term time horizon and

    will not need access to these funds for up to 5 years.

    Suitable for investors requiring income either

    immediately or in the short term, from the whole of,

    or a proportion of their portfolio.

    The portfolio benchmark is made up of a

    combination of the sector average returns of the

    funds in the portfolio, with the same weightings as

    funds in each portfolio. The portfolio benchmark is

    dynamic and its composition may change with any

    changes in the asset allocation or fund selection of

    the portfolio.

    Portfolio Aim

    The portfolio aims to achieve a higher level of

    income (target yield 3.5% after charges) than is

    typically available from cash. The target income

    yield is not guaranteed and may vary.

  • Emery Little Core Income Portfolio 5

    First Half, 2014 Page 4

    Market Review

    Market Commentary 6 months to 30 June 2014

    After a euphoric run at the end of last year, the start of

    2014 was a sobering reminder for market bulls that

    volatility has not gone anywhere. Equities worldwide

    plunged in January as currency troubles in emerging

    markets sent twitchy investors into a selling frenzy.

    Nonetheless, sentiment bounced back strongly and as the

    Northern Hemisphere welcomed the start of spring, major

    markets were once again threatening record highs.

    Global equities continued on a positive trajectory in the

    second quarter, with the world's major central banks

    having a key influence on market sentiment. Optimism over

    economic trends in the US, UK trumped geo-political

    concerns in Eastern Europe (Russia-Ukraine) and the Middle

    East (especially Iraq) to keep major indices on a broadly

    upward trajectory in the three months to June.

    However, market drivers remain in conflict: broad optimism

    of an accelerating US-led global economic recovery cannot

    completely displace fears of a sudden slowdown or banking

    crisis in China or stagnation in Europe.

    Though the US spent much of the first quarter shivering

    through the coldest winter in decades, most economic

    indicators still point to an improving growth outlook. US

    investors looked beyond the alarming 2.9% slump in GDP in

    Q1 influenced heavily by the extreme winter weather

    and celebrated positive industrial, housing, and jobs data.

    Inflation crept up to an 18-month high in May, but Federal

    Reserve is being cautious not to spook markets by

    accelerating the gradual withdrawal from its quantitative

    easing programme (the monthly stimulus is now down to

    US$55bn from a peak of $85bn).

    Having navigated the worst of the storm the European

    Central Bank (ECB) finally acted boldly in June to put some

    wind back in the sails of the Eurozone economy and ward

    off the spectre of a Japan-like era of deflation.

    The bank cut its benchmark financing rate from 0.25% to

    0.15% - with the deposit rate falling into negative territory

    at -0.1% - while launching a four-year programme of cheap

    loans for banks in the hope that this will encourage more

    lending and breath some life into the real economy. ECB

    leader Mario Draghi hammered home the message for

    markets by saying that the bank was not finished yet.

    The ECB's unprecedented move came soon after the

    surprising results of the EU Parliamentary elections in May,

    where the fallout of a prolonged economic slump was

    clearly evident. In what was described in the media as a

    'political earthquake', disenfranchised voters turned their

    backs on the establishment and handed nationalist fringe

    parties some of their best ever results.

    The UK has emerged as a leader in the economic recovery

    with the IMF raising its growth forecast for 2014 to 2.9%,

    the highest rate for any developed economy.

    In spite of this, with inflation falling at the start of the year,

    the Bank of England (BoE) has so far not shown any sign

    that it is ready to increase its benchmark rate or reduce its

    own 375bn QE plan just yet.

    That said, the BoEs Mark Carney surprised many at his

    annual Mansion House speech on 12th June by saying that

    interest rates could be raised sooner than markets

    currently expect. The comments had an immediate impact

    in the markets as investors adjusted to the possibility of a

    rate hike before the end of the year. Carney has since

    played down the hawkish tone but is facing some criticism

    for sending mixed messages that undermine his 'forward

    guidance' approach to monetary policy.

    Carney's BoE remains most concerned about potential

    overheating in the housing market, especially in London

    where the average cost of property has soared above

    400,000 for the first time ever. Against this backdrop, the

    Treasury gave the BoE new powers to impose restrictions

    on mortgage lending, including a 15% cap on the number of

    new housing loans that banks can offer that exceed 4.5

    times the borrower's salary.

  • Emery Little Income Portfolio 5 Page 5

    First Half, 2014

    Market Performance Performance of indices over six months to 30 June 2014.

    0.3

    3.3

    9.1

    5.6

    1.9

    1.6

    1.5

    3.5

    -1.5

    3.2

    2.8

    7.8

    0.5

    2.3

    17.6

    9.2

    12.4

    13.1

    19.1

    9.8

    -1.2

    10.0

    1.4

    -22.9

    -25 -20 -15 -10 -5 0 5 10 15 20 25

    Bank Of England Base Rate

    UK Gilts

    UK Property

    Residential Property

    UK Large Caps

    UK Equities

    UK Small Caps

    US Equities

    Japan Equities

    Global Equities

    Emerging Markets Equities

    Gold

    Total Return (%)

    1y

    6m

  • Emery Little Income Portfolio 5 Page 6

    First Half, 2014

    Income Portfolio Performance Summary

    Performance summary for six months to 30 June 2014.

    Over the six months to 30 June 2014 Income Portfolio 5 returned 2.2%. This compared to a rise of 1.1% in the Retail Price Index (RPI), a 1.9% increase in the FTSE 100 Index, and a return of 3.3% in the FTSE British Government All Stocks Index (all figures total returns in Sterling). This brought the 12-month performance of Income Portfolio 4 to 6.4%.

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  • Emery Little I