Investments

Portfolio Performance - August 2020

Our portfolio manager Daniel Greenhough takes a closer look at the Rosecut portfolio performance against the ARC index for August 2020 and how asset classes have performed during this time.

Portfolio Performance - August 2020

In August, the estimates of the ARC indices performance were ahead of the performance of the respective Rosecut portfolios e.g. the Rosecut Balanced increased by 1.24%, but the ARC Balanced was up 1.6%.

You should be aware that past performance is no guarantee of future performance.

Please note: all numbers listed above are sourced from Financial Express Analytics and stated in GBP net of fees.

* The ARC PCI indices are based on the returns being generated by investment managers in the private client industry for discretionary run portfolios. More information can be found on their website at: https://www.suggestus.com/

** The Rosecut Balanced model has an inception date of 28th February 2019. In the above table UK government bonds are represented by the FTSE All-Stocks Gilts index and UK corporate bonds by the Bloomberg Barclays Sterling Aggregate Corporate index.



Portfolio Performance


It is not immediately obvious what drove the performance of the ARC index in August – it is possible that the strong performance of UK mid-sized companies did, or a lack of exposure to government bonds did.


As long-term investors we do not stress over one-month performance numbers – over the past year the Rosecut Balanced is comfortably ahead of the ARC Balanced index. We keep an eye on the monthly numbers just to see if any interesting new trends are developing.



Asset Class (i.e. bonds, equities, and alternatives) Performance


The asset classes that fell in the month were bonds. The UK Gilt ETF we hold fell by 3%. This is because UK government bond yields rose (which have an inverse effect on government bond prices). Normally yields rise because of rising inflation or expectation of interest rate increases – but in this case it looks more likely that yields rose because of investors positioning portfolios.


As corporate bond prices are affected by government bond yields, they also fell in value during August – but to a lesser extent. The iShares Core Corporate Bond ETF fell by roughly 1%, to give you an idea of this.


Topping the leader board for August were US large caps and UK mid-caps as represented by the S&P 500 and the FTSE 250 respectively.  They both rose by over 5% in August.


Some of the behaviour in the US stock market appears somewhat irrational as stocks doing share splits found their market cap increasing materially. This is odd as the overall value of a company (as measured by its market cap) should not change as a result of a stock split – the only change is that the company has issued more shares and the share price should move to reflect that only.


For example, if a company does a “1 for 1” stock split it means for every 1 share you own, you get another. The share price should half as the company value stays the same, but the number of shares issued doubles. If the share prices is significantly higher than this, it raises eyebrows and suspicions of retail investor behaviour striking again. This behaviour tends to be more irrational and therefore vulnerable to losing money over time.


All other equity holdings increased in value over the month.


The table below shows the Asset Class Returns to the end of August 2020 in GBP.

Source: Financial Express Analytics

You should be aware that past performance is no guarantee of future performance.

The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested. This may be partly the result of exchange rate fluctuations in investments which have an exposure to foreign currencies