WEALTH MANAGEMENT QUARTERLY REVIEW Q3

MARKET OVERVIEW - QUARTER THREE 2021

Markets endured a more difficult quarter as a number of factors caused investors to question the direction of travel. Amongst these was further regulatory crackdowns being implemented by the Chinese leadership, aimed at reducing inequality and creating a more balanced society, which have unnerved investors. Later in the quarter, questions over the financial stability of Evergrande, a huge Chinese property conglomerate, raised concerns as to whether this may spill over into the wider economy. Perhaps most important however, was the perceived shift in focus from central banks which have begun to change narrative on the chances of inflation being stickier than anticipated. This has raised the chances of interest rates having to move upwards sooner than expected.

The inflation picture was also not helped by the spike in energy prices, with natural gas prices hitting all-time highs in Europe. A perfect storm of supply constraints and inclement weather conditions reduced supply at a time when demand is increasing. It is likely that we will see softer growth over the next few months and in some respects this may be welcome as it will allow supply to catch up with demand. It is probable that earnings numbers will be more mixed, which may see a more volatile picture, however we believe that any significant sell-off will be viewed as buying opportunities.

FSWM PORTFOLIOS - QUARTER THREE 2021 PERFORMANCE

The graphs below show how the FSWM portfolios within the four Finance Shop risk categories have behaved over the last three months. The first graph shows the total return for the quarter whereas the second graph illustrates the “month by month” performance. The performance figures are aggregated so, for example, the green bar is made up of all the FSWM Multi-Asset Balanced portfolios across all product types. If you require specific performance figures for your plan, please contact your adviser.

PERFORMANCE REVIEW

Despite a less supportive backdrop three of the four portfolios posted positive, albeit modest, returns. The exception was the very adventurous portfolio which has a greater exposure to Asian and emerging market equities which were much weaker than their developed market counterparts. 

FSWM PORTFOLIOS - ASSET ALLOCATION

There are six portfolios in the FSWM range, four growth and two income which are detailed below. Your FSWM pension or investment will be invested in one of these categories. The tables show the aggregate composition of the portfolios with some figures to show the potential risk and return of each category.

GROWTH PORTFOLIOS

INCOME PORTFOLIOS

There are two income portfolios which aim to produce an income within a target range as highlighted in the table below. The two portfolios cover the Cautious and Balanced Finance Shop risk categories.

FSWM PORTFOLIOS - LONGER TERM PERFORMANCE

The first graph below shows how the FSWM portfolios have performed over 12 months. For comparison, the returns of cash (MoneyFacts 90 days notice 10K) and inflation (UK Consumer Price Index) are also shown. As with the graphs on page 6, the figures for each category are aggregated.

The second graph illustrates how the portfolios have performed since launch (1st November 2008).

FSWM FUND REVIEW POLICY

A key part of the FSWM service is to monitor the underlying performance of each fund within the portfolios for both risk and return. We have selected quality funds with strong track records and therefore do not envisage a high turnover of holdings. However, there will be occasions when the performance of an individual fund will lead to its expulsion from the portfolio(s). There are a number of factors that determine this decision, for example consistent under-performance, change of management team etc. It is also important, however, to have patience with a fund that is just suffering short-term under-performance.

We operate a “traffic light” system and will move a fund from a “green” to “amber” rating if the fund requires closer scrutiny at the next review. If a fund shows sufficient improvement, it will move back to “green”. If the fund consistently underperforms without good reason its status will change to “red” and the fund will be removed from the portfolio(s). A replacement fund will be selected and all clients holding the fund within their portfolio will be notified. Upon receipt of their authority, the client’s funds will be switched accordingly.

RESULTS OF FUND & ASSET ALLOCATION REVIEW

The Investment Committee meets on a quarterly basis and one of its primary functions is to review our existing fund range. Within this meeting we scrutinise any funds which we feel are performing significantly differently to their peer group or benchmark, with a number then run against our internal performance and risk measurements.

There were several changes to the funds under review with a number, including Aberdeen Standard European and Jupiter Strategic Bond, being removed and Baillie Gifford Global Discovery and Fortem Alterative Growth being added. The funds under review are as follows:

• Ardevora Global
• Ardevora UK
• Artemis Global Growth
• Baillie Gifford Global Discovery
• Blackrock European Dynamic
• Blackrock UK Income
• BNY Mellon Asian Income
• Fidelity European
• Fortem Alternative Growth
• Garraway Financial Trends
• Pictet Robotics
• Polar Capital Global Insurance

ASSET ALLOCATION TABLES - IMPORTANT INFORMATION

The maximum quarterly gain and loss figures in the asset allocation tables above are taken from Financial Express based on the last 50 quarters of the longest running FSWM portfolios (up to August 2021). For the income portfolios, the figures are based on 32 quarters. 

FE Risk Score: Financial Express have introduced FE Risk Scores to provide a single, easy to understand measure of risk across a range of investments. In the UK, Risk Scores measure the riskiness of any given investment in relation to the FTSE 100. Weekly volatility is measured over up to 3 years, with recent behaviour counting more heavily than earlier behaviour. The Risk Score is calculated weekly, and can be tracked over time. Cash type investments will have scores near zero, investment funds will tend to have scores in the 0 - 150 range.

The FTSE 100 is always 100. There is no upper limit to the scores. 

The asset allocation figures are aggregated based on the current holdings within the FSWM portfolios for a new investor as at 17^th August 2021. They will vary on a daily basis subject to market fluctuations. Rebalancing will be recommended if equity content exceeds the benchmark maximums. There is no guarantee that any of the model portfolios above will achieve their stated objectives. Each model portfolio may also experience more or less volatility than expected. The value of investments will fall as well as rise and are not guaranteed. Past performance is no guide to future performance. The Finance Shop Risk Categories are graded from 1 to 7. The above portfolios cover categories 3 to 6. For further information on all categories, please speak to your Finance Shop Independent Financial Adviser.

ADDITIONAL IMPORTANT INFORMATION

This report has been issued by the Investment Committee of the Finance Shop Wealth Management team using data provided by Financial Express. Care has been taken to ensure that the information is correct but Financial Express and Finance Shop neither warrants, represents nor guarantees the contents of the information, nor does Financial Express or Finance Shop accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein.

Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. Currency fluctuations can also affect fund values. The above report does not constitute advice and you should speak to your Independent Financial Adviser before you make any alterations to investments or pension plans.

The instruments recorded above are weighted model portfolios created using Financial Express Analytics. Performance figures shown are based on the weighted models and may differ from the actual returns achieved by investors. Performance figures shown are based on bid to bid gross returns and do not include plan, contract or ongoing adviser charges / commission. Please refer to your policy documentation for further details.

Financial Express Limited Registration number: 2405213. Registered office: 7 Chertsey Road, Woking, Surrey, GU21 5AB. Telephone 01483 783 900. Website www.financialexpress.net

Finance Shop is a trading name of Finance Shop Limited. Company Number 07535053. Registered in England. Registered Office: North Wood Place, Octagon Business Park, Little Plumstead, Norwich, Norfolk NR13 5FH.

Finance Shop is authorised and regulated by the Financial Conduct Authority.

ABOUT FINANCE SHOP

Formed in 1990, Finance Shop has grown to become one of the region’s leading firms of Independent Financial Advisers.

As a locally owned, genuinely independent company, we pride ourselves on the quality of our advice and service to both personal and corporate clients. With over 150 years of financial services experience within the firm and over half a billion of assets under management, we have the expertise, experience and knowledge to be able to advise on all aspects of financial planning.

Our belief is that access to quality, independent advice is more important than ever and that is why we spend the majority of our time face to face with new and existing clients, explaining the key issues of today and helping them plan for the future.