Lowes MPS - Quarterly Reports

Performance During the period the portfolio outperformed the IA Global sector average, returning 3.89% and 2.19% respectively. Strong performers during the period were European equity funds, to be expected given that this was the strongest performing of the major regions. Other strong performers were those funds with a ‘value’ style bias, such as Schroder Recovery investing in UK equities and Man GLG Japan Core Alpha. Funds with this style bias tend to perform stronger than growth stocks in periods of higher bond yields and rising interest rates. Another strong performer was the Jupiter Gold & Silver fund. Both of these metals can perform well in inflationary environments. Miners are also benefitting from strong cash flow generation given demand at a time when new resources coming online via new mines is limited. Weaker performers during the period were US equity funds, with a weaker US dollar against sterling not helping here due to the currency translation impact. In general, those funds with more of a growth bias underperformed those with more of a value style bias for the reasons mentioned above. Source: FE Analytics, Bid-Bid, Total Return Portfolio Activity and Positioning During the quarter there were adjustments made to the UK and European equity exposure within the portfolio. In the UK we sold down the holding in the SVM UK Growth fund in favour of CRUX UK Special Situations. Both funds have a similar ‘growth at a reasonable price’ investment philosophy. The CRUX fund however, despite this similarity and comparable market cap exposure, has proven more resilient in negative and volatile markets, whilst showing a similar degree of upside capture in positive markets. In terms of European equity exposure, the position in Jupiter European was sold, with proceeds recycled into Lightman European and R&M European funds. The Lightman fund has a strong valuation bias, a style which should hopefully continue to perform well in an environment of higher interest rates and bond yields. Value, as an investment style, despite the recent improved performance, still remains at a significant discount relative to growth stocks. The R&M fund meanwhile adopts a business cycle approach to investing. This tends to give the fund a style agnostic approach, although the willingness to be contrary does mean that it can typically tilt towards value, although not as aggressively as other funds, for example those investing in special situations/recovery/deep value stocks. Although further interest rate hikes are still forecast from year end levels in the UK, Europe and US, the market began to price in the possibility of interest rate cuts in the US for the second half of 2023. This was on the basis of inflation falling from its peak and also the threat of recession. This was somewhat at odds with the US Federal Reserve however, who believe that there is little likelihood that cuts will be seen in 2023. Whilst interest rates in the US therefore are likely to peak in the first half of 2023, it remains to be seen therefore whether we will see a full ‘Fed pivot’. Disclaimer The portfolio is managed on a discretionary basis therefore the investment manager may make changes to the investments held without notice. Investors are agreeing to the investment model as recommended by an Adviser and may not be investing into the specific assets included in this report. Past performance is not a guide to future performance. The value of investments and any income from them can fall as well as rise and are not guaranteed, so you may get back less than you invested. If you invest in currencies other than your own, fluctuations in currency value will mean that the value of your investment will move independently of the underlying asset. Consideration should be given to whether it is felt that the outcome of any risk assessment is accurate and advice should be sought for factors such as investment objectives, the investment term, attitude to risk, capacity for investment loss and the level of inflation. This illustrative document is intended for investors where advice has been given by Advisers. Models are prepared in accord ance with the stated objective and not client circumstances. Information from given sources is taken to be reliable and accu rate, which Lowes Investment Management Ltd cannot warrant for accuracy or completeness. Lowes Investment Management is authorised and regulated by the Financial Conduct Authority (192938).