Lowes MPS - Quarterly Reports

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’.

Performance During the quarter the portfolio return outperformed the IA Targeted Absolute Return sector average, posting a return of 2.97% compared to 2.06% on a total return basis. All funds within the portfolio posted a positive return during the period. The strongest performer of the underlying funds was M&G Episode Allocation fund. It benefitted from a meaningful allocation to equities, this being a fund in the IA Mixed Investment 20-60% Shares sector. The fund had a similar exposure across UK, European, US, Japanese and Asia Pacific equity markets. The BNY Mellon Real Return fund was also a strong performer helped by a meaningful allocation to equities. The fund was also saw a positive contribution from its fixed income allocation, with duration helping as bond yields fell. Weaker performers were those funds which had a stronger third quarter, highlighting the need for diversification in this market environment. Whilst the diversification to alternative strategies helped in the third quarter, they held the performance of the Janus Henderson Multi Asset Absolute Return fund back over the most recent three months. The market neutral positioning of the Tellworth UK Select fund was also a headwind in a positive environment for equities, but we are happy to see the fund manager sticking to their investment philosophy and process. Both funds were positive returning however in absolute terms.

Source: FE Analytics, Bid-Bid, Total Return

Portfolio Activity and Positioning There were no changes made to the portfolio during the quarter, remaining comfortable with the current fund selection and allocations. As there were no changes made to the portfolio in the third quarter also, the portfolio will be rebalanced in the first quarter of 2023, returning the underlying funds to their original allocations.

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 accordance with the stated objective and not client circumstances. Information from given sources is taken to be reliable and accurate, which Lowes Investment Management Ltd cannot warrant for accuracy or completeness. Lowes Investment Management is authorised and regulated by the Financial Conduct Authority (192938).