Lowes MPS - Quarterly Reports

Performance The portfolio outperformed the IA Mixed Investment 40-85% Shares sector average during the quarter, posting returns of 4.54% and 2.86% respectively. The top three strongest performing funds in the portfolio over the period were equity income funds. Equity income funds, in particular those which deliver dividend growth as well as an attractive yield, can prove popular with investors as a partial hedge against higher inflation. The ability of funds to pay a growing dividend also shows that the company potentially has more resilient earnings and cash flow generation in periods of economic weakness. Man GLG Income was a particularly strong performer, followed by Artemis Income and abrdn Europe ex UK Income. Another strong performer was our own Lowes UK Defined Strategy Fund, benefitting from strength in the UK equity market. The weakest performer during the quarter was the L&G UK Property Feeder fund, with weakness seen across physical property markets in general. Higher bond yields made this asset class less attractive to some investors, coupled with concerns that a protracted economic slowdown/recession could be negative for capital values. Whilst we monitor closely, we continue to see property as an alternative, diversifying income stream for the portfolio. Source: FE Analytics, Bid-Bid, Total Return Portfolio Activity and Positioning No changes were made to the portfolio during the period. Following the weakness in fixed income and infrastructure and therefore the higher yields now available, we continue to assess that the portfolio has the correct level of exposure to these asset classes. The level of equity exposure remains comfortably within the sector guidelines and could be increased further. For now, however, we prefer to monitor closely the potential impact which an economic recession could have on company earnings. Given that no changes have been made to the portfolio over the last two quarters the portfolio will be rebalanced in the first quarter of 2023, returning the underlying funds to their original allocations. 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 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).