You are on page 1of 8

On Platform

MONTHLY COMMENTARY
INVESTMENT MANAGERS:
Patrick Toes Investment Director with over 20 years’ experience in fund management. Previously a member of Rensburg Sheppards Asset Allocation and Fund Selection Committees for over 9 years. David Cowell Chief Executive, possessing over 40 years’ experience in financial services, with over 25 years being investment management focussed.

DECEMBER 2012

5 years of performance – a marathon not a sprint
Although we have been running client portfolios since 2006, our model portfolio records start at the end of 2007 which means we are now able to show a five year performance record. We strongly believe that managing clients’ investments should be viewed as a marathon not a sprint and whilst 2012 has been a year where we have lagged a little - mostly in the last quarter - I would draw your attention to our longer term performance (marathon). This record is one where we have acted to protect capital given the difficult investment landscape and we have been successful in that regard. Our balanced and flexible approach (we often refer to it as ‘avoiding the potholes’ or mitigating their effect with the ‘shock absorbers’ in our portfolios) is in many ways the antithesis of the benchmark-hugging and high equity content of many of our peers. In the volatile markets we have been through and which we expect will remain for some years to come, we feel a more risk conscious and absolute return mentality should be at the forefront. We are mindful that there have been four corrections of 15% in equity markets over the last four years or so. In such circumstances outcomes for portfolios with structurally high equity content offer binary outcomes; it goes up a lot or down a lot, which is fine in good years but savage to investors’ capital, when not. Myddleton Croft’s Balanced Moderate risk model (platform clients) has risen by 19% which compares favourably with a 12.56% return for the IMA 20-60% equity sector. Moreover, our Speculative risk model has grown by 16.42%, outpacing its benchmark IMA 40-85% which has risen by 10.07%.

SALES: Julie Jones
Julie has over 20 years experience of working in investment sales and marketing, previously as Head of UK Retail Sales for BNY Mellon (Newton Investment Management).

2012 review
2012 was a year of moderate returns as you can see from the table opposite, however, it wasn’t always that way throughout the year. Worries over Greece and the periphery of Europe moved back into the headlines, particularly through the second quarter of the year, to be met with firm resolve by Mario Draghi ‘to do whatever it takes to protect the Euro’. Just as that threat saw risk assets rally in Europe, so too did Bernanke’s and other central bank action. 2012 was not a year of strong profit growth; quite the opposite. Stockmarkets rallied significantly more than the growth in corporate earnings in 2012 and a similar situation took place in bond markets where sovereign debt rose very modestly but the lowest grade of debt (high yield) rallied strongly. Investors’ confidence to take on more risk in both equity and bond markets was the key driver of returns in 2012. Sovereign bonds rose but far more modestly than in 2011 and modestly too in respect of the expansion of central banks’ balance sheets. The dire straits of 2011 were gone but their legacy remains money for nothin’ and your debts for free (excuse the pun). To cap it all off, the worries over US tax rises coming into force at the end of 2012, known as ‘fiscal cliff’, were misplaced as eventually politicians fudged a solution. The effect was that equity markets moved strongly higher in the last week of the year and the beginning of the New Year. Clearly all our worries have gone away, all our problems have been solved, the stalls have been opened and it’s off to the races…. Or not? And so to our outlook for the year and further ahead. We see two distinctly different scenarios which could unfold in the year ahead. Confidence is the key as to whether we see a replay of 2011 or 2012 markets. We expect growth in developed markets to be modest and slower than currently expected. This would mean 2013 will look very similar to 2012. In 2012 low growth was ignored and more positive investor psychology pushed valuations higher, this effect typically accounting for two thirds of the returns seen in equities. A reprise of 2012’s low earnings growth and improving sentiment is our positive scenario. Alternatively, our negative scenario would see low growth allied to flat or worsening sentiment, more akin to 2011. You will often hear that equities are cheap relative to history, particularly the period prior to 2008. We would caution against wholly accepting such a premise,. The chart below compares a more ‘normal’ level of GDP growth in the States of 3% as opposed to the current slower growth environment. The valuation on the US market of 13x 2013 earnings seems cheap in the context of history but much less so in a slower growth environment. We would extend this thesis broadly to other developed economies. We are not suggesting that equity valuations cannot rise further towards the top end of the slower growth range at 17x but it is worth noting we are trading above the average.

For further information call :

0113 274 7700
Email : sales@mcim.co.uk

Or visit us at : www.myddletoncroft.co.uk
IMPORTANT INFORMATION This information has been approved for distribution to professional investors. The information in this document is believed to be correct but cannot be guaranteed. Opinions and forecasts constitute our judgment as at the date of issue and are subject to change without notice. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Before contemplating any transaction, you should consult your financial adviser. This material is not intended as an offer or solicitation for the purchase or sale of any security or any other action, without first seeking advice as to the suitability of it for your needs. * Platform performance / allocation may differ from model depending on platform availability of underlying investments.

Myddleton Croft Investment Managers, 1 Woodside Mews, Clayton Wood Close, Leeds, LS16 6QE T: 0113 274 7700 F: 0113 274 7711 E-mail: info@mcim.co.uk Website: www.myddletoncroft.co.uk Myddleton Croft Ltd is authorised and regulated by the Financial Services Authority. Registered in England & Wales number 05782909. VAT number UK 889 241088. Registered office: 11 Clifford Avenue, Ilkley, LS29 0AS.

Myddleton Croft Investment Managers Balanced – Moderate Risk Model
Continued/DECEMBER 2012
INVESTMENT MANAGERS:
Patrick Toes Investment Director with over 20 years’ experience in fund management. Previously a member of Rensburg Sheppards Asset Allocation and Fund Selection Committees for over 9 years. David Cowell Chief Executive, possessing over 40 years’ experience in financial services, with over 25 years being investment management focussed.
You could call it ironic that US stocks are at five year highs despite the fact that the 3rd quarter earnings were very disappointing. It seems likely that the 4th quarter reporting season (starting January 8th 2013) will also disappoint. Make no mistake, when a public company sets earnings guidance these numbers are very conservative, and they expect to beat them comfortably in a healthy business environment. The fact that companies currently have to struggle to meet expectations shows how difficult it is from a corporate profit standpoint. The global manufacturing PMI index has proved a good indicator of equity markets over the last few years. The chart below illustrates that there have been periods of confidence (green lines) where equity prices diverged from macro fundamentals. In these cases there were no instances of a strong pick up in Global PMI and subsequently the market corrected. We need to keep in mind that there are some risks should growth remain subdued that this confidence based rally may correct. We would also highlight that when comparing developed markets to emerging markets manufacturing PMI, the latter has seen a pick up inferring that emerging markets are not as stretched as developed markets in valuation terms. We have been minded to agree that confidence is improving even though growth continues to look anaemic and we have increased equity exposure toward the end of the year. Small companies valuations look attractive with drivers such as M&A and cheap valuation looking likely to assist their performance. This is an area we have added to recently. We remain overweight in Asia & emerging markets whose outlook seems to be improving and we will look to add to that area should we see some weakness. However, we have maintained exposure to defensive areas as we see those areas less susceptible to disappoint, and should hold up better if we see sentiment wane. Gilts and western sovereign bonds, which for recent years have been the default ‘safe haven’, have seen their yields fall to very low levels, pushed by risk aversion and Bernanke ‘et al’ continuing to use the printing press. We see considerable risk to capital of investing both in this area and long duration (investment grade) credit over the medium term. We expect there will be consequences to central banks’ efforts to avoid deflation which include much higher inflation ‘down the road’. In effect it is a Scylla and Charybdis dilemma: in attempting to avoid the first peril it almost assures capture by the second. Our solution is to position with short duration to avoid the collateral effects of sovereign and long duration bond yields rising. However this brings up a second issue: short duration often comes hand in hand with lower quality debt which is highly correlated to equity returns. We note many of our peers have positioned in the riskiest end of fixed interest. We are concerned that in such positioning little diversification is being exercised and, should equities markets fall, so will the so-called safety element of a portfolio. In effect it is like playing roulette and betting on black - the numbers bet on are irrelevant should it come up red. Squaring this circle seems difficult but we have tried to find a balance. On the one hand by owning very little sovereign debt and on the other, some of the more attractive areas in high yield and emerging market debt, whilst carrying a high exposure to the US dollar as a ‘safe haven’ which rallies in a time of stress, much like sovereign bonds but more attractively priced. We consider the US dollar will provide a good hedge against ‘tail risk’ and we have positioned ourselves against the herd. We continue to hold gold which still remains under-owned and offers protection for both left and right tail risk (deflation and inflation) scenarios.

SALES: Julie Jones
Julie has over 20 years experience of working in investment sales and marketing, previously as Head of UK Retail Sales for BNY Mellon (Newton Investment Management).

. For further information call :

0113 274 7700
Email : sales@mcim.co.uk

Or visit us at : www.myddletoncroft.co.uk
IMPORTANT INFORMATION This information has been approved for distribution to professional investors. The information in this document is believed to be correct but cannot be guaranteed. Opinions and forecasts constitute our judgment as at the date of issue and are subject to change without notice. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Before contemplating any transaction, you should consult your financial adviser. This material is not intended as an offer or solicitation for the purchase or sale of any security or any other action, without first seeking advice as to the suitability of it for your needs. * Platform performance / allocation may differ from model depending on platform availability of underlying investments.

Myddleton Croft Investment Managers, 1 Woodside Mews, Clayton Wood Close, Leeds, LS16 6QE T: 0113 274 7700 F: 0113 274 7711 E-mail: info@mcim.co.uk Website: www.myddletoncroft.co.uk Myddleton Croft Ltd is authorised and regulated by the Financial Services Authority. Registered in England & Wales number 05782909. VAT number UK 889 241088. Registered office: 11 Clifford Avenue, Ilkley, LS29 0AS.

On Platform
Myddleton Croft Defensive Risk Model
INVESTMENT MANAGERS:
Patrick Toes Investment Director with over 20 years’ experience in fund management. Previously a member of Rensburg Sheppards Asset Allocation and Fund Selection Committees for over 9 years. David Cowell Chief Executive, possessing over 40 years’ experience in financial services, with over 25 years being investment management focussed.

DECEMBER 2012

PERFORMANCE SINCE LAUNCH

SALES: Julie Jones
Julie has over 20 years experience of working in investment sales and marketing, previously as Head of UK Retail Sales for BNY Mellon (Newton Investment Management).

2012 PERFORMANCE

For further information call :

0113 274 7700
Email : sales@mcim.co.uk Or visit us at : www.myddletoncroft.co.uk
Platform model portfolios include the cost of underlying investments and Myddleton Croft’s annual management fees but not the respective platform charges.

ASSET ALLOCATION

IMPORTANT INFORMATION This information has been approved for distribution to retail and professional investors only. The information in this document is believed to be correct but cannot be guaranteed. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Before contemplating any transaction, you should consult your financial adviser. This material is not intended as an offer or solicitation for the purchase or sale of any security or any other action, without first seeking advice as to the suitability of it for your needs. * Platform performance / allocation may differ from model depending on platform availability of underlying investments.

Myddleton Croft Investment Managers, 1 Woodside Mews, Clayton Wood Close, Leeds, LS16 6QE T: 0113 274 7700 F: 0113 274 7711 E-mail: info@mcim.co.uk Website: www.myddletoncroft.co.uk Myddleton Croft Ltd is authorised and regulated by the Financial Services Authority. Registered in England & Wales number 05782909. VAT number UK 889 241088. Registered office: 11 Clifford Avenue, Ilkley, LS29 0AS.

On Platform
Myddleton Croft Cautious Risk Model
INVESTMENT MANAGERS
Patrick Toes Investment Director with over 20 years’ experience in fund management. Previously a member of Rensburg Sheppards Asset Allocation and Fund Selection Committees for over 9 years. David Cowell Chief Executive, possessing over 40 years’ experience in financial services, with over 25 years being investment management focussed.

DECEMBER 2012

PERFORMANCE SINCE LAUNCH

SALES: Julie Jones
Julie has over 20 years experience of working in investment sales and marketing, previously as Head of UK Retail Sales for BNY Mellon (Newton Investment Management).
Platform model portfolios include cost of underlying investments and Myddleton Croft’s annual management fees, but not the respective platform charges.

2012 PERFORMANCE

For further information call :

0113 274 7700
Email : info@mcim.co.uk Or visit us at : www.myddletoncroft.co.uk

ASSET ALLOCATION
IMPORTANT INFORMATION This information has been approved for distribution to retail and professional investors only. The information in this document is believed to be correct but cannot be guaranteed. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Before contemplating any transaction, you should consult your financial adviser. This material is not intended as an offer or solicitation for the purchase or sale of any security or any other action, without first seeking advice as to the suitability of it for your needs. * Platform performance / allocation may differ from model depending on platform availability of underlying investments.

Myddleton Croft Investment Managers, 1 Woodside Mews, Clayton Wood Close, Leeds, LS16 6QE T: 0113 274 7700 F: 0113 274 7711 E-mail: info@mcim.co.uk Website: www.myddletoncroft.co.uk Myddleton Croft Ltd is authorised and regulated by the Financial Services Authority. Registered in England & Wales number 05782909. VAT number UK 889 241088. Registered office: 11 Clifford Avenue, Ilkley, LS29 0AS.

On Platform
IMPORTANT INFORMATION

Myddleton Croft Moderate Risk Model PERFORMANCE SINCE LAUNCH

DECEMBER 2012

INVESTMENT MANAGERS:
Patrick Toes Investment Director with over 20 years’ experience in fund management. Previously a member of Rensburg Sheppards Asset Allocation and Fund Selection Committees for over 9 years. David Cowell Chief Executive, possessing over 40 years’ experience in financial services, with over 25 years being investment management focussed.

SALES: Julie Jones
Julie has over 20 years experience of working in investment sales and marketing, previously as Head of UK Retail Sales for BNY Mellon (Newton Investment Management).

2012 PERFORMANCE

For further information call :

0113 274 7700
Email : sales@mcim.co.uk Or visit us at : www.myddletoncroft.co.uk
Platform model portfolios include the cost of underlying investments and Myddleton Croft’s annual management fees but not the respective platform charges.

ASSET ALLOCATION

IMPORTANT INFORMATION This information has been approved for distribution to retail and professional investors only. The information in this document is believed to be correct but cannot be guaranteed. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Before contemplating any transaction, you should consult your financial adviser. This material is not intended as an offer or solicitation for the purchase or sale of any security or any other action, without first seeking advice as to the suitability of it for your needs. * Platform performance / allocation may differ from model depending on platform availability of underlying investments.

Myddleton Croft Investment Managers, 1 Woodside Mews, Clayton Wood Close, Leeds, LS16 6QE T: 0113 274 7700 F: 0113 274 7711 E-mail: info@mcim.co.uk Website: www.myddletoncroft.co.uk Myddleton Croft Ltd is authorised and regulated by the Financial Services Authority. Registered in England & Wales number 05782909. VAT number UK 889 241088. Registered office: 11 Clifford Avenue, Ilkley, LS29 0AS.

On Platform
NOTE: THE ADVENTUROUS RISK MODEL HAS BEEN RENAMED THE PROGRESSIVE RISK MODEL Myddleton Croft Progressive Risk Model
INVESTMENT MANAGERS:
Patrick Toes Investment Director with over 20 years’ experience in fund management. Previously a member of Rensburg Sheppards Asset Allocation and Fund Selection Committees for over 9 years. David Cowell Chief Executive, possessing over 40 years’ experience in financial services, with over 25 years being investment management focussed.

DECEMBER 2012

PERFORMANCE SINCE LAUNCH

SALES: Julie Jones
Julie has over 20 years experience of working in investment sales and marketing, previously as Head of UK Retail Sales for BNY Mellon (Newton Investment Management).

2012 PERFORMANCE

For further information call :

0113 274 7700
Email : sales@mcim.co.uk Or visit us at : www.myddletoncroft.co.uk
Platform model portfolios include the cost of underlying investments and Myddleton Croft’s annual management fees but not the respective platform charges.

ASSET ALLOCATION

IMPORTANT INFORMATION This information has been approved for distribution to retail and professional investors only. The information in this document is believed to be correct but cannot be guaranteed. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Before contemplating any transaction, you should consult your financial adviser. This material is not intended as an offer or solicitation for the purchase or sale of any security or any other action, without first seeking advice as to the suitability of it for your needs. * Platform performance / allocation may differ from model depending on platform availability of underlying investments.

Myddleton Croft Investment Managers, 1 Woodside Mews, Clayton Wood Close, Leeds, LS16 6QE T: 0113 274 7700 F: 0113 274 7711 E-mail: info@mcim.co.uk Website: www.myddletoncroft.co.uk Myddleton Croft Ltd is authorised and regulated by the Financial Services Authority. Registered in England & Wales number 05782909. VAT number UK 889 241088. Registered office: 11 Clifford Avenue, Ilkley, LS29 0AS.

On Platform
NOTE: THE HIGHLY ADVENTUROUS RISK MODEL HAS BEEN RENAMED THE ADVENTUROUS RISK MODEL Myddleton Croft Adventurous Risk Model
INVESTMENT MANAGERS:
Patrick Toes Investment Director with over 20 years’ experience in fund management. Previously a member of Rensburg Sheppards Asset Allocation and Fund Selection Committees for over 9 years. David Cowell Chief Executive, possessing over 40 years’ experience in financial services, with over 25 years being investment management focussed.

DECEMBER 2012

PERFORMANCE SINCE LAUNCH

SALES: Julie Jones
Julie has over 20 years experience of working in investment sales and marketing, previously as Head of UK Retail Sales for BNY Mellon (Newton Investment Management).

2012 PERFORMANCE

For further information call :

0113 274 7700
Email : sales@mcim.co.uk Or visit us at : www.myddletoncroft.co.uk
Platform model portfolios include the cost of underlying investments and Myddleton Croft’s annual management fees but not the respective platform charges.

ASSET ALLOCATION
IMPORTANT INFORMATION This information has been approved for distribution to retail and professional investors only. The information in this document is believed to be correct but cannot be guaranteed. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Before contemplating any transaction, you should consult your financial adviser. This material is not intended as an offer or solicitation for the purchase or sale of any security or any other action, without first seeking advice as to the suitability of it for your needs. * Platform performance / allocation may differ from model depending on platform availability of underlying investments.

Myddleton Croft Investment Managers, 1 Woodside Mews, Clayton Wood Close, Leeds, LS16 6QE T: 0113 274 7700 F: 0113 274 7711 E-mail: info@mcim.co.uk Website: www.myddletoncroft.co.uk Myddleton Croft Ltd is authorised and regulated by the Financial Services Authority. Registered in England & Wales number 05782909. VAT number UK 889 241088. Registered office: 11 Clifford Avenue, Ilkley, LS29 0AS.

On Platform
Myddleton Croft Speculative Risk Model
INVESTMENT MANAGERS:
Patrick Toes Investment Director with over 20 years’ experience in fund management. Previously a member of Rensburg Sheppards Asset Allocation and Fund Selection Committees for over 9 years. David Cowell Chief Executive, possessing over 40 years’ experience in financial services, with over 25 years being investment management focussed.

DECEMBER 2012

PERFORMANCE SINCE LAUNCH

SALES: Julie Jones
Julie has over 20 years experience of working in investment sales and marketing, previously as Head of UK Retail Sales for BNY Mellon (Newton Investment Management).

2012 PERFORMANCE

For further information call :

0113 274 7700
Email : sales@mcim.co.uk Or visit us at : www.myddletoncroft.co.uk
Platform model portfolios include the cost of underlying investments and Myddleton Croft’s annual management fees but not the respective platform charges.

ASSET ALLOCATION
IMPORTANT INFORMATION This information has been approved for distribution to retail and professional investors only. The information in this document is believed to be correct but cannot be guaranteed. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Before contemplating any transaction, you should consult your financial adviser. This material is not intended as an offer or solicitation for the purchase or sale of any security or any other action, without first seeking advice as to the suitability of it for your needs. * Platform performance / allocation may differ from model depending on platform availability of underlying investments.

Myddleton Croft Investment Managers, 1 Woodside Mews, Clayton Wood Close, Leeds, LS16 6QE T: 0113 274 7700 F: 0113 274 7711 E-mail: info@mcim.co.uk Website: www.myddletoncroft.co.uk Myddleton Croft Ltd is authorised and regulated by the Financial Services Authority. Registered in England & Wales number 05782909. VAT number UK 889 241088. Registered office: 11 Clifford Avenue, Ilkley, LS29 0AS.