Investment News & Views

Guardian Portfolio Update and Changes
February 2021

Spring is around the corner and with the vaccine being steadily rolled out through the UK and in many parts of the world, it feels that there is reason for hope and optimism. There are of course still many risks, such as new variants for which the vaccine may be ineffective, delays in rolling out the vaccine in many countries specifically within Europe and Canada, and the decoupling of China and the US. Over the next year, the easing of lockdown will be a catalyst for growth in equity markets as well as increased use of fiscal policy to boost economies. With under 7s returning to school in Wales and a proposal for a return to school for all ages on March 8th, the beginning of the end seems near.

In anticipation of markets reopening across the world and to bring our portfolios’ equity content closer to our benchmarks, we have increased the maximum amount of equity for our Balanced, Cautious and Defensive portfolios to 60%, 45% and 30% respectively. We made this change for our Guardian portfolios last week and will also make similar equity allocation changes to Green Path and Heritage portfolios as we rebalance over the next few weeks.

We have included some new funds to our Guardian portfolios. We have added a global small cap fund to our international allocation as we expect small companies to rebound as economies reopen. Sustainable energy has performed particularly well over the past year. We believe this sector will remain strong as the world continues to move to a more sustainable future and have therefore included a sustainable energy fund into our allocation. We have also added a global infrastructure fund as this is an area we believe will grow as world economies open and as fiscal policies are enacted to provide further support.

Overall, we have not modified our economic expectations or allocations greatly across equity markets. We have reduced our exposure to some markets slightly to include our new funds for our Adventurous and Strategic portfolios to maintain our equity allocation, while increasing it slightly amongst our Balanced, Cautious, and Defensive portfolios as our equity allocation increased. We believe that the reopening of markets will not be synchronized across the world or regions as this depends upon both the uptake and supply of vaccines and on how much individual countries have been locked down. With Biden’s record-breaking £1.9 trillion stimulus package, we expect the US to continue to perform well. The UK economy is expected to pick up as the vaccination programme continues and the lockdown is eased. We also expect the Pacific to continue to be strong as it has managed the virus exceptionally well and some of the emerging markets as they have continued to operate without much lockdown.

On the fixed income side, as equity markets recover, we do not expect much growth from government bonds or longer dated bonds but have retained some investment into both gilts and US government bonds as risks to markets still exist. Our allocation has therefore tilted towards short-dated bonds and we have included some inflation-linked bonds as there is likely to be some expectation of inflationary pressure over the next few months. We have added a small allocation to emerging market bonds and an ethical bond fund to provide further diversification and because these are areas we expect to grow.

Our Dynamic Planner ratings for our Guardian portfolios are still a 6 for Adventurous and Strategic, 5 for Balanced, 4 for Cautious, and 3 for Defensive. If you would like any further information, please let us know and we would be happy to help.

As it is ISA season and there could be a move to align Capital Gains Tax and Income Tax rates in the forthcoming budget, we have created a few documents illustrating how a £20,000 ISA investment into our Guardian, Heritage, or a blended portfolio of the two would have performed over the past 5 years.

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Guardian ISA Example Illustration

This document details the performance ratios, costs and risk ratings of a 5 year illustration investment in each of the 5 Guardian portfolios.

Guardian ISA Illustration

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Guardian/Heritage blended ISA Example Illustration

This document details the performance ratios, costs and risk ratings of a 5 year illustration investment into a 50/50 blend of the Guardian and Heritage portfolios.

Guardian/Heritage ISA Illustration

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Heritage ISA Example Illustration

This document details the performance ratios, costs and risk ratings of a 5 year illustration investment in each of the 4 Heritage portfolios.

Heritage ISA Illustration

  • Wednesday, February 17, 2021

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Tomiko Evans

Chief Investment Officer

Tomiko is Chief Investment Officer of Crossing Point and holds the IMC qualification for Investment Management.