Investment News & Views

Heritage Portfolios Poised for Growth

Although Crossing Points Heritage portfolios’ short-term returns were impacted by the market concerns over inflation and 10-year bond yields this quarter, toward the end of March and in the beginning of April these returns had already started to recover. There are further risks due to the coronavirus and potential variants. But, with vaccine rollouts gaining momentum, we expect equity markets will continue to recover this year boosted by increased fiscal stimulus packages and accommodating monetary policies. We have therefore made a few changes to our Heritage portfolios to take advantage of the expected increase in growth through 2021.

We increased our equity allocations by 5% for the Heritage Balanced and Cautious portfolios to bring them closer to the equity allocations within their benchmarks and in anticipation of a recovery as the lockdown restrictions ease. We have also increased our allocation to the UK, international, US, Japan, and emerging markets. We removed the clean energy fund as it has been particularly impacted by the changes in 10-year bond yields and as we expect other equity markets to recover but have kept property and technology investment trusts for diversification. We reduced our government bond exposure in favour of inflation-linked, short-dated index linked, and investment grade bonds. Even with the increase in equity our Dynamic Planner ratings for the Heritage portfolios continue to be 6 for Heritage Adventurous and Strategic, 5 for Balanced, and 4 for Cautious.

We reviewed our funds for performance, gearing, discount/premium, and costs and decided to increase the diversification of the portfolios by splitting our allocation where possible between two funds for each market. We added a second fund to emerging markets, Europe, and the UK as well as a UK growth and mid cap fund to our UK allocation. The addition of new funds can increase transaction costs, but as we do not trade regularly, this should have minimal impact compared to the added benefits of diversification.

We removed two funds due to their high gearing ratios. Gearing allows the investment trust to borrow capital against the trust’s assets. This can increase returns in a rising market but does increase risk and losses in a falling market. Our current gearing limit is 20%. This is in line with several of our established investment trusts which have published gearing ratio ranges up to 20%. All our funds also fall between the -15% discount and 10% premium limits which we have established.

As markets recover this year, we expect our investment trusts to continue to provide superior long-term returns.

To find out more about our market expectations, Heritage performance and further statistics, download the quarter report here.

Heritage Performance Review

Heritage Performance Review

This review covers the quarter until the 1 April 2021.

Heritage Performance Review

  • Wednesday, May 5, 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.