Investment News & Views

Monthly Portfolio Update
April 2020

Another week of volatility and uncertainty in markets.

Guardian Portfolios

All Guardian portfolios have outperformed across all time periods. Our further statistics such as volatility, maximum drawdown and sortino ratios are all also better than the relevant benchmarks.

After the recent increase in market values, this week we made the decision to cautiously re-enter the markets for a small percentage of the asset allocation for international, US and Japanese funds. Due to a dip in volatility this week when compared to last week, we decided to use some of the longer trend-following indicators. This allows us to have a very small amount of exposure to gain returns if the market does start to recover, but also still helps us to weather any potential further drops in the market.

At this time, we also decided to re-enter a modest investment across all Guardian portfolios into US government bonds, gilts, UK investment grade bonds, UK short duration investment grade bonds, global investment grade bonds, and global short-term investment grade bonds. These bonds are undoubtedly safer at the moment than equities but have the potential to provide some return.

It will be impossible to tell if we are the bottom of the bear market or in a short-term bounce until after the fact. We are not in the business of predicting future price movements, as it is completely impossible to do so. Instead, we are continuing to review our decisions daily. We are also aware that due to trading time delays, we need to be confident in our decisions and trade only once a week. If there is evidence of a further downward trend in equities, we may choose to again exit this small allocation to move into cash or continue to hold a very small allocation in equities.

Our concern is always to ensure that we guard and protect the money which is invested in Guardian. As we did when the markets started falling in Feb and early March, we will continue to err on the side of caution for Guardian investments.

If an investor is looking to protect their investments but are also looking to have more exposure to equities at the moment, we are in the process of creating a new set of Foundation Portfolios. The performance of these portfolios as of 1st of April also outperforms the majority of the time for the relevant benchmarks, but not to the same extent as Guardian currently is. The Foundation portfolios allow an increase in equity exposure further than Guardian positions currently do. These could be blended with a Guardian investment to create a bespoke investor proposition. They will have a similar asset allocation to the Guardian portfolios but will only be modified every 6 months.

We are aware that some of the platforms are not able to support the Heritage or Green Path portfolios. These strategies also invest in ETFs and investment trusts respectively and therefore might not be appropriate for all investors. If an investor is looking to have a blended unit trust proposition, a combination of Guardian and Foundation portfolios could be tailored to them.

Foundation Portfolios will be available shortly and we will send out the Fact Sheets and other documentation as soon as it is complete. We expect this to be completed sometime early next week.

Green Path Portfolios

As buy and hold propositions, our Green Path portfolios are continuing to ride the markets. Market reductions as great as the ones which we have just experienced can also create large upward swings quickly. We expect these positions to recover fully once the markets recover.

Our strategic and balanced Green Path portfolios have underperformed their benchmarks over the past six months, but the cautious portfolio has outperformed over the past 6 months. The importance of environmental, social and governance characteristics within a company when markets do open back up could strengthen the companies within this sector. We continue to believe that this is an important and growing aspect of investing.

Heritage Portfolios

As a buy and hold proposition, our Heritage portfolios recently have underperformed their relevant benchmarks over the past 2 years for the adventurous portfolio, 1 year for the strategic portfolio, and over the past 6 months for the balanced portfolio. Although this is the case, the strong previous performance from these portfolios has meant that it has continued to outperform over 3 years for adventurous, over 2 years for strategic, over 1 year for balanced, and over all time periods for the cautious portfolio. When markets do recover, we expect these to again significantly outperform their benchmarks even though they are experiencing more volatility now.

Our Heritage portfolios invest predominantly in investment trusts. One of the features of investment trusts when compared to normal equity is that they are able to use previous retained revenue in order to smooth dividend payments even in years where revenue has decreased. Although dividends are never guaranteed, in the current environment this may be relevant to investors who are relying on dividend payments for income. For further thoughts, please have a look at our blog:

Investment Trusts are a reliable source of income

Panoramic skyline view of Bank and Canary Wharf, central London's leading financial districts

We are continuing to monitor markets daily to ensure we make the appropriate decisions for the Guardian portfolios and are spending our days trying to best support you, including creating the new Foundation portfolio range. If there is anything that we can do to support you during this difficult time, please let us know. We are always open to suggestions.

  • Monday, April 6, 2020

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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.