Quarterly Investment Report January 2019

As I write this briefing, it has just been announced that legendary fund manager, and founder of Vanguard Group, John (Jack) Bogle has passed away.

I appreciate than many of you will not have heard of him; but it is estimated that thanks to Jack Bogle, investors have saved $175 billion in fees since Vanguard was founded in 1974 not counting the savings from lower fund fees forced upon Vanguard’s rivals to remain competitive.

Warren Buffet said of Jack Bogle “Jack did more for American investors as a whole than any individual I’ve known. A lot of Wall Street is devoted to charging a lot for nothing. He charged nothing to accomplish a huge amount”.

Moving on.

As you know by now, our aim with this report is to show the performance of the EWM portfolios compared to other investment management groups by comparing to Asset Risk Consultants (ARC) Private Client Indices.

ARC is the go to index provider for wealth managers, covering 86 contributors including all the major stock brokers and discretionary fund management firms and more than 130,000 portfolios.

The size and quality of the data set means that it is possible to assess performance against a peer group covering all major investment styles, approaches and philosophies.

ARC gathers and publishes data quarterly; it allocates portfolio returns in to one of four categories depending on a risk return analysis: –

  • ARC Sterling Cautious
  • ARC Sterling Balanced Asset
  • ARC Sterling Steady Growth
  • ARC Sterling Equity Risk

This process reflects that one manager’s balanced fund may not be the same as another manager’s balanced fund.

What does EWM do?

Our investment philosophy is driven by process; the aim is to capture the market return for the risk the client is prepared to take, less as low fees as possible.

The 6 EWM portfolios combine growth assets (shares in the great companies of the world) with defensive assets (global developed world government bonds and UK inflation linked gilts). The portfolios are: –

  • EWM P0 Defensive
  • EWM P20 Cautious
  • EWM P40 Cautious Plus
  • EWM P60 Balanced
  • EWM P80 Balanced Plus
  • EWM P100 Adventurous

Remember, growth assets are always stated first so P0 Defensive holds no growth assets, P40 holds 40% growth assets, P80 holds 80% etc.

The portfolios are managed systematically, with no judgemental activity at client level as to where or how monies are allocated. Instead, our Investment Committee uses global market capitalisation to determine country allocations.

The portfolios are managed systematically, with no judgemental activity at client level as to where or how monies are allocated. Instead, our Investment Committee uses global market capitalisation to determine country allocations.

We then seek to add return by allocating to emerging markets and small & value shares reflecting evidence these factors have increased return historically, with some additional risk.

Our process driven approach ensures we are not affected by common behavioural biases affecting clients, their advisers and active managers.

The following chart shows three year returns for the EWM portfolios to 31/12/2018. Also included is MSCI All World index, and UK One Month Treasuries as a proxy for cash deposits.

You can see how the EWM portfolios sit against these indices in this chart: –

EWM versus ARC PCI

Although the EWM portfolios are not directly comparable to ARC for the reasons outlined, it’s interesting to reflect on the 3 year risk and return metrics shown in the scatter graph below: –

Represented in a chart: –

Portfolio / PCI Risk relative to world equities % Tolerance bands % 3 year volatility % 3 year return%
EWM P0 0 2.42 7.66
EWM P20 20 3.51 13.72
ARC Sterling Cautious 0-40 0-50 2.93 6.08
EWM P40 40 5.38 19.67
ARC Sterling Balanced 40-60 30-70 4.69 9.95
EWM P60 60 7.19 25.24
ARC Sterling Steady Growth 60-80 50-90 6.29 15.09
EWM P80 80 8.85 30.71
ARC Sterling Equity Risk 80-110 70-120 7.41 19.18
EWM P100 100 10.34 35.48

You’ll note that there are ‘tolerance limits’ to the ARC PCI, indicating that managers may have different allocations to equities in their portfolios. The figure above 100% indicates that managers may have borrowed money to invest, a common practice for investment trusts, known as ‘gearing’.


Please remember your portfolio performance is likely to be different to the returns shown above because you will have invested at a different time and there may be cash flows in or out of your portfolio.

Nevertheless, the data shows that the processes EWM employs to manage money on behalf of our clients and their families are robust and are producing good results in comparison with our peers.

2018 was a tough year for investors especially so in December when markets experienced several turbulent days. This is reflected in the data above, the 3 year volatility for all portfolios has increased slightly in comparison to last year’s data. Notwithstanding the small increases in volatility, 3 year real returns are still well into positive territory for all but the P0 Defensive portfolio.

It’s always important to remember that volatility isn’t the real risk. The real risk is running out of money before we run out of life. Volatility is the price we pay for equity returns; we need to learn to embrace it.

Finally, and with reference to the recent market volatility, it seems fitting to end with a Jack Bogle classic; “This too shall pass”.

If you have any questions or comments please do get in touch; we’d love to hear from you.


All data sourced by EWM from FE Analytics as at date shown. Past performance is not a guide to the future.

The information in this bulletin does not constitute investment or financial advice in any form. No responsibility is taken for any action or inaction taken by clients solely in relation to this information.

The bulletin is published for educational purposes only.


About the Author

Dom is a qualified and experienced Chartered Financial Planner (CII) and Chartered Wealth Manager CFP (CISI) and a Registered Life Planner (Kinder Institute) with over 30 years experience. His work primarily focuses on retirement income planning, helping clients to maintain financial dignity and independence in retirement. Read more from Dominic...
This article is distributed for educational purposes and should not be considered investment advice or an offer of any product for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated.
Since starting my relationship with Expert Wealth Management I have had nothing but outstanding advice. PB (Witney)

Expert Opinion…

The Pain & Pleasure of Diversification

Dominic, June 12th, 2019

It is human nature to look at an investment that has done particularly well and wish you had been invested in it. We all risk being dragged into ‘if only’ mind games: ‘If only I had put a £10,000 into Amazon in 2003, I’d be retired by now’.  ‘If only I had bought Bitcoin at £1…’. These thoughts are dangerous to investors, as this fear of missing out (FOMO) can tempt them into taking speculative risks, often based on a rear-view mirror perspective. Concentrated risks have concentrated outcomes, both good and bad.

Read More
Enjoy yourself!

Jonathan, June 5th, 2019

The world of financial planning can be complex and technical. It's sometimes easy to lose sight of why having a financial plan is so important! We recently came across this amazing video of Doris Day, singing in the 1950's and felt it was an apt reminder of what we're trying to achieve in the Expert Wealth family. Have a look!

Read More
From early July we’ll be recording all incoming calls

Dominic, June 4th, 2019

At Expert Wealth, we're always looking for ways to improve the standard of service we offer. We would like to inform you we will begin recording all incoming calls to Expert Wealth from the end of June 2019. This will allow us to monitor the quality of service we're offering on the phone, and give you all the same security you would have when you're meeting us face to face in the office.

Read More
T: 01993 772467      E: advice@expertwealth.co.uk

Expert Wealth Management, West Wing, The Old Dairy, High Cogges Farm, Witney, Oxfordshire, OX29 6UN

Your Protection: In the unlikely event of your ever having a complaint which we have not been able to resolve amicably, you have recourse to the Financial Ombudsman Service (FOS). This is an independent body which will investigate complaints at no cost to you.  The FOS website is www.financial-ombudsman.org.uk.