Quarterly Investment Report – June 2019

Welcome to our quarterly returns bulletin for the end of June. First of all, we feel we should apologise for being a little tardy with this one. Our excuse is that we have all been away on our holidays and when not doing that, busy serving our lovely clients!

This month, we’re going to turn our attention to the benefits of doing nothing.

Doing nothing is simple, but it is by no means easy.

Simple because, in portfolio terms, all the big decisions taken at a high level by the Investment Committee ultimately inform the portfolio constructions. This approach result in highly diversified portfolios that require no more than an annual rebalance.

Doing nothing is difficult because we’re constantly faced with a wave of noise from the Negative Events World Service (NEWS), the weekend press and financial media constantly pushing our buttons. We instinctively want to do something.

The reason we feel this way, is because we are hard wired to react to perceived threats with our ‘fight or flight’ response honed by millions of years of evolution.

Fight or flight, whilst helpful for avoiding predators on the savannah, has made us poorly adapted to survive the challenges of investing.

Fight or flight, whilst helpful for avoiding predators on the savannah, has made us poorly adapted to survive the challenges of investing.

Rather than reacting to the NEWS we need to step back, pause, take a deep breath and remember that the great companies of the world are much more than just a wiggly line or a series of red and green numbers on a screen.

The great companies are valued at approximately $51 trillion, have annual profits of $2 trillion and more than 13,000 CEOs worldwide overseeing more than 82 million employees selling products in 195 countries1.

Look around you at the products and services in your home; do you have Apple, Samsung, or Microsoft, Johnson & Johnson, and Nestle? Do you use Facebook, Amazon, Visa, Netflix, Coca Cola or Pepsi Co?

Investing in the great companies via the global stock market is the only way to capture the value of human ingenuity and every single individual’s desire to improve their own, their children’s or their grandchildren’s future.

It simply isn’t rational to believe that capitalism will go out of business.

As such, our message is always to focus on your plan and things you can control; everything else is noise.

Your portfolio should be viewed as the servant to your plan; it exists to deliver the returns that your plan needs.

Standing strong in the face of a wave of noise is tough; we get that. As investors ourselves, we feel what you feel, we invest the same way you do, we have skin in the game.

We know that all declines are temporary, they are the price that has to be paid for access to the exceptional returns available to the patient investor. Permanent loss in a well-diversified portfolio is always a human achievement of which the market itself is incapable.

We’re here for you when you need us.

We’re here for you when you need us.

With that said, it should come as no surprise that what follows doesn’t contain any market commentary and it certainly doesn’t contain any short-term predictions.

EWM Portfolio Performance

We aim to give a sense of the performance of our approach by comparing our portfolios to those in the 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 – more than 130,000 portfolios.

The size and quality of the dataset make it possible for us to assess the performance of the EWM portfolios against a peer group covering all major investment styles, approaches and philosophies.

ARC gathers and publishes data quarterly; it allocates each individual portfolio in the indices in to one of four categories depending on its individual characteristics. The four categories are:

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

This process allows us to be confident that each segment is an appropriate benchmark against which to compare our own portfolios as it’s ARC themselves who decide where a given portfolio they receive should go. This controls for the fact that one manager’s “balanced” fund may not be the same as another manager’s “balanced” fund.

As you well know by now, 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 portfolio construction ensures that there are clear steps in risk and return from one to the next. The portfolios are:

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

Remember, it’s the growth assets that are stated 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

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 developed market capitalisation to determine country allocations. This means that, as the UK market for example only makes up about 7-8% of the total value of developed markets, it only gets allocated 7-8% of the value of the growth assets in your portfolio.

Clearly the global market is gradually evolving and there will come a time when some markets currently defined as ‘developing’ will reach a level of sophistication that warrants their inclusion in the portfolios in their own right. China is the obvious example in this category. Our exposure to its markets is currently provided by the Dimensional Emerging Markets Core Equity fund as it’s still deemed to be a developing market. The monitoring of this situation and the decisions around it are just one example of the issues that the Investment Committee tackles at its quarterly meetings and one that we’ll likely be posting more about in the future.

Our approach ensures we are well insulated from common behavioural biases that tend to affect investors.

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:


Portfolio / PCI Risk relative to world equities % Tolerance bands % 3 year volatility % 3 year return%
EWM P0 0 2.17 5.82
EWM P20 20 3.19 13.28
ARC Sterling Cautious 0-40 0-50 3.08 10.05
EWM P40 40 5.15 20.30
ARC Sterling Balanced 40-60 30-70 4.88 16.45
EWM P60 60 6.99 26.74
ARC Sterling Steady Growth 60-80 50-90 6.52 23.73
EWM P80 80 8.62 32.84
ARC Sterling Equity Risk 80-110 70-120 7.88 28.84
EWM P100 100 10.15 38.61

Tolerance bands indicate that some managers may have different allocations to equities in their portfolios, and the figure above 100% indicates that gearing (borrowing money to invest) can apply.

Finally, we include a summary of three-year returns, referenced to the global stock markets measured by MSCI All World Index and GBP cash measured by UK One Month Treasuries. So that you can see a slightly longer period, we have also included the 5 year version of this chart.


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


  • 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.
  • *Visual Capitalist, 2017 data

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.
We’re both grateful for the meeting which has made us more confident of finances going forward. Like you always say, “keep doing what you’re doing”. A & RA (Worcester)

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