JANUARY 2020 MARKET UPDATE
performance since inception
| model | benchmark | |
|---|---|---|
| 3 | 13.0% | 12.5% |
| 4 | 14.1% | 11.5% |
| 5 | 14.7% | 12.1% |
| 6 | 14.8% | 12.9% |
| 7 | 11.1% | 15.7% |
as at 25/01/20
As we reach the two year anniversary stage, we thought it worth reflecting on the investment models over that time and the investment strategies we have employed.
Firstly, we would highlight that four out of the five different portfolios that we manage have outperformed their respective benchmarks and performed strongly against our peers.
This outperformance has been due to a number of factors.
Firstly, our own VT Sorbus Vector UK Equity Fund, held across all of the investment models, has enjoyed strong performance both over the short and medium term, demonstrating our equity expertise.
Our other exposure to the UK stock market outside of Vector has also served our clients well. Our view that prices would recover once some of the geopolitical uncertainty cleared has proven to be correct, particularly following the general election in December.
During 2019 we reduced our holdings of bonds as interest rates went negative for many of them, and values were comparatively high. This decision has thus far proven correct, as fears about a recession have eased leading to yields rebounding and consequently bond prices (which move in the inverse direction of yields) falling.
Our only detractor was our underweight position to the US stock market, which resumed its relentless ascent. This is reflected in the underperformance of our all equity portfolio.
Regular readers will be aware that we view this particular market as becoming some sort of collective madness given the stratospheric prices result in many measures of valuation being off the charts, and we remain underweight.
Finally, our exposure to gold has added significant value.
We should stress that, whilst we believe it to be a potential safe haven investment and a dollar currency hedge (and as investors have been rewarded as such as market participants have worried about rising geo-political risk), we are not dyed in the wool goldbugs.
Gold is prone to spending long periods out of favour. For example, gold rose to around $800 per ounce in the early 1980’s. It then bottomed at not much more than $250 by the start of 2000, thus losing approx 80% of its value (even more when inflation over the period is added in) and of course providing no income at all during that time. As an aside, the fact that Gordon Brown, the then Chancellor of the Exchequer, sold over half of the UK’s gold reserves at pretty much the bottom at $275 is worth mentioning as an indication of the competence of politicians when it comes to financial matters!
Whilst selling gold reserves too cheaply was not economically beneficial to the country, the above investment history demonstrates that holding too much gold can seriously harm your wealth.
It can also harm your health. Long ago, people allegedly drank gold to preserve their youth and French King Henry II’s mistress, Diane de Poitiers, may have died from gold poisoning as a consequence of this! That being said, most people in the twenty-first century are more familiar with Shirley Eaton’s character Jill Masterson dying after having been painted with gold in the Bond film Goldfinger!
We therefore, as always, remain alert to changing market conditions in both this and other investment markets and are able to take swift action that will enable us to continue outperforming for the benefit of our investors.
