Bi-Monthly Review January 21

Since the last review, Covid-19 has continued to wreak havoc on the world and the second wave is in full flow. The UK and many other parts of the world are presently in lockdown and there are several variants of the virus affecting different parts of the world. However, the main difference is the vaccines are now being rolled out and there are signs that new daily cases across the world are just starting to fall. The UK infection rate has fallen significantly from a peak of 68,000 on January 3rd to 22,000 on January 25th. There are still worries with new variants and that is why we don’t expect lockdown to be lifted until at least Easter. The plan we believe is to keep the UK isolated from the variants and give as much immunity to the general population by rolling out the vaccines. The UK seems to be rolling out the vaccines at a faster rate than most other nations. The US are speeding up vaccinations, but the Europeans are squabbling over whom gets the vaccine and when, so they are doing a poor job at rolling out the vaccine. Asia remains largely unaffected.

Thus, we expect the virus stats to continue to improve but we don’t expect the real ‘normal economy’ to rebound for several months to come.

The American election has been won by Joe Biden, who represents the Democratic party. This will have a profound effect on the direction America is going in the next four years and the markets are now expecting a stimulus to the US economy in the next few months. Biden has also reiterated his commitment to Environmental issues, and we would expect some news soon on these matters going forward. We also expect him to be more reasonable on the international stage and may not be quite as harsh with China as Trump was.

As a result of the vaccine roll out and the lockdown, we expect to see a continued reduction in numbers affected by Covid-19 moving forward and a gradual move towards the economy recovering in the spring or summer.

Our Portfolios have continued to perform well, seeing further increases in value since the last review.

An example of this is to compare one of our balanced Portfolios, Risk 5, with the 20-60% share portfolio benchmark over the past 3 years. As you can see in the table below, and a graph at the bottom of the email, the average market return has been 9.9% over 1 year and 46% over 3 years which represent great returns on your money well ahead of the benchmark.

Portfolio / Index 1 yr 3yrs
Platinum Portfolio 5 9.9% 46.0%
Mixed Investment 20-60 Shares 3.6% 36.0%

We will strive to keep these standards, although the level of outperformance we have achieved is not likely to be repeated to the same extent in the future.

It is always difficult to predict the markets, however, we believe the coronavirus impact on the market is now waning. Covid-19 will of course continue to disrupt things over the next six months or until the vaccines have been significantly rolled out. We also think the world GDP will show negative results for months to come. However, things are expected to improve as the influence of the virus becomes less and less. Therefore, with an improving economic situation, we expect markets to continue to rise over the next two months, all be it at a slower rate.

Over the past year we have held high cash holdings. We now intend to start reducing the amount we hold in this sector. The reason we are reducing cash is to bring the Portfolios closer in line to their expected risk profile. We are not making huge cuts to cash however, as there is still a lot of uncertainty out there. For example, what will the new normal look like post virus. We are therefore reducing cash in Portfolios 4, 7 and 8.

Overall, we are more market neutral to slightly positive regarding markets over the next two months, so we intend to increase the Portfolios risk slightly. We expect to continue this trend over the next few months as economies pick up. However, due to the recent surge there is a question over market value thus the reason to gradually increase the Portfolios back to their normal risk positions instead of doing it instantly.

Asset Class Review


The world equity markets have continued to recover from the crash in spring last year. The pace of recovery has slowed down now, probably more to the fact that most funds have now recovered their losses than anything else. The vaccine is now being rolled out globally and it appears that the news must therefore get better over the next couple of months. We feel that the markets should continue to rise but at a slower rate as most of the good news has been factored into the markets. We believe the US and Asian economies are still the strongest and the UK may have the most potential. We also feel there is some value in the US Mid -Caps and some diversity from our other US funds holding the larger tech companies. We are not planning on throwing caution to the wind and are still holding other more defensive assets in case any of the new variants start taking off.

Bonds / Government Debt

This market is mainly used as a hedge for example if equity markets fall gilts usually rise. The market may get a boost if the Bank of England cuts interest rates further due to Brexit. Otherwise, the market is likely to hedge the risk of equity markets as the two are generally negatively correlated.

Gold Miners

Over the past six months the gold mining fund we hold has fallen back after showing strong growth for over a year. Despite the fact gold generally performs well in recessions, we are cutting back on our holdings due to the good news of the vaccines. We are not however reducing gold drastically due to the possibility of a USA stimulus and a prolonged recession before full recovery. A stimulus would weaken the dollar and that would usually increase gold’s value. We do not think it would yet be prudent to cut back too far as we feel we might need gold’s hedging effect. We have taken lots of profit out of gold on the upside and will continue to do so this review.


With regards to property, this asset class is subject to the potential for fund managers to instantly reduce the price and potentially suspend any money in or out of a fund as a protective move. In a Covid-19 post virus world we may see more people working from home and less demand for office space, we intend therefore to wait and see in this market. Furthermore, the high street has continued to have an awful time, with the latest news Debenhams is being taken over by the online retailer Boohoo and now will be an online only company.

Emerging Markets

These markets can be unpredictable, and the Virus has affected these nations badly, hitting them hard, especially in South America. Their recovery is generally lagging behind the USA. This is perhaps due the emerging market regions being lower in the pecking order with regards to receiving the vaccine. Any recent surge in the emerging markets hasn’t been as striking as that in the developed west, with the exception of the Asian emerging markets which we are indirectly increasing our holdings via the Asian Funds we hold.


In all our Portfolios, the level of cash is already relatively high due to the uncertainty in markets. We now intend to tentatively start reducing our cash holding bit by bit until the world looks a little more normal. We do not want to reduce too much cash because they are merely a neutral investment offering no growth or falls.

Absolute Funds

Some of these types of funds can ‘hedge’ the volatility of the market by buying long and selling short so reducing the overall risk, protecting against the falls, and thus reducing the volatility. This sector is difficult to predict however as each fund manager has a different strategy giving differing splits between long and short holdings. It is therefore important we keep in the sector but in a diversified manner.


This fund should do well in a recession or a recovery however some infrastructure projects may be cancelled due to lack of funding and staff shortages as this will not be a normal cyclical recession, but a technical recession caused by the Coronavirus. This area is likely to take off if we are left with high unemployment as infrastructure projects create jobs, we will bide our time before entering this sector again.

Environmental Social Governance (ESG)

This, as you may have noticed, is a new sector that we are reporting on. This is essentially investing in ethical or green types of investments. In short, companies that consider the environment and do not exploit their workers etc. There is good reasoning for considering this sector now. There is clearly a strong momentum across the globe amongst the millennials to protect the environment and for more equality. This is demonstrated by the strong ‘Black Lives Matter’ movement. The millennials are influencing the media and their parents, and this momentum is pushing more and more people to look for more ethical investments. As a result, there is more demand for green investments and excess demand means share values are pushed higher. Once the share values are pushed higher by increased demand, other investors look at this sector and it’s showing great performance. Thus, this sector is starting to outperform other sectors which will push markets up further. We believe this market is here to stay and will only get bigger and bigger. From a legislative point of view governments are starting to drive this market and under MIFID II rules, environmental considerations must be considered by investment professionals. So, we hope that you will be able to help save the planet and make money at the same time. We predicted this fund would rise last month and this sector has started to reach all-time highs, so we are not intending to expand this due to value worries.

Sustainable Energy

For portfolio 8 only we are expanding this ESG theme into clean energy.

The new world order when it comes to coming out of this crisis is to grow in the most environmentally way possible.

With governments now bringing forward the dates to be CO2 neutral then multiple other energy sources are going to be required. The original Paris Climate Change Agreement of 2015 to limit global temperature growth to 2.0*C and the CO2 reduction required has already been proven to not be enough and the targets are likely to be increased further at the 2021 conference in Glasgow when all leaders will meet. The current estimate is a 3.9*C rise which could be catastrophic.

To achieve these goals then clean energy transition will play an essential role and how we produce, distribute and consume energy will have to change.

One example that is all over the news is the banning of gas boilers in new homes soon. This is on top of the fact that most old gas boilers have already been changed with the help of government grants to more efficient ones. So, the knock on effect of further legislation on new homes will mean existing boilers will also end up being changed. We don’t know if this will be to electricity from renewables or heat pumps etc, but a lot is still to change.

The fact that the cheapest form of electricity is now Wind power when only 10 years ago it was the most expensive even over Nuclear just shows the changes coming with scaling up.

Battery storage in massive GigaWatt storage to feed into the grid when the wind is light or night time when solar doesn’t work will become more the norm then gas power stations.


You may have noticed that our funds have performed well again over the last 2 months and indeed the past year despite the awful headwinds. We are proud to show you the performance of our Portfolios over 1 and 3 years which we think have been excellent.

  • Portfolio 3 has grown by 5.5% and 11.0%
  • Portfolio 4 has grown by 7.0% and 16.5%
  • Portfolio 5 has grown by 9.5% and 20.0%
  • Portfolio 6 has grown by 12.5% and 24.5%
  • Portfolio 7 has grown by 13.5% and 26.0%
  • Portfolio 8 has grown by 17% and 28.5%

These figures are as of 25th January 2021 and are rounded down to the nearest 0.5%

Please note, due to present levels of volatility these figures may differ significantly day by day. If you have paid in or taken funds out during the year this will also affect your overall performance.


All our portfolios are showing a profit year on year, and this is a result of outperformance on our behalf especially in the earlier part of the year. We will do our best to continue to anticipate the markets to the best of our ability with no promises, but we will of course keep the situation under review.

We have managed to bring most of our Portfolios in line with their natural risk level. Please be aware that risk level 6, 7 and 8 Portfolios are still a slightly lower risk than prescribed due to the combination of the recessionary nature of the world economies. We have also chosen our funds well which although they are in higher risk sectors many have had below average volatility whilst still maintaining significant out performance. We have however increased the risk at today’s review.

Funds to buy.

Baillie Gifford Pacific

We are recommending this fund to diversify from the Fidelity Asia Pacific Opportunities fund and also to reduce our exposure to Hong Kong . We wish to reduce our exposure to Hong Kong as they are presently in direct conflict with China and they can only loose. This matter may or may not become an issue but again we believe in diversification. We are recommending Baillie Gifford again because it is hard to ignore their total out performance compared to other fund management groups. This fund performance has been superb providing top quartile performance for the last 1, 3 and 5 years. The fund has the top FE 5 crown rating. Finally, Baillie Gifford are undoubtedly the top fund managers as of now.

Portfolio 8 only

Guinness Sustainable Energy

We are increasing our holdings in the environmental sector this time directly into energy. Guinness fund managers have a long-standing experience in the energy sector as a whole and this fund was launched itself in 2007. The fund provides exposure to global renewable energy markets. They believe that over the next twenty years the sustainable energy sector will benefit from the combined effects of strong demand growth and improving economics of renewable energy supply. The sector will benefit from both public and private support for low carbon technologies. The fund invests in companies in solar, wind, hydro, geothermal, biofuels and the ever expanding energy efficiency and storage. The fund is truly global and has performed very well over the last 12 months with an outstanding performance of 85%. The fund also has the top FE 5 crown rating.

Funds to increase.

Schroder US Mid-Cap

This fund has been chosen to diversify our asset holdings more. The fund invests in US mid-caps thus avoiding a lot of the companies with high PE ratios. These companies, in my experience, show a lag to the main indices and thus the timing of this market may be better. The fund is well rated with a FE 3 crown rating and a Morningstar Bronze rating. The fund has shown considerable outperformance over the past 3 and 6 months being in the top quartile, hopefully showing trend. The fund has performed well for us the past couple of months thus we intend to add more into this sector.

Funds to sell.

Ninetyone Global Special Situations

This fund did not recover like we hoped, so we don’t really see any momentum developing with this fund now. We therefore feel the easiest solution is to sell out and put the capital in areas we believe capable of better growth.

Fidelity Asia Pacific Opportunities.

Portfolio 3 increasing

Portfolio 4 no change

Portfolio 5, 6, 7 and 8 reducing.

For this fund we are adjusting the holding to complement our new Baillie Gifford Pacific fund, so the max overall ratio is 66% in Fidelity and 33% in the new Baillie Gifford fund, whilst overall increasing our Asian Funds.

We believe Asia has handled the virus better than the west and should continue to grow. We have a slight concern in the region and that is Hong Kong is in conflict with China and that can only be bad for them. We therefore wish to diversify our funds away from Hong Kong slowly and reassessing at each review. The fund has performed well so we are making the changes for strategic reasons. The fund has a FE 5 crown rating, a FE Alpha fund manager, and a Morningstar Bronze award.

Funds to reduce.

Blackrock Gold and General

This fund can be incredibly volatile. It tends to do well out of insecurity and performs poorly in improving market conditions. So as things improve, we intend to sell the fund down month by month. The fund has performed very well over the years because it has a successful long-term strategy, and the fund manager does not vary from this strategy despite market conditions. If the world recovers from this virus then this fund may underperform for a while. We are not selling down completely as we are not out of the woods yet with new virus strains developing so we plan to keep modest holdings in this area for the short term at least.

All except 5


We have reduced our fund holdings in this sector to increase the risk in the funds to hopefully start increasing the overall risk in each Portfolio.

Portfolio 7 only

Vanguard Life Strategy 20% Equity

This is a low-cost tracker fund which is a lower risk fund than equities but higher risk than cash. We are using this fund as an alternative to cash to help increase risk on the Portfolios. The fund is very highly rated with a FE 5 Crown rating and a Morningstar Gold rating. Thus, now we are reducing the holdings in risk 7 to increase the risk on this portfolio not because we dislike this fund.

Baillie Gifford Pacific

Guinness Sustainable Energy

Ninety One Global Special Situations

Schroder US Mid Cap

Liontrust UK Smaller Companies

Artemis UK Smaller Companies

Blackrock Natural Resources Growth and Income

ASI Latin American

Allianz Gilt Yield

Liontrust Sustainable Future Global Growth

FP Argonaut Absolute Return

Kames Global Equity Market Neutral

Baillie Gifford China

Brooks Macdonald Defensive Capital

Jupiter Distribution

Fundsmith Equity Fund

Fidelity Asia Pacific Opportunities

Vanguard US Equity Index

Vanguard FTSE Developed Europe ex-UK Equity Index fund.

Baillie Gifford American B Acc Fund factsheet

Vanguard LifeStrategy 20% Equity

Blackrock Gold & General

M&G Global Listed Infrastructure

Vanguard FTSE UK All Share Index

Vanguard Lifestrategy 40% Equity

Vanguard UK Investment Grade Bond Index

Fidelity Cash

Lindsell Train Japanese Equity

Jupiter India

Baillie Gifford European

JP Morgan US Small Cap Growth