Forward Glance

Strategy Report – Medium Portfolio

September 2019

1st November 2011 – 31st August 2019 – gross return (since inception)


Summer: the traditionally calm and introspective time of year for the market!

That has clearly not been true in recent years, most notably in the UK of course but more broadly across the world.

Our latest investment meeting was amidst the furore before Parliament prorogation, which might mean there is time for calm although behind the scenes preparations for a new UK election as well as the fight for the future of our relationship with the EU continue.

The UK stock market is relatively very cheap compared to other developed markets. There is a dearth of willing investors in the UK, something that could continue for a while. The range of possible outcomes is simply too wide to want to take a larger position for the time being.

Interest rates are incredibly low, and with central banks more likely than not to start printing money again, even after 10 years it is difficult to see rates rising meaningfully any time soon – even though there are many people who would very much like to do so.

In the meantime, the indicators suggest that growth will stay more moderate and that interest rates and inflation expectations are likewise well below ‘the old days’, right across the globe. However, a significant recession, we believe, is still further out. That does not mean we will not get one, we do every 10 years on average, but there is also a huge difference between a dramatic, long-lasting event – the sort we saw in the financial crisis – and a more technical recession where growth contracts for a number of months.

Partly this view is built on the realisation that central banks and politicians will continue to do everything in their power to keep a semblance of economic stability, but also in part on the information on high levels of employment, gently rising wages and confidence and spending that is holding up reasonably well.

How does this impact the investment outlook at KMG?

After making changes over the summer, reducing some of the riskier ends in the face of expected turmoil, we do not feel the need to adjust the current mix of investments for the time being.

We are already holding more non-sterling assets, preferring the diversity available through global investments and we are still more than a little concerned over the huge amounts of debt and the tiny levels of interest on offer. So, we are holding onto a bit more cash as we move through this period.

Portfolio analysis

Investment objectives

The medium portfolio offers a diverse fund range with the aim of achieving capital growth over the longer-term. The portfolio has the ability to invest in a broad range of investments on a wide geographical basis. Equity exposure within this portfolio will vary between 40% – 65%.

Portfolio details

Inception date1/11/2011
Number of holdings30
Estimate yield2.03%
BenchmarkBoE Base Rate +2%
Total expense ratio0.51% (net – clean)
Volatility target range6% – 10%
Minimum investment time horizonFive years

Contribution to performance by fund – 1 year

1st March 2019 – 31st August 2019 – gross return (six months)

Gross statistics (1st November 2011 – 31st August 2019)