Firstly, we wish you a very happy Christmas and we hope a more prosperous 2023!

Secondly, in line with previous years and our feelings about our carbon footprint, we will not be sending out Christmas cards and instead have made a generous donation to     St Catherine’s Hospice which in these times of huge challenge need every penny so they can continue their wonderful work for the community.

Thirdly, the Investment Committee met on 6^th December to consider our performance and to discuss a rebalance strategy for our model portfolios in line with our views about the future.

Past performance is no guarantee of future success, but we are reasonably comfortable with our performance in both the short, medium and longer term.  Having reviewed our performance against our peer group and our benchmarks we have seen better results whilst retaining reasonable levels of volatility.  Therefore, we continue the justification of remaining invested in our thematic approach, which as you will have seen in your recent performance is now beginning to show some attractive recovery.

In the eye of the storm it is incredibly difficult to think positively but generally the Investment Committee feels comfortable about the strategy that we have adopted on the equity side of the portfolio, and our principle changes at this time are to move out of cash (which ironically is now producing an interest rate) and move this money into government stock in the UK and around the world along with corporate bonds.

We feel that the inflation rate for most of the world is probably near the peak and that although interest rates may rise a little bit more in developed economies they will probably peak during the course of next year and then start to ease back.  Therefore, we are moving into the fixed interest environment where yields are really quite attractive and there may well be the possibility of some capital appreciation in the future, especially if interest rates fall and inflation declines to its long-term average.  These investments should provide some stability and attractive investment growth.

In general, our view is that the best way to protect yourself against inflation is to have a high level of equity-orientated assets where you have the possibility of taking a long-term view, as history shows these can be the only assets that ultimately keep pace with inflation.  We have decided not to hedge against currency fluctuations, and this is primarily because we feel very comfortable that we have such a diversified strategy that we can cover the extraordinary volatility in exchange rates around the world more evenly by having a very mixed bag of investments and currencies.

Investment changes

The outcome of our recent Investment Committee meeting was that we will be reducing the cash holdings back towards more normal levels. We will then use the surplus to invest in Vanguard for the US and Corporate bond funds, an iShares fund to invest in the UK Gilt market and an Invesco fund for some further short-term fixed income.  These updates will be actioned on or around the 16^th December.

We are not altering our equity strategy at this moment.

Tax

Where changes are made within portfolios there may be some capital gains tax incurred when switching outside a tax-free wrapper.  Any changes within the VT KMGIM Medium-High fund will not be taxable.

Fund charges

The fund charges for the portfolios will either remain the same or increase slightly as a result of investing cash into the market.  These increases are between zero and 0.04% depending on the portfolio.  There is no change to the funds fee of the VT KMGIM Medium High fund.  

More details of the changes together with the Key Information documents for the new funds will be available on the KMG Website at the following address:

https://www.kmg.co.uk/news/

Thank you for your continued support.  We feel very comfortable that the future is significantly more positive than it may seem to be at this time in the economic cycle.

Best wishes and yours sincerely,

The KMG Team