Greystone Investment Committee Quarterly Report€¦ · Quarterly Commentary 5 All data is sourced from the Greystone Investment Committee and Refinitiv Lipper for Investment Management,

Greystone Investment Committee

Quarterly Report

July 2020

Second quarter 2020

Q2 2020

Conservative Managed Fund R Acc

IA Mixed Investment 0-35% Shares NR

Cautious Managed Fund R Acc


Balanced Managed Fund R Acc


Global Growth Fund R Acc

IA Global NR

8.777.61

11.9210.25

16.31

13.20

20.6019.13

0

4

8

12

16

20

24

2020 Q2

All performance in this report is based upon R share class accumulation units denominated in GBP. Investment Association (IA) sector NR refers to Nominal Returns. All performance data is sourced from Refinitiv Lipper for Investment Management and compiled to 30.06.2020 unless stated otherwise. The Conservative Managed Fund achieved a conservative allocation and assumed the name Conservative on 01.09.2012. The Cautious Managed Fund changed mandate on 24.07.2009. The Balanced Managed Fund changed mandate on 01.09.2010. The Global Growth Fund launched on 05.12.2005. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated.

Quarterly Commentary 1

Second Quarter Review

We are pleased to send you our quarterly report for the Greystone funds. Portfolio performance and activity is discussed in our fund manager review, whilst global events are covered in the economic and market commentary.

The Investment Committee rotate between asset classes and incorporate high levels of portfolio diversification to help generate consistent returns.

Please see below a snapshot of our funds’ performance for Q2 2020 versus their respective Investment Association (IA) sector averages.

July 2020

Source: Refinitiv Lipper for Investment Management.

Q2 2020 Performance %

James MenziesInvestment Director Greystone Investment Committee

James JacksonHead of Investment ResearchGreystone Investment Committee

Christopher JeavonsInvestment AnalystGreystone Investment Committee

0

10

20

30

40

Sep/12 Sep/14 Sep/16 Sep/18

All performance in this report is based upon R share class accumulation units denominated in GBP. All performance data is sourced from Refinitiv Lipper for Investment Management and compiled to 30.06.2020. All Investment Association (IA) sector performance is Nominal Return (NR). TheConservative Managed Fund achieved a conservative allocation and assumed the name Conservative on 01.09.2012. 1Ann refers to annualised performance since inception on 01.09.2012. The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated.

Fund Manager Commentary

Conservative Managed Fund

July 2020

Multi-asset Portfolio

Performance Summary

The fund rose 8.77% over the second quarter versus the Investment Association (IA) Mixed Investment 0-35% Shares sector average7.61% and the IA Standard Money Market 0.26%.

Since the fund’s re-launch on 1st September 2012 it has delivered 33.75% versus the IA sector average 32.60% and IA Standard Money Market 2.86%. The fund’s share price as at 30th June 2020 was; 129.23p (R share class accumulation units).

The fund continues to offer investors low risk access to investment markets and provides the opportunity to outperform inflation and cash rates over the course of an economic cycle.


Fund Objective

The fund’s objective is capital growth with outperformance of its sector average and cash. We aim to achieve this with less than a third of equity market risk. The fund holds a minimum of 45% investment grade bonds and between 0% - 35% UK and overseas shares.

We target 3% - 6% annualised growth over the recommended investment time horizon of at least three years.

Performance %

Cash 08%Fixed Interest 48%Allianz Strategic BondMan GLG Strategic BondRathbone Ethical BondRoyal London Global Bond OpportunitiesRubrics Global Credit UCITSVanguard Global Bond Index Vanguard Global Short-Term BondWaverton Sterling Bond

Equity 25%CFP SDL UK BuffettologyBaillie Gifford AmericanPolen Capital Focus U.S. GrowthLiontrust Global DividendHermes Global Emerging Markets

Alternatives 19%Protea UCITS II - ECO Advisors ESG Absolute ReturnFP Foresight UK Infrastructure IncomeVT Gravis UK Infrastructure IncomeLegal & General UK Property FeederThreadneedle UK Property FeederTM Home Investor Feeder

Holdings

-5

0

5

10

2020YTD

2019 2018 2017 2016 2015 Ann¹

Conservative Managed Fund R AccIA Mixed Investment 0-35% Shares NR

Source: Refinitiv Lipper for Investment Management.(Key applies to both charts).

Calendar Year Performance %

Underweight


Conservative Managed Fund

July 2020

Asset Allocations

Please see below the current asset allocation for the Conservative Managed fund and the relative position versus the IA sector average.

Current Asset Allocation

Source: Greystone Investment Committee.


All data is sourced from the Greystone Investment Committee and Refinitiv Lipper for Investment Management, for fund asset allocation. Data compiled to 30.06.2020. The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated.

Relative Positioning versus IA Mixed Investment 0-35% Shares sector average

Source: Greystone Investment Committee and Lipper.

8%

48%

4%1%

16%

4%19%

Cash

Fixed Interest

UK Equity

European Equity

North American Equity

Emerging Markets Equity

Alternatives

-18% -12% -6% 0% 6% 12% 18%

Alternatives


Japanese Equity

Asian Equity


European Equity

UK Equity

Fixed Interest

Cash

Overweight

Fund Review

The fund rose in value during the second quarter and outperformed sector average peers. An overweight position in equities was a key contributor. Fixed interest, both sovereign debt and corporate credit, performed well. Physical property lagged, whilst absolute return had another solid quarter.

Central bank activity continued throughout Q2, providing accommodative monetary policy to shore up economic growth and increase market liquidity amid uncertainties over the impact of Covid-19. Despite concerns over the outlook for global economic growth, both fixed interest and equity markets performed well over the period. Bonds, particularly those with greater sensitivity to interest rates, fared better than those with less, as yields fell and bond values rose.

Within the fixed interest component, effective duration management and an underweight to corporate credit delivered for our strategic bond specialist. Limited interest rate sensitivity held back a short-dated sovereign debt fund, whilst movements in corporate spreads boosted returns of our global credit manager.

Looking to equities, the UK led the way up, followed by North America and emerging markets. An automotive systems provider and a games designer drove returns for our core UK multi-cap fund.

In the US, communication services and health care stocks helped a large-cap holding, whilst exposure to technology and consumer discretionary stocks boosted returns for a growth manager.

Brazilian and Indian financials, along with an electronics company, delivered for an emerging markets specialist, whilst a Swiss pharmaceuticals company, coupled with IT stocks and financials, powered returns for our global income manager.

Within alternatives, long positions in utilities and health care businesses, coupled with short positions in consumer goods and services, drove performance for a global market neutral specialist.

Turning to physical property funds, independent property valuers have been unable to visit; offices, shops and industrial units to provide accurate valuations. These funds are still pricing, but have paused on both redemptions and new investments. Property is a useful portfolio diversifier, but we continue to monitor the situation closely. This is not a liquidity event and all funds maintain significant cash levels.

Listed infrastructure performed well in Q2, but lagged behind broader equity markets. Wind farms and solar energy helped our UK focused income specialist, whilst health care and education facilities delivered for another.

Cash 3%Fixed Interest 32%Allianz Strategic BondCapital Group Global High Income OpportunitiesMan GLG Strategic BondRathbone Ethical BondRoyal London Global Bond OpportunitiesWaverton Sterling Bond

Equity 48%LF Gresham House UK Multi Cap IncomeMI Chelverton UK Equity Growth TB Evenlode IncomeLF Miton European OpportunitiesNinety One Asia Pacific FranchiseArtemis US Extended AlphaBaillie Gifford AmericanNinety One American FranchiseVanguard US Equity IndexLiontrust Global Dividend

Alternatives 17%FP Foresight Global Real InfrastructureM&G Global Listed InfrastructureBMO UK Property FeederLegal & General UK Property FeederThreadneedle UK Property FeederTM Home Investor Feeder

0

25

50

75

100

Jul/09 Jul/11 Jul/13 Jul/15 Jul/17 Jul/19

All performance in this report is based upon R share class accumulation units denominated in GBP. All performance data is sourced from Refinitiv Lipper for Investment Management and compiled to 30.06.2020. All Investment Association (IA) sector performance is Nominal Return (NR). Cautious Managed Fund changed mandate on 24.07.2009. Natural yield data sourced from Refinitiv Lipper for Investment Management and Valu-Trac, and compiled to 30.06.2020. 1Ann refers to annualised performance since inception on 01.09.2012. The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated.


Cautious Managed Fund

July 2020


Fund Objective

The fund’s objective is capital growth along with outperformance of the sector average. We aim to achieve this with less than half of equity market risk. The fund holds a minimum of 30% fixed interest and between 20% - 60% UK and overseas shares. We target 4% -7% annualised growth over the recommended investment time horizon of at least five years.

Performance %

Holdings

-10

-5

0

5

10

15

2020YTD

2019 2018 2017 2016 2015 Ann¹

Cautious Managed Fund R AccIA Mixed Investment 20-60% Shares NR


Performance Summary

The fund rose 11.92% over the second quarter versus the Investment Association (IA) Mixed Investment 20-60% Shares sector average 10.25% and the IA Standard Money Market 0.26%.

Since the fund’s mandate change on 24th July 2009 it has delivered 75.15% versus the IA sector average 81.34% and IA Standard Money Market 5.20%. The fund’s share price as at 30th June 2020 was; 153.34p (R share class accumulation units) and 101.38p (R share class income units).

The fund’s natural yield of 4.03% (R Income share class, IA sector average 2.28%) is generated from equities, fixed income and alternative investments.



3%

32%

13%6%

22%

7%17%

Cash

Fixed Interest

UK Equity

European Equity


Asian Equity

Alternatives

Underweight


Cautious Managed Fund

July 2020

Asset Allocations

Please see below the current asset allocation for the Cautious Managed fund and the relative position versus the IA sector average.







-12% -8% -4% 0% 4% 8% 12%

Alternatives


Japanese Equity

Asian Equity


European Equity

UK Equity

Fixed Interest

Cash

Overweight

Fund Review

The fund rose in value during Q2 and outperformed sector average peers. UK and international equities were key contributors. Fixed interest and absolute return had a strong quarter. Physical property lagged, whilst infrastructure posted solid numbers.

Global monetary policy remained accommodative in the second quarter in order to stimulate economic growth. Asset prices rebounded following the Covid-19 outbreak, whilst governments began easing lockdown restrictions. Central banks have delivered unprecedented support in order to backstop economies.

Turning to the fund, bond managers with greater sensitivity to interest rates fared better than those with less, as yields fell and capital values rose.

Within the fixed interest component, effective duration management boosted returns for one strategic credit fund, whilst movements in corporate bond yields delivered for another. Sovereign debt, coupled with longer duration exposure, powered returns for a fixed interest specialist, whilst Dollar strength and US corporate debt helped our global high yield bond manager. He was the standout performer over the period.

In UK equities, economically sensitive small-caps outperformed defensive large-caps during the quarter. Domestically-focused IT stocks and support services powered returns for a cyclically-positioned multi-cap growth manager. Specialist financials and consumer services delivered for our small-cap income fund, whilst media stocks and consumer goods drove performance for a large-cap holding.

Looking to overseas equities, Europe led the way up, followed by North America and Asia.

Norwegian financials and a Swiss logistics company enabled our multi-cap European growth manager to outperform peers over the period. Financials and health care, coupled with short positions in communication services, held back a flexible US holding, whilst technology and consumer discretionary stocks drove returns for a growth manager. An online retailer and Taiwanese semiconductors powered our Asian equity specialist, whilst a Swiss pharmaceuticals company, coupled with financials and IT holdings, delivered for a global income manager.

Within alternatives, listed infrastructure performed well, but lagged broader equity markets. Transport services and power grid suppliers helped a global manager, whilst US utilities and Canadian land royalties, combined with Dollar strength, delivered for another.

Moving to physical property funds, independent property valuers have been unable to visit; offices, shops and industrial units to provide accurate valuations. These funds are still pricing, but have paused on both redemptions and new investments. This is not a liquidity event and all funds maintain significant cash levels. Property is a useful portfolio diversifier, but we continue to monitor the situation closely.

-20

0

20

40

60

80

100

120

140

Sep/10 Sep/12 Sep/14 Sep/16 Sep/18

All performance in this report is based upon R share class accumulation units denominated in GBP. All performance data is sourced from Refinitiv Lipper for Investment Management and compiled to 30.06.2020. All Investment Association (IA) sector performance is Nominal Return (NR). Balanced Managed Fund changed mandate on 01.09.2010. 1Ann refers to annualised performance since inception on 01.09.2010. The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated.


Balanced Managed Fund

July 2020


Fund Objective

The fund’s objective is capital growth and outperformance of its sector average, with less risk than equity markets. The fund holds between 40% - 85% UK and overseas shares. We target 5% - 9% annualised growth over the recommended investment time horizon of at least seven years.

There is flexibility to rotate between asset classes which helps smooth returns and protect against volatility.

Performance %

Cash 2%Fixed Interest 17%Allianz Strategic BondCapital Group Global High Income OpportunitiesRathbone Ethical BondRoyal London Global Bond OpportunitiesWaverton Sterling Bond

Equity 69%LF Gresham House UK Multi Cap IncomeTB Evenlode IncomeCFP SDL UK Buffettology Merian UK Dynamic EquityMI Chelverton UK Equity GrowthLF Miton European OpportunitiesArtemis US Extended AlphaMajedie US EquityNinety One American FranchisePolen Capital Focus U.S. GrowthVanguard US Equity IndexWells Fargo U.S. Large Cap GrowthNinety One Asia Pacific FranchiseHermes Global Emerging Markets

Alternatives 12%Protea UCITS II - ECO Advisors ESG Absolute ReturnFP Foresight Global Real InfrastructureM&G Global Listed Infrastructure

Holdings

-10

-5

0

5

10

15

2020YTD

2019 2018 2017 2016 2015 Ann¹

Balanced Managed Fund R AccIA Mixed Investment 40-85% Shares NR


Performance Summary

The fund rose 16.31% over the second quarter versus the Investment Association (IA) Mixed Investment 40-85% Shares sector average 13.20% and the IA Standard Money Market 0.26%.

Since the fund’s mandate change on 1st September 2010 it has delivered 93.68% versus the IA sector average 84.68% and IA Standard Money Market 3.77%. The fund’s share price as at 30th June 2020 was; 213.36p (R share class accumulation units) and 181.94p (R share class income units).

The fund continues to offer investors the ability to maximise capital growth whilst managing risk through a combination of bond, equity and alternative investments.



Underweight

-12% -8% -4% 0% 4% 8% 12%

Alternatives


Japanese Equity

Asian Equity


European Equity

UK Equity

Fixed Interest

Cash

Overweight

Asset Allocations

Please see below the current asset allocation for the Balanced Managed fund and the relative position versus the IA sector average.


Balanced Managed Fund

July 2020

2%

17%

23%

7%

29%

5%

5%12%

Cash

Fixed Interest

UK Equity

European Equity


Asian Equity


Alternatives







Fund Review

The fund rose in value during the second quarter and outperformed sector average peers. All managers delivered positive returns over the period. Overweight positions in both UK and North American equities were key contributors.

Bond managers, particularly those with greater interest rate sensitivity, performed well as yields fell following more accommodative monetary policy. Equity markets were also supported by Central Bank policymakers amid continued worries over slowing global economic growth and the uncertainties over the impact of Covid-19.

Turning to the fund, both sovereign and corporate bonds posted solid numbers. US corporate debt, coupled with Dollar strength, delivered for a global high yield bond fund. Effective duration management and sovereign debt exposure boosted performance for our fixed interest specialist, whilst movements in corporate bond yields helped a strategic credit manager.

In UK equities, more economically sensitive quality small-caps outperformed defensive large-caps. Consumer goods and media stocks helped our large-cap fund, whilst consumer services and specialist financials delivered for a small-cap income manager. A games designer and an automotive systems provider benefitted our core multi-cap holding, whilst more domestically focused support services and IT stocks powered returns for a cyclically-positioned multi-cap growth fund.

Looking to overseas equities, Europe led the way up, followed by emerging markets, North America and Asia.

On the continent, a Swiss logistics company and Norwegian financials boosted returns for our multi-cap European growth manager.

In North America, online payment services and IT stocks helped a large-cap specialist outperform peers, whilst long positions in financials and health care, coupled with short positions in communication services held back a flexible US holding.

In Asia, Taiwanese semiconductors and an online retailer delivered for our growth manager. Indian and Brazilian financials, along with a China-based multinational provider of consumer goods and services, powered returns for an emerging markets holding.

Within the alternatives component, long positions in health care and utility stocks, coupled with short positions in consumer goods and services, drove performance for a global market neutral specialist. Listed infrastructure performed well in Q2, but lagged behind broader equity markets. Canadian land royalties and US utilities, combined with Dollar strength, helped a global manager, whilst power grid suppliers and transport services benefited another.

Cash 2%Equity 93%CFP SDL UK BuffettologyMI Chelverton UK Equity GrowthArtemis US Extended AlphaBaillie Gifford AmericanMajedie US EquityNinety One American FranchisePolen Capital Focus U.S. GrowthVanguard US Equity IndexWells Fargo U.S. Large Cap GrowthBlackRock European DynamicJupiter EuropeanLF Miton European OpportunitiesFirst State Japan FocusMorant Wright SakuraNinety One Asia Pacific FranchiseHermes Global Emerging Markets

Alternatives 5%FP Foresight Global Real Infrastructure

-50

0

50

100

150

200

250

300

Dec/05 Dec/08 Dec/11 Dec/14 Dec/17

All performance in this report is based upon R share class accumulation units denominated in GBP. All performance data is sourced from Refinitiv Lipper for Investment Management and compiled to 30.06.2020. All Investment Association (IA) sector performance is Nominal Return (NR). Global Growth Fund launched on 05.12.2005. 1Ann refers to annualised performance since inception on 05.12.2005. The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated.


Global Growth Fund

July 2020


Fund Objective

The fund’s objective is capital growth and outperformance of its sector average, with less risk than global equity markets. At least 80% of the fund will be held in overseas shares.

We target 6% - 10% annualised growth over the recommended investment time horizon of at least ten years.

Performance %

Holdings

-8

0

8

16

24

2020YTD

2019 2018 2017 2016 2015 Ann¹

Global Growth Fund R Acc IA Global NR


Global Equity Portfolio

Performance Summary

The fund rose 20.60% over the second quarter versus the Investment Association (IA) Global sector average 19.13% and the IA Standard Money Market 0.26%.

Since the fund launched on 5th December 2005 it has delivered 252.55% outperforming the IA sector average 195.44% and IA Standard Money Market 14.08%. The fund’s share price as at 30th June 2020 was; 352.55p (R share class accumulation units).

The fund continues to offer investors the potential for high levels of capital growth from geographically diverse investments across more than 30 countries worldwide.


The Global Growth fund has outperformed its benchmark in eleven out of the past fourteen calendar years. (Source: Refinitiv Lipper for Investment Management).

Underweight


Global Growth Fund

July 2020

2% 6%

56%

13%

8% 5%5%

5%Cash

UK Equity


European Equity

Japanese Equity

Asian Equity


Alternatives

Asset Allocations

Please see below the current asset allocation for the Global Growth fund and the relative position versus the IA sector average.





Relative Positioning versus IA Global sector average


-12% -8% -4% 0% 4% 8% 12%

Alternatives


Japanese Equity

Asian Equity

European Equity


UK Equity

Fixed Interest

Cash

Overweight

Fund Review

The fund rose in value during Q2 and outperformed sector average peers. All our managers delivered positive returns. Dollar strength and an overweight position in US equities were key contributors.

Global equity markets rebounded over the period, following a difficult first quarter where asset prices experienced significant gyrations as economic uncertainties over the impact of Covid-19 unnerved markets.

Despite concerns over the outlook for global economic growth, equity markets took comfort from more accommodative monetary policy following unprecedented measures taken by Central Banks in order to backstop economies.

Turning to the fund, North American equities led the way up, followed by Europe, the UK, emerging markets, Asia and Japan.

Within North American equities, online payment services and IT stocks drove performance for our growth specialist, whilst financials and health care, coupled with short positions in communication services, held back a flexible US fund. An underweight to technology tempered returns for one large-cap manager, whilst overweight positions in consumer discretionary stocks boosted returns for another. He was the standout performer in Q2.

On the continent, small-cap growth outperformed large-cap value, although both investment styles delivered strong returns over the period. Danish pharmaceuticals and German industrials helped our core value manager, whilst Norwegian financials and a Swiss logistics company drove performance for a multi-cap growth fund.

Within UK equities, an automotive systems provider and a games designer powered returns for our core UK multi-cap holding, whilst domestically-focused IT stocks and support services delivered for a cyclically-positioned small-cap growth manager.

Brazilian and Indian financials, along with a China-based multinational provider of consumer goods and services, drove performance for an emerging markets specialist. A Hong Kong-listed online retailer and Taiwanese semiconductors boosted returns for our Asian growth manager.

In Japan, construction and insurance stocks held back our mid-cap manager, whilst an IT service management company and industrials helped a large-cap fund.

Within alternatives, listed infrastructure performed well, but lagged broader equity markets. Transport services and power grid suppliers delivered for our global manager.

Firstly, please let me take this opportunity to offer our best wishes to you and your family during these strange and troubling times. To a greater or lesser extent, everyone’s lives have been affected by the virus.

At the time of writing (late June) over 10 million1 people around the world have tested positive for Covid-19; of those, more than 500,0001 have sadly lost their lives, according to Johns Hopkins University. At home, it is a tragedy to report that over 43,0001

people have died from coronavirus, in the UK.

On a personal level, if we haven’t had the virus ourselves, most of us now know of someone that thinks they have either; had the virus, tested positive for it, or tragically know of somebody that has passed away from it.

Stock markets are currently being driven by policymakers’ responses to the pandemic. Therefore, I thought it appropriate to briefly update you on medical treatments for the disease, but firstly the research being carried out in search of a vaccine for Covid-19.

Huge resource is being committed to combat the virus. Large-scale human trials for a vaccine are progressing all over the world. In North America, Moderna’s drug is believed to be entering Phase III trials, as early as this month.

The Oxford University and AstraZeneca (AZ) joint venture is beginning large scale international trials in September. However, AZ are confident that Phase II trials sufficiently proved safety and effectiveness. According to CEO Pascal Soriot, they are already manufacturing two billion doses of the vaccine, for UK and US distribution this Autumn. AZ are also believed to have signed a licensing deal with the Serum Institute of India to provide one billion doses. Other vaccines are being developed in the UK, Germany, France, China and North America, but those aren’t as advanced.

Remdesivir, Gilead’s antiviral drug, was believed to be the best available treatment for Covid-19, until recently. Gilead’s share price jumped six per cent on 29th April2 on news of a breakthrough. However, the firm’s share price has since retraced most of these gains because the drug maker’s serum isn’t perceived as a ‘game changer’, according to doctors. Then on 16th June, UK scientists announced that a low cost and widely available off patent generic steroid, Dexamethasone, can help save the lives of patients seriously ill with coronavirus.

Nevertheless, until a truly effective treatment or vaccine is discovered, health and medical issues will continue to direct decisions of policymakers.

So, what does all this mean for economies and stock markets and where will we go from here?


“How to kick start an economy….”

At the start of this year, no one would have predicted that by early Spring the world’s economies would be brought to a halt by a global pandemic. Furthermore, even if it had been predicted, no one could have foreseen that equity markets would recover much of their lost ground by early Summer.

Central bankers and politicians around the world are to be thanked for the rally in share prices. Following unprecedented support and stimulus injected into the global economy, chiefly led by the US Government and Federal Reserve, financial analysts quickly realised that policymakers had the willingness to do whatever it took to kick start the economy.

Therefore, investors stopped selling and started buying shares and bonds in late March, and have continued to do so throughout Q2. Fund managers chose to look past the earnings shock of 2020 and factored in a rapid bounce back in economic activity and corporate profits for next year in the expectation of a so called, V-shaped recovery.

Although this scenario is most desirable, it does seem a bit optimistic. Politicians and central bankers moved rapidly and should be applauded. However, whilst it is true that human beings are social creatures, the psychological shift needed to sit on a bus, in a restaurant or cinema again, after staying at home for three months, may take a little longer than some are suggesting.

Whilst remnants of the virus remain within the populace and social distancing policies are maintained, it is difficult to see how we can return to full normality. Moreover, an increase in unemployment, the end of expensive temporary stimulus measures and a spike in corporate and government debt levels may defer further spending and thus a swift economic recovery.

Furthermore, as witnessed in the US and UK in June, we may be on course for more social and political upheaval, particularly as politicians begin to point fingers of blame over the handling of the pandemic.

Brexit still rumbles on. The UK has officially left the European Union but is in a transition phase and is yet to agree a trade deal with the EU. Across the pond, the US Presidential election on 3rd November could also have significant implications for markets. In short, stock market volatility is set to continue for some time yet.

It is important to remember that opportunities still present themselves. The determination of central banks and governments to underpin the recovery and asset prices should not be ignored.

In recent months - how individual stocks have performed relative to their peers has depended on how much, if at all, these companies are able to adapt to the ongoing lockdown measures, some industries such as; retail, leisure and airlines have been devastated whilst others such as pharmaceuticals, logistics and technology are thriving.

Investment Committee

Economic & Market Commentary

July 2020

The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. All performance data compiled from Refinitiv Lipper for Investment Management, data correct to 30.06.2020. References: 1 Johns Hopkins University, 2 CNBC Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated.

Investment Committee

Economic & Market Commentary

July 2020


The second quarter of 2020 has crammed in several years’ worth of social and technological change. On 30th April, Satya Nadella, Microsoft’s CEO, reported to Wall Street that “We’ve seen two years’ worth of digital transformation in two months”.

Even my parents, who are into their eighth decade, now order their groceries online and watch Netflix, this is something that I imagine many in their demographic wouldn’t have dreamt of before Covid-19, but will probably keep doing so hereon in.

Rapid uptake of new technology for social and business use causes massive ripple effects and ramifications for economies and poses many questions. For example, will we need as many shops and offices in future and what does this mean for investment in commercial property? The rollout of fifth generation mobile communication and the stability of internet connectivity is recognised now more so than ever, as being of paramount importance. Particularly if people are asked to work from home for a prolonged period, or for a second time.

Some businesses, mainly giants and mainly in America; Amazon, Visa, Microsoft, Google are at the forefront of this rapid change. Strength of balance sheets, market share, ability to innovate, stable and visible earnings have become even more valuable since rates of interest on cash deposits have fallen to near zero and yields on bonds have reached new lows.

So, what does all this mean for our portfolios? In short, we have increased exposure to the US and businesses with less economic sensitivity and tempered overweight positions to the UK and cyclical investment strategies.

We continue to seek out the best fund managers in North America, whether they are based in New York, Baltimore or Indianapolis. We also search for the best investment specialists in Europe, Asia and at home in the UK. We invest with those managers that consistently demonstrate the ability to refine and disregard most shares in an index and instead construct a concentrated portfolio of market-leading companies.

Japan, Korea and Taiwan have some of the most innovative companies in the world; particularly in robotics, silicon chip manufacturing and IT. China, once known for copying the West’s products, recently surpassed the US, to become the top source of applications for intellectual property patents. It is also a leader in facial recognition technology, and it too has its own internet titans in Alibaba and Tencent. Closer to home, Europe has world beating car manufacturers, consumer goods companies and pharmaceutical businesses.

However, let us pause and reflect for a moment and go back to where we began this quarterly review.

We too have some of the world’s best innovators, it was Sir Tim Berners-Lee who invented the internet. Moreover, it is quite possible, that scientists from Oxford University and UK pharmaceutical giant AstraZeneca, may indeed find a vaccine for coronavirus.

It is our job to seek out the world’s best investors. To find the fund managers who can decipher the message from the noise, understand the innovation that is prevalent all around the globe and generate consistent investment returns.

Risks are aplenty, but so too are opportunities, in the ‘new normal’ we find ourselves in. The only constant is change. We have all certainly changed, as has the world around us in the past few months.

After a difficult Q1 it is pleasing to see markets recover and the Greystone funds bounce back strongly. We have rotated the funds in order to dampen the exposure to economic cyclicality in favour of higher quality growth investments that will generate more consistent investment returns, whatever the economic weather.

Our strategy is to set a course, invest with the best fund managers, who in turn invest in a concentrated select group of the world’s leading companies, and compound the returns that these businesses can generate over time.

Thank you for your continued support. As always, please contact your usual adviser for further information or for access to our monthly updates.

The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing. All performance data compiled from Refinitiv Lipper for Investment Management, data correct to 30.06.2020. References: 1 Johns Hopkins University, 2 CNBC Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated.

2%

4%

6%

8%

10%

12%

14%

16%

2000 2004 2008 2012 2016 2020

US Unemployment Rate

-1%

0%

1%

2%

3%

4%

5%

6%

2006 2008 2010 2012 2014 2016 2018 2020

BoE Base Rate US Federal Funds Rate

Euro Area Base Rate

“Fightback“

In recent months we have seen coordinated action from major Central Banks to help offset the potential impacts of Covid-19 on global economic activity. The key method used is a reduction in interest rates. This aims to stimulate the economy by reducing borrowing costs for businesses and consumers.

The chart shows how interest rates in the UK, US and Eurozone have changed over the past 14 years. The US Federal Reserve was the most active, reducing rates to near-zero over the course of two emergency meetings during March, whilst the Bank of England reduced the UK base rate to 0.10%, an historic low level. The European Central Bank left rates unchanged at minus 0.5%, but did announce further quantitative easing, plus a separate set of measures to support lending by banks to affected European companies.

Central bank base rates influence the yields on government bonds; these assets have increased in value in 2020 due to the inverse relationship between bond yields and capital values. The yield on 10-year UK Gilts1 is currently at 0.20%. Despite sitting at historically low levels, we are mindful that government bond yields could fall further and even dip below zero amid continued economic uncertainty.


Key Charts

Final Thoughts

July 2020

The above are the views and opinions of the Greystone Investment Committee and are correct at the time of writing unless otherwise stated. 1Gilts is an informal term for UK Government Bonds. 2Data refers to the ’Effective Federal Funds Rate’, which is the interest rate banks charge each other overnight loans, similar to LIBOR in the UK. 3Data refers to the Euro Area Deposit Facility Rate. 4U.S. Bureau of Labor Statistics. Interest rate data is correct as at 30.06.2020, and unemployment data is correct as at 31.05.2020. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated.

Source: US Bureau of Labor Statistics.

Central Bank Interest Rates – since 2006

Source: Bank of England, US Federal Reserve, European Central Bank.

US Unemployment Rate – Since 2000

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Ra

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“Back to Work”

In response to Covid-19, national governments introduced measures such as; lockdowns and social distancing to reduce the spread of the virus. These measures led to the temporary closure of many businesses and this has had an impact on the affected countries’ economies, particularly the unemployment numbers. The unemployment rate measures the percentage of the population currently out of work but actively looking for a job. The chart shows how this has changed in the United States since 2000. Previous recessions are highlighted with grey bars.

Unemployment had been at record low levels for several years but increased to 14.7%4, c.23 million people 4 during April following the lockdown imposed in the US, with other nations also experiencing increases.

As countries relax their Covid-19 restrictions we can expect the unemployment rate to reduce as more businesses reopen, but it is unlikely to quickly return to the historic low levels seen at the start of the year. During May, the US unemployment rate reduced by c.2.5mln 4, to 13.3% 4 (circled). This reduction of 1.4% was the largest in a single month since 1949.

IMPORTANT INFORMATIONThis document is for advisers and retail clients. It does not constitute a form of financial advice and should not be relied upon. This is provided for information only. At Greystone we seek to guide you with your investment strategies by assessing and continually checking the levels of investment risk you are willing and able to take, thus ensuring suitable investments are made on your behalf. Past, simulated past or future projected performance is not a reliable indicator of future performance and may not be repeated. Investment markets and conditions can change rapidly and as such any views expressed herein should not be relied upon when making investment decisions. Neither the payment of dividends or return of capital is implied or guaranteed. There is a risk of loss of capital. Rates of exchange may cause the value of investments to go up or down. The information and any opinions expressed herein may change at any time and therefore this document does not constitute investment, tax, legal or other advice or recommendation or an offer to sell or an invitation to apply for any product or service. Investors should consider carefully whether an investment in this fund or portfolio is suitable in light of circumstances and resources.

The Greystone Investment Committee is part of Greystone Wealth Management, a trading name of Foundation Investment Management Limited who are authorised and regulated by the Financial Conduct Authority. Financial Services Register Number 612117.

Q2 20-Jul

Visit www.greystonefs.co.uk for additional information

Awards:City of London Wealth Management Awards 2019 – The awards celebrate the outstanding achievements of both the companies and individuals working in the wealth management sector. James Menzies (Investment Director/Lead Manager) won the Portfolio Manager of the Year Award at the awards on 14th March 2019.

ACQ5 Global Awards 2019 – The ACQ5 Global awards are based on independent reader nomination and voters are invited to consider funds that have top-quartile returns, a high Sharpe ration, low downside deviation, along with their personal or institutional experiences they’ve had when engaging with that firm. Greystone won the UK – Multi Asset Fund of Funds of the Year Awards

MoneyAge Awards 2019 – The MoneyAge Awards celebrate excellence innovation and professionalism in the finance sector. Greystone are shortlisted for the Wealth Management Firm of the Year Award. The awards will take place on 10th October 2019.

CityWire Investment Performance Awards 2018 – These awards celebrate the wealth management firms that are delivering stellar returns for their clients. The awards are based on ARC’s (Asset Risk Consultants) respected performance analysis and are strictly quantitative, focusing on risk-adjusted performance over a three year period. Greystone were shortlisted within the Aggressive category at the awards on 4th October 2018.

Investment Week Specialist Investment Awards 2018 - Investment Week’s prestigious Specialist Investment Awards celebrate the outstanding achievements of boutique, specialist fund managers and passive investing. Greystone were named as winners of the Discretionary Fund Management Group of the Year (under £5bn Assets under Management) at the awards on 19th October 2018.

Portfolio Adviser Wealth Manager Awards 2019 – The awards recognise excellence in wealth management and boast an experienced judging panel with individuals from leading financial planners, law firms, accountancy practices, consultancy businesses and trust companies. The VT Greystone Global Growth fund won the Aggressive portfolio – boutique (Gold) award at the awards on 11th July 2019.

Documents

Greystone Investment Committee Quarterly Report€¦ · Quarterly Commentary 5 All data is sourced from the Greystone Investment Committee and Refinitiv Lipper for Investment Management,