Our investments


About our investments

We construct portfolios for you, principally by investing in exchange traded funds — ETFs. These provide an easy way to gain exposure to a pool of investments without having to buy each one individually. They can track a share index, such as the FTSE 100, and they can give you exposure to assets like Government and corporate bonds. They can also help you invest in specific sectors such as precious metals or forestry.

Our investment team chooses from a universe of over 1,800 ETFs. We consider many factors in choosing our investments and favour physically backed ETFs with high liquidity and good tracking performance. The investments in our portfolios are reviewed regularly to ensure they're the most suitable for our customers' needs.

The list below includes investments we currently use as well as those we may have used in the past.

Developed Equities

Shares in companies listed on the stock exchanges of developed markets, ranging from the United States to New Zealand.

VUKE FTSE 100

Vanguard Asset Management

Description: This ETF aims to track the performance of the FTSE 100. The FTSE 100, which currently includes household names such as HSBC, Vodafone and Diageo, is the index of the 100 largest companies in the UK.

Why we hold this: For any UK-based investor, any stock market holdings are likely to contain an exposure to the largest 100 companies listed in the UK. While the top 100 companies may be listed in the UK and traded in sterling, they derive a significant proportion of revenues from overseas (72% on our latest estimate).

Thoughts from Shaun: This fund is an excellent example of how investing in ETFs can be extremely cost effective and deliver very reliable performance. Since the fund was launched the difference between the performance and the market (gross of fees) has been virtually zero. Buying and selling the fund also attracts no stamp duty, unlike buying individual stocks in the FTSE 100.

Research: Google | Yahoo

MIDD FTSE 250

iShares

Description: This ETF aims to track the performance of the FTSE 250. The FTSE 250, which currently includes companies such as Balfour Beatty, is made up of the largest 250 UK stocks outside the FTSE 100.

Why we hold this: The FTSE 250 contains a broad mix of holdings, ranging from builders like Taylor Wimpey to student housing company Unite, and is not dominated by a few companies or sectors. Over the long-term mid-sized companies have historically outperformed large (FTSE 100) companies.

Thoughts from Shaun: Mid-sized companies are a great way to benefit from the growth of the UK economy. This fund provides a solid exposure to these stocks at a very good price.

Research: Google | Yahoo

HSPX S&P 500

HSBC Global Asset Management

Description: This ETF aims to track the performance of the Standard & Poor's 500 Index. The S&P 500 is based on the top 500 publicly traded American companies.

Why we hold this: The S&P 500 Index contains many of the largest companies in the world and benefits from the exposure to a broad range of market sectors.

Research: Google | Yahoo

EQQQ EQQQ Fund

Powershares

Description: This ETF aims to track the American NASDAQ-100 Index. The NASDAQ-100 reflects the largest domestic and international companies, with the exception of financial companies.

Why we hold this: The exclusion of financial instituions reduces the risk on this ETF making it more attractive to cautious investors compared to the S&P 500. The companies retain a diverse mix of industries that operate across the globe.

Thoughts from Shaun: The strong recent performance of US equities and the diversified nature of this index makes this ETF a great addition to medium risk portfolios.

Research: Google | Yahoo

UC62 UBS ETF MSCI Japan 100% hedged to GBP UCITS ETF

UBS

Description: This ETF aims to track the performance of the MSCI Japan GBP Hedged index. The index covers the top 85% of the Japanese equity market, while also aiming to minimise currency risk by entering into forward foreign exchange contracts to 'hedge' Japanese yen currency exposure.

Why we hold this: Japan is the second largest stock market in the world, after the US. A broad range of stocks are listed on the exchange, giving exposure to both domestic and export-orientated companies.

Thoughts from Shaun: The Japanese stock market has a very poor long-term track record, with prices lower than in 1990. However, we believe that the prospects for the economy and the stock market have improved considerably over the past two years.

Research: Google | Yahoo

ISP6 S&P SmallCap 600

iShares

Description: This ETF aims to track the Standard & Poor’s SmallCap 600 Index, offering exposure to 600 small US-listed companies.

Why we hold this: Academic research has shown that over long periods small-company stocks tend to outperform large company stocks. Compared to large cap stocks, small companies have a greater focus to the domestic economy.

Thoughts from Shaun: This fund provides a very simple way to gain a pure exposure to growth in the US economy. Compared to the S&P 500 index, which tracks the top 500 companies in the US, this index offers a more diverse range of companies, with the 20 largest accounting for just over 10% of the index, compared to over 30% for the S&P500. That said, small-company stocks are much more risky than large companies.

Research: Google | Yahoo

IEUX iShares MSCI Europe ex-UK

iShares

Description: This ETF aims to track the performance of the MSCI Europe ex. UK Index. It provides exposure to 340 companies in 15 European countries outside the UK, with the largest holdings in France, Germany and Switzerland.

Why we hold this: This fund enables us to invest across the broad range of European companies - not just in the key countries of Germany and France, but also Switzerland and the Nordic countries.

Thoughts from Shaun: Investing across the European continent offers a very diverse range of companies and sectors, from the industrials of Germany to the pharmaceuticals of Switzerland.

Research: Google | Yahoo

EUDV SPDR S&P Euro Dividend Aristocrats UCITS ETF

iShares

Description: This ETF aims to track the performance of the S&P Euro High Yield Dividend Aristocrats Index. It provides exposure to the 40 highest dividend-yielding Eurozone companies that have followed a policy of increasing or stable dividends for at least 10 consecutive years. The holdings are rebalanced quarterly.

Why we hold this: Companies within the fund come from a broad range of the industries and are the top dividend paying companies in Europe. This can help secure strong future dividend performance in a variety of market conditions.

Thoughts from Shaun: Historically, dividends have provided the majority of long-term investment returns. This ETF allows us to target European companies with very strong track records in rewarding investors with regular dividends.

Research: Google | Yahoo

IGUS S&P 500 GBP Hedged UCITS ETF

iShares

Description: This ETF aims to track the performance of the S&P 500 British Pound Hedged Index. It is invested in some of the biggest US firms such as Exxon Mobil, Apple and Microsoft, and seeks to minimise the impact of fluctuations in the US Dollar/British Pound exchange rate.

Why we hold this: The US equity market is always likely to be a key focus for many investors in stocks. However, movements in the exchange rate can significantly influence returns for UK investors, so removing the impact of currency risk is a useful tool.

Thoughts from Shaun: Predicting currency movements is notoriously difficult, but they can have a very big impact on returns - good and bad. While this fund is more expensive than the 'un-hedged version' at times this small premium is worth paying to eliminate currency risk of investing in the US equity market.

Research: Google | Yahoo

DJMC EURO STOXX Mid UCITS ETF

iShares

Description: This ETF aims to track the performance of the EURO STOXX Mid Index as closely as possibly. The Index is defined as the 201st to 400th largest stocks of the STOXX 600 Index, and offers exposure to mid capitalisation stocks from European developed countries.

Why we hold this: The Euro STOXX Mid ETF enables investors to benefit from the exposure to a range of European mid cap firms they have not had access to in the past. Many of those mid-sized companies are in the phase of a rapid growth and expansion.

Thoughts from Shaun: Like investing the FTSE 250, this fund allows us to make a more focused investment in mid-sized Eurozone companies, with returns expected to be higher, but with more risk than large companies.

Research: Google | Yahoo

IMIB FTSE MIB UCITS ETF

iShares

Description: This ETF aims to track the performance of the FTSE MIB Index, the main indicator of the Italian stock market. The Index comprises the top 40 stocks on the Borsa Italiana, including companies such as Eni, Unicredit, Luxottica and Fiat.

Why we hold this: Italian index serves as a good EM equity proxy due to its risk-return profile.

Thoughts from Shaun: Despite many structural, economic and political headwinds Italian index is likely to see a comeback whe the ECB takes more action.

Research: Google | Yahoo

DJSC iShares EURO STOXX Small UCITS ETF

iShares

Description: This ETF aims to track the performance of 200 small capitalisation stocks listed on Eurozone stock exchanges included in the EURO STOXX Small Index.

Why we hold this: Small capitilisation European stocks are an exciting asset class that combine the potential for impressive long term returns, albeit but with a higher level of risk. Academic studies have shown that small-cap stocks outperform large-cap stocks over long time horizons.

Thoughts from Shaun: This fund allows us to invest in a very wide range of Europe companies without any one country dominating returns. Small cap stocks tend to perform very well when economic growth is recovering.

Research: Google | Yahoo

XDDX DAX UCITS ETF

DB X-Trackers

Description: This ETF aims to track the performance of the German DAX Index. It provides exposure to the top 30 companies listed on the Frankfurt stock exchange.

Why we hold this: The German stock market is the 7th largest in the world and the 4th largest in Europe, with a range of well-known blue-chip companies such as Siemens, Daimler, E.ON and Volkswagen.

Thoughts from Shaun: The German market has a wide range of quality companies with a global focus. Compared to other European markets and the UK in particular, the DAX has a greater exposure to consumer and technology businesses, which makes it a useful holding during periods of strong growth in developed and emerging markets.

Research: Google | Yahoo

VUSA Vanguard S&P 500

Vanguard

Description: This ETF aims to track the performance of the Standard & Poor's 500 Index. The S&P 500 is based on the top 500 publicly traded American companies.

Why we hold this: The S&P 500 Index contains many of the largest companies in the world and benefits from the exposure to a broad range of market sectors.

Thoughts from Shaun: This charging structure of this fund is exceptionally good value - costing just £7 for every £10000 invested.

Research: Google | Yahoo

VMID FTSE 250 ETF

Vanguard

Description: This ETF aims to track the performance of the FTSE 250. The FTSE 250 is made up of the largest 250 UK stocks outside the FTSE 100, commonly known as 'mid-caps'.

Why we hold this: The FTSE 250 contains a broad mix of holdings and is not dominated by a few companies or sectors, unlike the FTSE 100. Over the long-term mid-sized UK companies have historically outperformed large UK companies, albeit with a higher level of risk.

Thoughts from Shaun: Mid-sized companies are a great way to benefit from the growth of the UK economy. This fund is significantly cheaper than the equivalent fund from iShares.

Research: Google | Yahoo

VJPN FTSE Japan UCITS ETF

Vanguard

Description: This ETF aims to track the performance of the FTSE Japan index, covering the top large and mid-sized companies listed on the Japanese stock exchange.

Why we hold this: Japan is the second largest stock market in the world, after the US. A broad range of stocks are listed on the exchange, giving exposure to both domestic and export-orientated companies.

Thoughts from Shaun: The Japanese stock market has a very poor long-term track record, with prices lower than in 1990. However, we believe that the prospects for the economy and the stock market have improved considerably over the past two years.

Research: Google | Yahoo

UC60 UBS MSCI EMU ETF

UBS

Description: This ETF aims to track the performance of the MSCI EMU Index, independent of movements in the pound/euro exchange rate (currency hedged). It provides exposure to over 230 companies in the 11 countries of the Eurozone with the largest holdings in France, Germany and Spain.

Why we hold this: This fund enables us to invest across the broad range of companies in the Eurozone, while eliminating euro currency risk.

Thoughts from Shaun: Investing across the Euro-area offers a very diverse range of companies and sectors, such as the industrials of Germany and the consumer companies of the Netherlands.

Research: Google | Yahoo

VERX Vanguard FTSE Developed Europe ex UK UCITS ETF

Vanguard

Description: This ETF aims to track the performance of the FTSE Developed Europe ex. UK Index. It provides exposure to over 380 companies in 15 European countries (excluding the UK) with the largest holdings in France, Germany and Switzerland.

Why we hold this: The fund enables us to gain broad exposure to a diverse range of European companies across Europe. Whilst a large part of the exposure is to the dominant economic countries of Germany, Switzerland and France, the fund also includes exposure to the wider continental European economy.

Thoughts from Shaun: Investing across the European continent offers a very diverse range of companies and sectors, from the industrial companies of Germany to the pharmaceuticals stocks in Switzerland.

Research: Google | Yahoo

XDN0 db x-trackers MSCI Nordic Index UCITS ETF DR

db X-trackers

Description: This ETF aims to track the performance of the MSCI Nordic Countries Index, providing exposure to 66 companies across the Nordic region.

Why we hold this: The fund enables us to gain broad exposure to a portfolio of large and medium sized companies from across the Nordic countries of Sweden, Denmark, Finland and Norway.

Thoughts from Shaun: We think the Nordic region looks particulary attractive due to strong economic growth, negative interest rates and independent currencies. This fund provides broad access to some of the largest companies in the region.

Research: Google | Yahoo

UC07 UBS MSCI USA Value UCITS

UBS

Description: This ETF aims to track the performance of the MSCI USA Value Index. It provides exposure to companies within the larger MSCI USA index, that are deemed to have value characteristics.

Why we hold this: Companies are typically classified as having 'value' or 'growth' attributes, or a combination of both. A 'value' stock is one that is deemed to be undervalued by investors, because it trades at a lower price relative to it's fundamental characteristics. This may include stocks that have fallen out of favour, or stocks whose price has fallen below historical levels.

Thoughts from Shaun: This fund allows us to invest in stocks which the market believes are being priced below where they should be over the long term. The attractiveness of value stocks tends to be cyclical, so this fund will only be only be used in periods where we believe value stocks are attractive to hold.

Research: Google | Yahoo

XDPG S&P 500 GBP Hedged UCITS ETF

DB X-trackers

Description: This ETF aims to track the performance of the S&P 500 GBP Hedged Index. It provides exposure to 500 of the largest US stocks while attempting to minimise currency risk by entering into forward foreign exchange contracts to 'hedge' US dollar currency exposure.

Why we hold this: The US equity market is always likely to be a key focus for many investors in stocks. However, movements in the exchange rate can significantly influence returns for UK investors, so removing the impact of currency risk is a useful tool.

Thoughts from Shaun: Predicting currency movements is notoriously difficult, but they can have a very big impact on returns — good and bad. While this fund is more expensive than the 'un-hedged version', at times this small premium is worth paying to eliminate currency risk of investing in the US equity market.

Research: Google | Yahoo

ISJP iShares MSCI Japan Small Cap UCITS ETF

iShares

Description: This ETF aims to track the performance of small cap Japanese stocks included in the MSCI Japan Small Cap Index.

Why we hold this: This fund provides access to small cap Japanese equities. For investors with less concern for short term volatility, exposure to smaller companies can provide the opportunity for higher long term returns.

Thoughts from Shaun: This ETF gives investors seeking exposure to the Japanese small cap equity market great liquidity and performance closely aligned to the benchmark index.

Research: Google | Yahoo

IMV iShares Edge MSCI Europe Minimum Volatility UCITS ETF

iShares

Description: This ETF aims to track the performance of the MSCI Europe Minimum Volatility Index, which is composed of selected European companies that, in the aggregate, have lower volatility characteristics relative to the broader European equity market.

Why we hold this: Minimum or low volatility is an investment style that has been shown to deliver higher returns over the long term, and provides a defensive exposure to European equities. Rather than weighting each stock by its size, the weighting system ensures that each stock has an equal contribution to overall risk.

Thoughts from Shaun: This ETF provides a low cost and efficient way to invest in a diversified portfolio of European stocks, that constructed to produce a portfolio with low volatility (relative to wider European equities).

Research: Google | Yahoo

Emerging Market Equities

Shares in companies from developing economies, including China, South Korea and Brazil. These shares carry significantly more risk than companies in developed markets.

VFEM FTSE Emerging Markets

Vanguard Asset Management

Description: This ETF aims to track the performance of the FTSE Emerging Markets Index. It provides exposure to the markets of developing economies such as Brazil, China, Taiwan and South Africa, investing in large and mid-sized companies.

Why we hold this: Emerging markets are one of the most attractive areas of investment opportunity right now. This ETF provides exposure to most of these markets with simplicity and low costs.

Thoughts from Shaun: Mid cap companies in emerging markets can quickly adapt to take advantage of the opportunities from rapid economic development.

Research: Google | Yahoo

IFFF iShares MSCI AC Far East ex-Japan

iShares

Description: This ETF aims to track the performance of the MSCI AC Far East ex Japan Index. It provides exposure to developed and emerging markets in Asia, excluding Japan and India. This consists of more than 500 companies in countries such as China, Hong Kong, Korea, Taiwan and Singapore, as well as smaller stock markets in Malaysia, Philippines, Thailand and Indonesia.

Why we hold this: This fund invests in companies from nine countries in developed and emerging Asia, with a concentration to Greater China (mainland, Hong Kong and Taiwan) and South Korea.

Thoughts from Shaun: The interesting combination of developed and emerging markets tracked by this fund offers more stable returns to investors with the potential of even greater returns. Economic growth in Asia has outperformed other regions over the last two decades and this fund enables investors to profit from this growth.

Research: Factsheet (pdf) | Google | Yahoo

HIDR MSCI Indonesia

HSBC

Description: This ETF aims to track the performance of the MSCI Indonesia Index. It provides exposure to the largest publicly listed companies in Indonesia. More than 70% of this ETF is invested in companies operating in the financials, consumer and telecomunications sectors.

Why we hold this: Indonesia has a booming consumer sector and as with most emerging markets, financial and consumer stocks are an important part of the market. Over recent years, the performance of Unilever Indonesia as been an important driver of stock market returns.

Thoughts from Shaun: While the Indonesian stock market is relatively small, the economy has expanded at a rapid rate and the population is one of the largest in the world. The amount of credit in the economy is very low and significantly below its neighbours, offering the potential for a period of strong growth.

Research: Google | Yahoo

IBZL MSCI Brazil

iShares

Description: This ETF aims to track the performance of the MSCI Brazil. It provides exposure to more than 80 Brazilian companies, such as Petrobras and Vale.

Why we hold this: Brazil is one of the largest stock markets in Emerging economies. This ETF provides exposure to the top 80 companies, with a focus on financial, energy and mining companies.

Thoughts from Shaun: Brazilian companies can combine the rapid developent of their domestic market, access to huge natural resources and an expanding regional market to expand operations and increase profits.

Research: Google | Yahoo

IKOR MSCI Korea

iShares

Description: This ETF aims to track the performance of the MSCI Korea Index, offering exposure to well known Korean companies such as Samsung Electronics and Hyundai Motor.

Why we hold this: Korea is an export-driven economy and the performance of Korean equities is strongly linked to global growth and industrial production. The technological focus of the Korean economy makes this fund very attractive for investors seeking long-term returns.

Thoughts from Shaun: While Korea is classified by MSCI indices as an Emerging Market, it will be re-classified to a Developed market in 2014 joining Hong Kong and Singapore in the developed market universe. Korea offers a blend of strong economic growth characterised by emerging markets, but also a relatively stable macro-economic environment more common with developed markets.

Research: Google | Yahoo

EMIM iShares Core MSCI Emerging Markets IMI UCITS ETF

iShares

Description: The fund aims to track the performance of the MSCI Emerging Markets IMI Index.

Why we hold this: The fund provides exposure to a range of Emerging Market stocks, listed in countries such as China, Soutk Korea, Taiwan and South Africa for a low fee.

Thoughts from Shaun: Emerging markets are experiencing considerable slowdown following years of impressive economic growth. Valuations currently look high and an improved outlook is not forthcoming.

Research: Google | Yahoo

Government Bonds, Developed Markets

Government bonds which pay regular interest based on their face value. They are generally regarded as a very safe investment, unless the government becomes unable (or unwilling) to pay its debtors.

IGLS FTSE Gilts UK 0-5

iShares

This ETF aims to track the performance of UK government bonds (also known as gilts) with a term to maturity of up to five years.

Why we hold this: UK government bonds are an excellent choice of investment for someone looking to minimise risk as far as possible whilst still receiving modest returns. This ETF is an excellent way for investors to gain exposure to this market in a straightforward way with excellent levels of liquidity.

Thoughts from Shaun: This ETF offers low-risk investors a flexible and liquid way to gain exposure to UK Government Gilts.

Research: Google | Yahoo

IGLT UK Gilts UCITS ETF

iShares

Description: This ETF offers exposure to Sterling denominated UK government bonds by aiming to track the FTSE Actuaries Government Securities UK Gilts All Stock Index as closely as possible.

Why we hold this: UK Government bonds ('gilts') are regarded as one of the safest asset classes for UK investors. They offer investors modest returns at low levels of risk.

Thoughts from Shaun: Government bonds have produced abnormally good returns for investors over the past 20 years. Even though future returns from gilts are likely to be low, they are useful tool in a diversified portfolio as government bonds typically rise in value when stock markets decline.

Research: Google | Yahoo

VGOV Vanguard UK Government Bond

Vanguard

Description: This ETF aims to track the performance of UK government fixed-income securities denominated in Pounds Sterling.

Why we hold this: UK Government bonds ('gilts') are regarded as one of the safest asset classes for UK investors. They offer investors modest returns at low levels of risk.

Thoughts from Shaun: Government bonds have produced abnormally good returns for investors over the past 20 years. Even though future returns from gilts are likely to be low, they are useful tool in a diversified portfolio as government bonds typically rise in value when stock markets decline. This fund is also considerably cheaper than the equivalent fund from iShares.

Research: Google | Yahoo

GLTS Barclays 1-5 Year Gilt UCITS ETF

SPDR

Description: This ETF aims to track the performance of UK government bonds (also known as gilts) with a term to maturity of one to five years.

Why we hold this: UK government bonds are a good choice of investment for someone looking to minimise risk as far as possible whilst accepting modest returns. This ETF is an excellent way for investors to gain exposure to this market in a simple and cost-effective way.

Thoughts from Shaun: Gilts with a short time to maturity have historically produced a better return than cash deposits, although unlike cash gilts can lose money - usually when the bank rate is rising.

Research: Google | Yahoo

GLTL SPDR Barclays 15+ Year Gilt

SPDR

This ETF aims to track the performance of the Barclays 15+ Year Gilt Index. The index measures the performance of UK Government bonds with maturities of over 15 years.

Why we hold this: The longer maturity of the Gilts contained within this fund make it a useful defensive tool for portfolios when markets are volatile, at a very attractive cost of just 0.15% per year.

Thoughts from Shaun: This ETF provides low cost access to an asset that is defensive in times of stress, and is supported by natural demand from the savings and pension industry.

Research: Google | Yahoo

GILS FTSE Actuaries UK Conventional Gilts Index

LYXOR

This ETF aims to track the performance of UK government fixed-income securities denominated in Pounds Sterling.

Why we hold this: UK Government bonds — gilts — are regarded as one of the safest asset classes for UK investors. They offer investors modest returns at low levels of risk.

Thoughts from Shaun: Government bonds have produced abnormally good returns for investors over the past 20 years. Even though future returns from gilts are likely to be low, they are a useful tool in a diversified portfolio as government bonds typically rise in value when stock markets decline. This fund is also considerably cheaper than the equivalent fund from Vanguard or iShares.

Research: Google | Yahoo

GIL5 FTSE Actuaries UK Gilts 0-5 Years UCITS ETF

LYXOR

This ETF aims to track the performance of UK government bonds, also known as gilts, with a term to maturity of zero to five years.

Why we hold this: UK government bonds are a good choice of investment for someone looking to minimise risk as far as possible whilst accepting modest returns. This ETF is an excellent way for investors to gain exposure to this market in a simple and cost-effective way.

Thoughts from Shaun: Gilts with a short time to maturity have historically produced a better return than cash deposits although, unlike cash, gilts can lose money — usually when the bank rate is rising.

Research: Google | Yahoo

Government Bonds, Inflation Linked

Different to normal government bonds in that they pay regular interest based on the recent rate of consumer price inflation.

INXG iShares £ Index-Linked Gilts UCITS ETF

iShares

Description: This ETF aims to track the performance of the Barclays Capital UK Government Inflation-Linked Bond Index. The majority of the bonds (also known as index-linked gilts) in this index have more than 20 years until maturity.

Why we hold this: Inflation-linked bonds offer returns linked to the rate of inflation, providing regular interest payments and the repayment of capital inflated by the growth in retail prices.

Thoughts from Shaun: During periods of rising current inflation and/or expectations of long-term inflation, index-linked bonds can offer a degree of protection.

Research: Google | Yahoo

ITPS Barclays Capital $ TIPS

iShares

Description: This ETF aims to track an index which offers exposure to inflation-linked US Treasury bonds.

Why we hold this: US Treasury bonds are widely considered to be the safest asset class worldwide. This ETF gives investors a straightforward way of investing in this asset class without unnecessary risk or high management fees.

Thoughts from Shaun: Inflation-linked bonds are extremely popular with investors for obvious reasons. This fund offers them at low cost and relatively low risk.

Research: Google | Yahoo

Government Bonds, Emerging Markets

Although these bonds are backed by governments, they are regarded as high-risk investments in comparison to government bonds in developed markets. They can be issued in US dollars or in local currencies.

SEMB JP Morgan $ Emerging Markets Bond Fund

iShares

Description: This ETF aims to track the JP Morgan Emerging Markets Bond Index Global Core Index. The index includes government bonds issued by countries such as Brazil, Russia and Indonesia.

Why we hold this: Sovereign 'hard currency' bonds from emerging markets typically offer a higher yield (return) than developed government bonds, without significant currency risk. The great worthiness of emerging economies continues to improve, in contrast the developed economies where high debt loads have led to downgrades in credit ratings.

Thoughts from Shaun: Emerging market bonds typically offer significantly higher returns compared to UK and US government bond markets. This fund allows us to reliably tap these returns when we believe that the risk-reward ratio is favourable for investors.

Research: Google | Yahoo

SEML Barclays Capital Emerging Market Local Govt Bond

iShares

Description: This ETF aims to track the performance of the Barclays Capital Emerging Markets Local Currency Core Government Index. This offers exposure to bonds issued by the governments of Brazil, Hungary, Indonesia, Malaysia, Mexico, Poland, South Africa and Turkey. As the bonds are issued in local currencies, the risk from exchange rate fluctuations is significant in this fund.

Why we hold this: Emerging markets bonds are an excellent addition to any low to medium risk portfolio by providing good returns without unnecessary risk. The movement of the emerging market currencies these bonds are issued in could shift investors returns either way. This ETF offers investors a simple way of benefitting from the interest these bonds pay without the complex procedures of owning the underlying assets.

Thoughts from Shaun: The local currency aspect of the bonds in this fund can be seen as a great opportunity to take advantage of future currency movements.

Research: Google | Yahoo

Corporate Bonds

Corporate bonds are classified either as ‘investment grade’ – those issued by companies with good agency ratings – or ‘high yield’ – those with a higher risk of default. The return on high yield bonds is potentially greater, albeit with more volatility than with investment grade bonds.

ISXF Markit iBoxx £ Corporate Bond ex-Financials

iShares

Description: This ETF is invested in Sterling-denominated corporate bonds issued by companies outside the financial sector. The majority of the companies are based in Europe and the United States, including Pfizer, EDF and WalMart.

Why we hold this: This fund offers exposures to sterling-denominated corporate bonds issued by non-financial companies. In some environments, such as the credit crisis, owning bonds issued by financial companies is not desirable, so this fund allows us to invest only in bonds issued by non-financial companies.

Thoughts from Shaun: Bonds issued by financial companies are the largest share of the corporate bond market, but have risks distinct from the rest of the non-financial bond market. Rather than avoiding bonds during periods of stress in the financial sector, this fund enables us to earn the returns from the bond market but without investing in financial companies.

Research: Google | Yahoo

IHYG Markit iBoxx Euro High Yield Bond

iShares

Description: This ETF invests in high yield corporate bonds with fewer than 10.5 years to maturity. The majority of the companies are based in Europe, and the constituent bonds have a sub-investment grade credit rating.

Why we hold this: Bonds with low credit ratings - commonly known as 'junk bonds' offer the potential for higher returns that investment-grade bonds.

Thoughts from Shaun: High Yield bonds behave like a hybrid of bonds and equities, offering a regular income (coupon payments) but with values correlated to equity markets and investors appetite for risk more generally. Whie high yield are an extremely useful asset class, they should not be consider a 'buy-and-hold' investment throughout the economic cycle.

Research: Google | Yahoo

STHY PIMCO Short-Term High Yield Corporate Bond Index Source

Source | PIMCO

Description: This ETF aims to track the performance of the Bank of America Merrill Lynch 0-5 Year US High Yield Index. It is invested in US dollar-denominated bonds rated at below investment-grade with fewer than five years to maturity. The fund is managed by PIMCO, one of the largest fixed income managers in the world.

Why we hold this: The characteristics of high-yield bonds are a hybrid of high grade bonds and equities, providing a high level of income compared to other bonds. For low and medium-risk investors, they can provide good returns but with less risk than equities.

Thoughts from Shaun: This fund invests in US high yield bonds with less than five years to maturity, potentially reducing the impact of a rise in market interest rates. High yield bonds can offer high returns but should not be considered a 'buy-and-hold' investment throughout the economic cycle.

Research: Google | Yahoo

IS15 Markit iBoxx £ Corporate Bond 1-5

iShares

Description: This ETF aims to track the performance of the Markit iBoxx £ Corporate 1-5 Index, with exposure to investment grade, sterling-denominated corporate bonds which mature in one to five years’ time. The majority of the companies are based in Europe and the United States.

Why we hold this: Corporate bonds offer good returns for investors who are more risk averse. This ETF comprises bonds from a range of different sized companies domiciled in a range of developed economies and is denominated in Pound Sterling which protects investors from currency movements. Bonds with their maturity below 5 years are less sensitive to changes in interest rates.

Thoughts from Shaun: Bonds with a short time to maturity (less than five years) are much less exposed to changes in interest rates than the full market of bonds, so this fund allows us to obtain higher returns than government bonds, while taking a lower level of risk.

Research: Google | Yahoo

SLXX iShares £ Corporate Bond UCITS ETF

iShares

Description: This ETF aims to track the performance of the Markit iBoxx £ Liquid Corporate Large Cap Index, with exposure to the most liquid sterling-denominated investment grade corporate bonds. The majority of the companies are based in UK, US and continental Europe.

Why we hold this: This ETF offers high quality bonds from highly liquid major companies like Walmart, Barclays and Vodafone. The bonds have a relatively long maturity and provide attractive yields relative to government bonds.

Thoughts from Shaun: High-quality 'investment grade' bonds offer higher returns ('yields') than government bonds but with a modest increase in risk. Unlike equities, corporate bonds are relatively cumbersome to buy and sell so this fund provides a very simple, efficient and cost-effective way of obtaining the returns from company bonds.

Research: Google | Yahoo

SUKC Barclays 0-5 Year Sterling Corporate Bond UCITS ETF

SPDR

Description: This ETF aims to track the performance of the Barclays 0-5 Year Sterling Corporate Bond Index, with exposure to investment grade, sterling denominated corporate bonds which mature in less than five years’ time. The majority of the companies are based in the UK, Europe and the United States.

Why we hold this: Corporate bonds offer good returns for investors who are more risk averse. This ETF comprises bonds from a range of different sized companies domiciled in a range of developed economies and is denominated in Pound Sterling which protects investors from currency movements. Bonds with their maturity below 5 years are less sensitive to changes in interest rates.

Thoughts from Shaun: Bonds with a short time to maturity (less than five years) are much less exposed to changes in interest rates than the full market of bonds, so this fund allows us to obtain higher returns than government bonds of similar maturity, while taking less interest-rate risk. Compared to the similar iShares product ('IS15') this fund allows bonds to mature, rather than selling when their maturity falls to less than one year.

Research: Google | Yahoo

SHYG iShares Euro High Yield Corporate Bond UCITS ETF

iShares

Description: This ETF aims to track the performance of the Markit iBoxx EUR Liquid High Yield Total Return Index. The fund invests in Euro and sterling denominated 'high yield' (below investment-grade) corporate bonds issued and traded in Europe.

Why we hold this: Bonds with low credit ratings - commonly known as 'junk bonds' offer the potential for higher returns that investment-grade bonds.

Thoughts from Shaun: High Yield bonds behave like a hybrid of bonds and equities, offering a regular income (coupon payments) but with values correlated to equity markets and investors appetite for risk more generally. Whie high yield are an extremely useful asset class, they should not be consider a 'buy-and-hold' investment throughout the economic cycle.

Research: Google | Yahoo

SMBS iShares US Mortgage Backed Securities UCITS ETF

iShares

Description: This ETF aims to track the Bloomberg Barclays US Mortgage Backed Securities Index, which provides exposure to a broad range of U.S. mortgage-backed securities issued by government sponsored enterprises such as Ginnie Mae, Fannie Mae, and Freddie Mac.

Why we hold this: This fund enables us to invest in the US mortgage market in a diversified and high quality way. Mortgage debt constitutes a significant part of US bond markets, and because the securities held in this fund are issued by government agencies, they are of a very high quality (rated AAA by rating agencies). This also means they have attractive risk reward characteristics versus other areas of the bond market.

Thoughts from Shaun: This ETF provides a very simple way to gain a broad and pure exposure to the US mortgage market. The US mortgage market is closely linked to the strength of the US housing market and the health of the US consumer, and has typically shown a low correlation to major equity indices over the previous 10 years.

Research: Google | Yahoo

Property & Infrastructure

Description: Shares in companies which invest primarily in property, such as real estate investment trusts, or infrastructure, such as electricity distribution or water supply.

IWDP FTSE EPRA/NAREIT Developed Markets Property Yield Fund

iShares

Description: This ETF offers exposure to real estate companies from developed countries, with the exception of Greece, which have a one-year forecast dividend yield of 2 per cent or more.

Why we hold this: This ETF offers transparent and efficient access to the wide geographical coverage of the property market including US, Singapore and Australia with minimal fees. Many of the real estate companies in this index have bond like characteristics, but importantly offer growth.

Thoughts from Shaun: I particularly like the worldwide diversification of the property companies in this fund, ranging from the largest markets like the US, to Singapore and Australia.

Research: Google | Yahoo

INFR FTSE/Macquarie Global Infrastructure 100

iShares

Description: This ETF aims to track the performance of an index which includes the 100 largest stocks in the infrastructure sector. Companies represented currently include E.ON and the National Grid.

Why we hold this: The global infrastructure sector stands to benefit from massive programmes of construction in emerging and developing markets, as well as renewal of ageing infrastructure in developed economies. Companies in this index have diversified global operations but their UK listings help investors avoid exchange rate risk.

Thoughts from Shaun: Countries around the world are investing in important infrastructure, making this fund a great investment opportunity.

Research: Google | Yahoo

IUKP UK Property UCITS ETF

iShares

Description: This ETF aims to track the performance of the FTSE EPRA, NAREIT Index. It provides exposure to the largest UK Real Estate Investment Trusts and real estate holding and development companies, such as Land Securities, British Land and Hammerson.

Why we hold this: Investing in this property ETF gives investors the ability to gain exposure to returns from property, but with the ability to buy and sell on a daily basis, unlike investing in physical property.

Thoughts from Shaun: The price of UK property companies typically rises in advance of an upturn in land and property prices, so this fund enables us to gain exposure to improving prospects for property values and rents.

Research: Google | Yahoo

GBRE SPDR Dow Jones Global Real Estate UCITS ETF

State Street

Description: The fund tracks the performance of the Dow Jones Global Select Real estate securities index with around 225 holdings.

Why we hold this: The fund offers access to a broad range of real estate companies listed in the US, Japan, UK, Australia, Canada and other developed markets.

Thoughts from Shaun: Property is a useful global asset class, and the broad global exposure within this fund provides good diversification, and access to a broad selection of global real estate businesses.

Research: Google | Yahoo

Commodities & Natural Resources

Physical commodities such as precious metals and shares in companies specialising in activities related to natural resources, such as mining.

SGLP Source Physical Gold P-ETC

Source

Description: This ETF seeks to track the day-to-day movement of the price of gold.

Why we hold this: This ETF provides an easy way to benefit from changes in the gold prices, without the difficulty and cost of holding physical gold bars.

Thoughts from Shaun: Gold ETFs have become the most efficient way to invest in gold, so much so that gold held in ETFs rival the largest holders in the world (the largest Central Banks). This makes buying and selling an exposure to gold highly efficient and cost effective.

Research: Google | Yahoo

WOOD S&P Global Timber & Forestry

iShares

Description: This ETF aims to track the Standard & Poor's Global Timber & Forestry Index. The index offers exposure to the 25 largest global companies involved in the ownership and management of forests and timberlands.

Why we hold this: The global timber and forestry index offers exposure to the 25 largest companies involved in the ownership and management of logging operations worldwide. The risks involved with this volatile and unpredictable commodity market are balanced by the excellent long term returns many of these comapnies provide to investors.

Thoughts from Shaun: The companies in this index stand to benefit enormously from the rising demand for timber and forestry products.

Research: Google | Yahoo

IH2O S&P Global Water

iShares

Description: This ETF aims to track an index which offers exposure to the 50 largest global companies involved in water-related businesses. These currently include companies operating in Switzerland, the UK, the US, Brazil and Israel.

Why we hold this: Companies in this index have considerable control over the supply and sale of this critical resource in various regions of the world. Low to medium risk investors are attracted to this relatively obscure asset class for the diversification it offers to the majority of portfolios.

Thoughts from Shaun: The companies in this index that manage and distribute water look set to benefit as demand increases.

Research: Google | Yahoo

SGLN Physical Gold

iShares

Description: This Exchange Traded Commodity (ETC) is designed to offer a simple way to gain exposure to physical gold without the need to take delivery of the commodity. Gold bars are held by a separate custodian, JP Morgan.

Why we hold this: This ETF provides an easy way to benefit from changes in the gold prices, without the difficulty and cost of holding physical gold bars.

Thoughts from Shaun: Gold ETFs have become the most efficient way to invest in gold, so much so that gold held in ETFs rival the largest holders in the world (the largest Central Banks). This makes buying and selling an exposure to gold highly efficient and cosy effective.

Research: Google | Yahoo

SPAG Agribusiness UCITS ETF

iShares

Description: This ETF offers exposure to the largest publicly-traded companies involved in the agriculture business worldwide by tracking the performance of the S&P Commodity Producers Agribusiness Index as closely as possible.

Why we hold this: This ETF provides the opportunity for investors to benefit from rising global demand for food, via a diverse range of companies across 20 countries such as Canada, Japan, Brazil, Norway and Singapore.

Thoughts from Shaun: Population growth will continue to drive increased business for agricultural businesses, particularly as incomes rise and diets change in developing economies.

Research: Google | Yahoo

Money Market

A money market fund aims to earn income while preserving capital. It invests in monetary instruments and highly liquid, short-term (typically less than one year) securities.

QUID PIMCO Sterling Short Maturity Source

Source | PIMCO

Description: The fund aims to maximise income gains, while attempting to preserve capital. The fund primarly invests in high-grade short-term corporate and government bonds, and mortgage-backed securities. This ETF is actively managed by PIMCO, one of the largest fixed income managers in the world.

Why we hold this: Given current fixed income valuations, the range of attractive vehicles within this asset class is limited. We chose PIMCO Sterling Short Maturity Source as a good diversification for our portfolios as it allows us to benefit from the performance of a wide range of investment grade debt from the UK and other major economies with a low level of risk. Also, currency hedging minimises the risks associated with foreign-exchange fluctuations.

Thoughts from Shaun: Finding stable returns higher than cash is a challenge in the current financial environment. This fund provides higher returns than cash deposits with an acceptable level of risk, investing globally but hedging the currency exposure back to sterling to keep risk to a minimum.

Research: Google | Yahoo

Cash

Cash plays a role in a diversified portfolio. You receive a rate of interest on cash in your portfolio that depends on the base rate set by the Bank of England. Nutmeg does not take any portion of the interest that you receive.