How we delivered our 12-month performance results

Shaun Port


4 min read

Nutmeg recently announced its annual portfolio performance figures for the 12 months to end of September 2013 and I’m pleased to say we have delivered excellent results for our customers. I’d like to explain a little more about the process and decisions that have contributed to such good returns. 

Nutmeg Portfolio 6 performance figures to 30th Sept 2013

Click on the image above to see Nutmeg’s portfolio performance figures

The Nutmeg approach

At the core of our investment strategy, we have an established monthly process whereby we review the investment assets in all of our customer portfolios. Every day we’re closely tracking a whole raft of economic data – inflation trends, interest rates, stock market prices, business reports, employment figures, and so on. Our monthly review process is no different. Our asset allocation committee that I chair pulls together a vast array of complex data and then, through rigorous analysis, we determine what changes (if any) we think should be made to the range of portfolios we manage in order to keep them in line with our customers’ investment goals.

We’re focused on our customers’ long-term goals. We are not in the business of day-trading and taking high risks on sudden price movements. For that reason, the portfolio changes we make can often appear to be subtle – and for very good reason. That said, as we’re constantly monitoring the markets, we are reactive when we need to be in order to manage your portfolio effectively. In addition to the monthly cycles, we decided to make two further portfolio changes during this 12-month period, in October 2012 and in June 2013.

See how we did – take a look at Nutmeg’s portfolio performance figures

The investment assets we selected and how they performed   

Firstly, bonds. We held very little developed government bonds in the final quarter of 2012 and no bonds from January 2013 onwards (low and medium-risk portfolios would normally hold sizeable amounts in government bonds). Instead, we held corporate bonds to benefit from the higher yields (both in ‘investment grade’ and ‘high yield’). More significantly, from late October 2012, we switched to bonds with a short date to maturity – typically averaging under three years compared to an average of 13 years for the gilt market. Bonds with longer maturity are more exposed to the risk of rising interest rates. We wanted to reduce that risk. From a low of 1.6% in May the gilt yield climbed to 3% by mid-September, causing sharp losses for those who held on to long-term gilts.

Regarding equities, we have generally favoured core developed stock markets, but with a bias towards mid and small-sized companies in the UK and US respectively. This has enabled us to benefit from an improving outlook for domestic growth. In the UK, the FTSE 250 price index rose 27.0% while the FTSE 100 index gained 12.5%. Also, we held low, or zero, holdings in emerging market stocks, because we considered the outlook to be less compelling for these regions. Over the 12 months emerging market stocks gained only 0.7% in sterling.

We were initially cautious about the sea-change in the Japanese stock market and continued our focus on other Asian markets (including Indonesia, which produced a similar performance to Japan in the early part of the year). We have since been satisfied that the growth in Japan appears to be robust and sustainable. We sold our holdings in Indonesia stocks in June when the environment for emerging markets turned nasty and are now firmly in favour of Japan, given the growth potential it now appears to offer.

In commodities, we substantially cut our holdings to gold on 10th January, when gold was around $1675, and removed it completely on 8th March when it hit $1582. Since then, gold fell below $1200 in June and made just a modest recovery to $1326 by the end of September (a 16% decline overall from 8th March).

We believe that the outlook for commercial property is improving, and valuations look reasonable – away from prime London offices, that is. Our holdings in global and UK property (through Real Estate Investment Trusts) showed a strong performance in the early part of the year but returns haven’t been quite as good as we’d expected since.

As we now enter the final quarter of 2013, the budget situation in the US continues to dominate global markets and shapes much of our strategic thinking. But rest assured, we’re not in the habit of commentating on our performance and investment strategy just annually. We keep in regular contact with our customers to explain how the latest economic data is relating to the portfolio management decisions we are making on their behalf. Here’s the latest in our series of monthly investment strategy video updates

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Risk warning

The views and opinions expressed herein are for informational purposes only. They are not personal recommendations and should not be regarded as solicitations or offers to buy or sell any of the securities or instruments mentioned. The views are based on public information that Nutmeg considers reliable but does not represent that the information contained herein is accurate or complete. With investment comes risk. The price and value of investments mentioned and income arising from them may fluctuate. Past performance is not an indicator of future results, and future returns are not guaranteed.

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Shaun Port

Shaun is the chief investment officer at Nutmeg. He has over 25 years’ experience developing and implementing investment strategies for clients ranging from central banks to pension schemes to charities and private individuals. Shaun holds a degree in Mathematical Economics from the University of Birmingham and is a Chartered Alternative Investment Analyst. He can be found tweeting @ShaunPort.


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