How have Nutmeg portfolios been performing?
So far in 2015 we’ve seen some very strong returns. We’ve seen growth of around 2% to 4% in our low risk portfolios for the year so far. Our medium risk portfolios have grown around 5% to 8%, and we’re up by more than 10% in our very highest risk portfolios for the year to date.
These high levels of returns are very unusual and certainly not what we’d expect consistently throughout the year. It’s important not to rely on strong returns when times are good, but instead focus on the long-term view with a three-year horizon at the absolute minimum.
What changes have we made to portfolios?
We’ve reduced our UK investments even further, we currently hold around one third of what we would usually expect to own in UK investments.
We have increased our investments in the Nordic countries where we have seen good growth opportunities. Negative interest rates in these countries are driving consumer spending – in Sweden the interest rate is -0.25% and in Denmark it’s -0.75%.
This is another way to get great exposure to the growth in other markets other than the UK, as well as the direct access we have through our investments in continental European markets.
Why are markets going up?
As we’ve said before, investors hate uncertainty. Some of the uncertainty that has been affecting markets for the past few months as all but disappeared – the situation in Greece is still simmering, but markets have not taken that into account, known as “pricing-in”.
The oil price also appears to have stabilised despite the fact that Chinese growth continues to weaken.
More good news is that Europe is doing much better, which we’ve been able to capitalise on.
Inflation has dipped below 1% in most developed markets, giving the economy a boost. We don’t think inflation will rise much over the next year meaning that central banks, particularly in the UK and US, are less likely to raise interest rates.
We don’t expect to see a rate hike in either of these countries before spring 2016, so we’re likely to have at least another year of super-low interest rates.
UK election focus
With less than a month to go the UK election coverage is certainly ramping up. Here at Nutmeg, we’ve reduced our UK holdings even further to help shelter our customers from the effects of any volatility in the wake of the election results.
We think it’s likely that the next government will be a minority coalition. Depending on which parties make up the coalition, we could face a certain amount of uncertainty in the UK market. Investors don’t like uncertainty, particularly international investors who do not have to invest in the UK.
We could either be faced with a government which might want to hold a referendum on the UK’s continued EU membership – a move which would create a high degree of uncertainty and cause instability in the stock markets.
Equally, we could have a government which rejects austerity – wanting to spend more and borrow more to boost the economy, which could also be seen by international investors as a very negative move.
We’ll be keeping a close eye on the polls, but in the meantime we are further diversifying our portfolios to truly benefit from global growth.
About this update: This update was filmed in April 2015 and figures cover the entire month of March unless otherwise stated.
Data sources: Bloomberg and Macrobond.
Risk warning: As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past or future performance indicators are not a reliable indicator of future performance.
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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.Other posts by Shaun Port