We want to make sure you always know how your portfolios are positioned and where your money is. That’s why our investment team tends to write a blog about any significant trading activity and Shaun, our chief investment officer, regularly mentions it in the investor updates. Here’s your latest update following our trades that took place on Thursday 18th October.
There were three main strands to our latest trades.
1. We’ve reduced our European exposure
We were already relatively light in European exposure, when compared to our long-term target and history, but we decided to reduce this further by shifting the focus of our EUDV1 – an ETF focusing on high dividend companies in Europe – to Nordic countries.
The two objectives of this trade were to respond to how much the European economy has degraded in the last six months, and to position your portfolios to better withstand further stress caused by the current political landscape. We see the ongoing political environments in Italy and Germany as particularly sensitive, and the European Parliament elections next year bring with them the prospect of renewed traction for populist parties. We wanted to make sure you’re better insulated against European political risks as they unfold.
We chose to move part of our exposure to Nordic countries because we think these markets are more attractive over the long term than the European market, and Nordic markets have outperformed European markets during most periods over the last 15 years. We also think the political landscape is more stable in this region, despite the outcome of the recent election in Sweden. When faced with the European political risks at play, we’re more comfortable with the indicators we’re seeing from Nordic countries. This position also means you have the potential to benefit from a more diversified basket of currencies.
2. We’ve reduced our UK FTSE 100 exposure
Given the latest developments in the Brexit negotiations, we’ve taken the decision to move some of our exposure away from UK equities. We’ve reallocated it to Japanese equities in the local currency (Japanese yen) and put the rest into a Nasdaq hedge.
Our decision to allocate more exposure to Japan reflects the current attractiveness of the Japanese market in terms of valuation, momentum and the defensiveness of the yen. There’s also a less binary outcome when compared with the Brexit/no-Brexit scenario currently faced by the European market, which we see as attractive.
We’ve chosen to take a small amount of Nasdaq exposure because we have a positive outlook on the long-term prospects of the US tech sector, and so we’re taking a speculative position on future growth in those stocks. While we do expect to see more volatility in the US over the coming weeks, we expect it to normalise and hope to benefit over the medium-term.
3. We’ve achieved some cost savings too
By trading out of one ETF and into another (VJPN2 to LCJP3), we’ve achieved a cost-saving, going from an underlying ETF fee of 0.19% to one of 0.12%. This is part of our continued efforts to make sure you’re investing in the most cost-efficient way.
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.
- SPDR S&P Euro Dividend Aristocrats UCITS ETF
- Vanguard FTSE Japan UCITS ETF
- Lyxor Core MSCI Japan (DR) UCITS ETF