“Returns on our portfolio were positive overall, supported by European equities and Euro fixed income investments. We fared particularly well from our defensive position in Uniglobal Minimum Variance Europe. However, Asian equities dropped dramatically due to increasing fears of a slowdown in the economy, and the Threadneedle Asia Growth fund contributed negatively to performance. We trimmed our position on volatility from 4 per cent to 2 per cent: this was invested in Centrale Long Vol. This enabled us to finance an increased position in Ecofi Quant Trésorerie Dynamique, which has recently slightly underperformed the cash market.”

“In the current highly volatile market environment we start our fund portfolio with a mixed allocation to global bond and equity funds. All funds selected have a quite defensive approach. The additional equity funds are regionally focused. As an active allocation overlay we also initiated a position in an asset allocation product from Blackrock. The current cautious positioning of the Blackrock manager enhances the defensive profile of our portfolio. At the same time the exposure to this actively managed allocation fund provides us with an opportunity to gain exposure to risky assets as soon as markets return to normality.”

“The best performing equity managers were Wellington & Axa Rosenberg in the US, both returning approximately 7 per cent. The emerging markets did poorly as the decoupling thesis faced the reality of a global integrated economy. Our European managers substantially outperformed, returning 4.6 per cent (IdB Equity Income) and 3.2 per cent (Odey) compared to a market return of approximately 1.5 per cent. These are also the two best performing equity managers, year to date, underlining the importance of having a willingness to make changes as market circumstances dictate. Hedge funds disappointed.”

“Managing a portfolio always comes down to stock-picking and asset allocation. This column is dedicated to the former. But, more than ever, both are closely linked to each other. Thus, conservativeness is a common feature to every fund in the portfolio. This can be simply reached by pure money market, without any credit risk, or it can be reached by hedging the portfolio against the inflation. On the equity side, conservative strategies as well as visible growth strategies must be favoured. The most battered sectors and themes are, at some point, becoming bargains (eg energy stocks).”

“In our opinion, current market uncertainties are more driven by financial newsflows than by macroeconomics figures. Crude oil under $100 had no positive effects, especially for emerging markets. On the other hand, fears of bankruptcies impacted negatively equities, and multiple interventions of central banks don’t attenuate bearish view of the investors. In this context, we maintain our slightly cautious bias and keep a 40 per cent exposure to alternative investments, through multi-strategy funds of hedge funds. In terms of geographic exposure, we continue to favour US and Japanese stocks. We are still less confident concerning Europe.”

“During August the strength of the US dollar had a major impact on portfolio performance with Blackrock US flexible and Findlay Park US Smaller Companies racing ahead in absolute terms. Two of the laggards are familiar ones in recent times: Artemis European and Atlantis Japan.The former has a quant driven investment process and it does tend to underperform at inflection points for the markets. Nevertheless it probably deserves greater attention given the scale of its lacklustre period. The latter is more of a niche play but overall Japan looks to be one of the contrarian plays at present.”

“August saw further volatility in equity markets, but this time the currencies joined in too. This made for interesting times for Euro thinkers with the US leading the way and corresponding good returns from Findlay Park US Smaller Cos, and Thames River Global Bond which is structured to benefit from USD weakness at present and rose by 4.6 per cent during August. Our selections in Asia and the Emerging Markets could only fare well on a relative basis as the oil price fall and Russia issues hit sentiment.”