BRENTHURST GLOBAL
BALANCED FUND COMING OF AGE

FIVE years ago we took the bold but audacious step to launch our own global balanced fund. The objective was to create a low-risk global balanced fund for our clients where we can have direct access to the fund managers and understand the investment process they follow.

We were fortunate enough to select Glyn Owen, one of London’s most experienced investment managers to head this fund, together with James Klempster, with a very specific mandate: do not take big risks as most of our clients are conservative investors.

WE ARE PROUD TO REPORT BACK TO YOU THAT THIS FUND HAS COME OF AGE AND IN THE PAST 12 MONTHS HAS BEATEN ITS BENCHMARK BY A SUBSTANTIAL MARGIN AND HAS DELIVERED A RETURN OF 9.37% IN US DOLLARS TERMS. ( YTD 12.45%)

It’s very difficult for any fund to beat its index due to the costs involved and there is no guarantee that this trend will continue, but we are very pleased with the performance of the fund. Even more satisfying is that this fund has beaten the returns of most other global balanced funds on offer by better known local fund managers. Long may this continue.

The Brenthurst Global Balanced Fund (The Fund) is medium risk balanced fund which investsand participates in portfolios which are well diversified in various asset classes such as cash,fixed income, equities, property and commodities. The fund is invested across multi currencies.

It is suited for an investor with a 5 year or longer time horizon.

The fund aims to provide the client with a balance between capital growth and preservation over the full investment cycle in local currency terms with a very low management fee of just 1.63%.

PORTFOLIO COMMENTARY:
The benign conditions we saw during the first quarter of the year continued through the second quarter. However most risk assets again made good upward progress. Volatility remained low, and equities and credit materially outperformed government bonds. Since the post Brexit referendum lows of mid 2016 equity markets have returned around 20%, taking a number of developed equity markets, including the US, to all-time highs.

With inflation low, debt levels high and confidence in the sustainability of the recovery still fragile, central banks maintained exceptionally loose policy. This combination of factors – accelerating growth, low inflation, few if any signs of excess or credit fuelled booms, and loose monetary policy – proved favourable for risk assets.

Developed equities, measured by the MSCI World index, returned 4.7% over the quarter, led this time by Japan and Asia, and emerging markets returned 4.9%, driven by Asia. Bond markets were also mostly in positive territory, US Treasuries returning 1.6% and corporate bonds 2-2.5%.

The fund manager’s preference for equities and credit over government bonds was therefore positive for performance over the quarter. Within equity, emerging markets outperformed developed markets and hence our current bias towards the latter was also positive, as was their positioning in the UK, Europe and Japan, all of which outperformed the US market in dollar terms.

Finally, looking at the underlying managers they have selected in the Fund, manager selection was positive overall and the majority of their equity managers outperformed their reference benchmarks during the second quarter in 2017, with Crux, our European equity manager, returning +13.7% in US dollar terms compared to +10.5% for the European equity market.

THE FUND MANAGER LOOKING FORWARD:
There are risks ahead: high global debt levels, China’s credit bubble, forces of populism and nationalism – all of which have been ongoing over the past 12 months. For the first time since the crisis however, we are now at the stage of the cycle where an unwinding of ultra-loose monetary policy is no longer speculation but reality.

The Fed is already tightening and the ECB has made its first move with a reduction in monthly asset purchases, with more certainty to follow. This process is likely to be a key determinant of short term market moves; too much tightening would cut short the expansion and damage markets, too little could let in the inflationary problem that excess liquidity in previous cycles has triggered. At the same time valuations of most assets are at historically high levels, leaving markets vulnerable to a correction in the short term.

However, the fundamentals for the global economy are good, the economic recovery generally is broadening on what appears to be a sustainable basis, and tightening of monetary policy from current very loose levels will be gradual. We therefore expect this cycle to be sustained for some considerable time ahead, supporting equities over bonds.