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Balancing act


Published: 17/04/2019

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As we start a new tax-year, investors are facing a dilemma.  Financial markets were weak in 2018, especially so in the fourth quarter.  However, the final three months of the 2018/19 UK tax year saw strong double-digit returns for many equity markets.  So, the prospects for 2019 look uncertain.  

Economic growth is slowing in many economies, but the US has paused its quantitative tightening programme and we may even see an interest rate cut this year. Elsewhere the Bank of England, European Central Bank and Bank of Japan are all taking a more dovish tone. This has reduced the risk of recession for now. Further, there now seems to be the prospect of better trade negotiations between the US and China. However, we cannot of course ignore the B word in the UK as political infighting and negotiations rumble on over Brexit. 

Jason Borbora-Sheen, co-manager of the Vitality Investec Multi-Asset Income Fund discusses, amidst the ever-changing political and economic environment, how he and the team are navigating the uncertainty and maintaining a sense of balance within the portfolio.   

 As asset managers seeking to achieve long-term defensive returns in the Fund, we try to remain unemotional towards the headlines and focus on the risks and the possibilities which are presented along the way. This enables us to insulate the portfolio from volatility where needed, whilst also benefitting from some great buying opportunities as they arise. 

A delicate balancing act 

For us, it is about balancing the characteristics of the stocks and bonds which we own, to manage the risks associated with any one of the myriad outcomes. For example, around 10% of equity exposure is in the UK. However, within that we have a balance between the large cap international exporters and the more domestically-focussed stocks. This helps to neutralise the Fund’s exposure to Brexit volatility.  

For example, we have exposure to GlaxoSmithKline and Unilever – UK domiciled companies which earn the majority of their revenue from outside the UK, therefore benefitting from sterling weakness. At the same time, we counterbalance that risk with stocks such as Lloyds Bank, which we like given its valuation, good dividend stream, improved business model and the fact that it is quite well-capitalised. The overall effect of owning both sorts of shares provides insulation from the turbulence. In the short term one tends to go up when the other goes down but both can participate in economic growth, longer-term. 

Whilst economic and political uncertainty and market volatility continue on their rollercoaster journey, we can’t afford to simply roll a dice and take a chance on what we believe to be the most likely conclusion. Rather, we are aiming to maintain a delicate balancing act ensuring our clients’ assets remain on a smooth trajectory, seeking to withstand the turbulence along the way.  
Diversification is key, in order to smooth the journey for investors, whatever the next 12 months brings.   


The portfolio may invest more than 35% of its assets in government securities issued or guaranteed by a permitted single state. The value of investments, and any income generated from them, can fall as well as rise. 

This communication is for institutional investors and financial advisors only. It is not to be distributed to the public or within a country where such distribution would be contrary to applicable law or regulations. Nothing herein should be construed as an offer to enter into any contract, investment advice, a recommendation of any kind, a solicitation of clients, or an offer to invest in any particular fund, product, investment vehicle or derivative. The information may discuss general market activity or industry trends and is not intended to be relied upon as a forecast, research or investment advice. The economic and market views presented herein reflect Investec Asset Management’s judgment as at the date shown and are subject to change without notice. There is no guarantee that views and opinions expressed will be correct, and Investec’s intentions to buy or sell particular securities in the future may change. The investment views, analysis and market opinions expressed may not reflect those of Investec as a whole, and different views may be expressed based on different investment objectives. English language copies of the Fund’s Prospectus and Key Investor Information Documents are available from Investec Asset Management on request. Issued April 2019. 

VitalityInvest is a trading name of Vitality Corporate Services Limited. Vitality Corporate Services Limited is authorised and regulated by the Financial Conduct Authority.