The Defensive Income Model Portfolio returned +1.5% in July. The total return of the portfolio since inception (31st December 2012) to 31st July 2018, is +40.6%, annualising at +6.3% per annum.
The objective of the Defensive Income Model Portfolio, over the medium term, is to achieve a return above inflation with an income focus, coupled with a low degree of volatility. The gross yield is at present targeted in the region of 4%. Fixed income investments are the main asset class.
The Model Portfolio will invest in circa 25 ETFs or other collective funds, which provides a high degree of flexibility to allow the manager to implement any tactical view. The manager’s approach is to provide their own tactical overlay and therefore in most cases passive instruments are used to minimise cost. However active managers are considered for each sector and used in a minority of cases where it is felt justified.
The firm’s investment philosophy advocates complementing a core of traditional assets with exposure to value stocks, smaller companies and emerging market debt. Within equities a global approach is taken with only a moderate UK bias. Given the income focus of this portfolio, value stocks will play a greater role than smaller companies and within fixed income, high yield is also added. For alternatives, commercial property is balanced with infrastructure. There is an absolute focus on risk management, to attempt to control volatility, minimise draw-downs and enable maximisation of risk adjusted returns.