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Smith & Williamson Managed Portfolio Service

OE (Open-Ended) Range - Investment Review

Q2 2020

For professional advisers’ use only –

not for use by or distribution to retail clients

Please read the important information section

2

Smith & Williamson Investment Management

MPS Q2 2020– Investment Review

Investment outlook

After very heavy falls in March 2020, global stock markets rallied strongly over

the three months to the end of June 2020. Moves to ease COVID-19 lockdowns

across the world, in combination with unprecedented fiscal and monetary support

from governments and central banks, have given markets a degree of confidence

that the global economy could rebound quite quickly – this is labelled by some

analysts as a ‘V-shaped’ recovery. It is important to remember that equities are a

forward-looking asset class and historically they have tended to bottom and

recover ahead of any upturn in the ‘real’ economy.

The recovery in risk assets has been broad based over the last three months:

Asset class returns, 3 months to 30 June 2020 Global equities – MSCI ACWI* (GBP) 18.7%

UK equities** (GBP) 8.8%

Gold (dollar spot price, USD) 10.6%

iBoxx Sterling Corporate Bond Index (GBP) 8.2%

ICE US High Yield Index (USD) 8.0%

Although the rally in stock markets has been encouraging, many equity markets

remain below their previous highs – for example, in the UK, the stock market is

still down by 19.6% for 2020 to date. However, it has been encouraging to see

other indices (such as the S&P 500 in the US) return to pre-COVID-19 levels.

Fixed income markets have been resilient over the quarter and the

calendar year to date, albeit underperforming the strong gains

registered by equities over the second quarter. In part, this resilience

reflects the fact that high-quality government bonds tend to benefit

from ‘safe haven’ flows whenever riskier assets such as equities are

volatile. This is one of the many reasons why we advocate portfolio

diversification. However, open-ended bond purchases by the US central

bank and expectations that interest rates will remain low for the next

few years have also helped to buoy the asset class over 2020 to date.

Corporate credit markets, which are riskier than high-quality

government bond markets, have also been boosted by the various policy

measures – including moves by the US central bank to buy high yield or

‘junk bonds’. It is hoped that very low interest rates, combined with

extensive and ongoing central bank buying of bonds, will keep corporate

borrowing costs low for companies, thus fostering an economic recovery

over the longer term. In commodity markets, oil has enjoyed a rally from

its mid-April lows. However, concerns remain that the combination of

COVID-19 (and the associated reduction in global travel) and the need to

address climate change could mean that demand for oil and related

products may not return to previous levels.

Source: Refinitiv Datastream/Smith & Williamson Investment Management LLP, data as at

30 June 2020 *All Country World Index **MSCI UK Investable Market Index

3



Investment outlook

Even allowing for the second-quarter rally in equities, we are aware

that valuation reports do not all make pleasant reading, especially if

one looks at the start of 2020 level. However, please be assured that

we are working extremely hard to support all our clients. We continue

to use the decades of experience and considerable insight of our

investment team to help negotiate difficult markets.

Whatever the longer-term ramifications of the COVID-19 pandemic, we

believe firmly that active management and close coordination with our

clients will help to ensure we are well positioned to meet your needs

in the months and years to come.

Source: Refinitiv Datastream/Smith & Williamson Investment Management LLP, data as at 30 June 2020 *All

Country World Index **MSCI UK Investable Market Index

Stock markets are optimistic that a new business cycle has started

after a short, sharp recession. There is some evidence of this

happening with consumers spending in the shops again following the

easing of restrictions. For instance, UK underlying real retail sales

(excluding petrol and diesel) rebounded by a record +10% in the month

of May, after a -15% collapse in April, which means that shops have

recouped c.45% of revenue lost during COVID-19.

We see three reasons to believe that this business cycle could be

extended beyond an initial bounce in growth. First, the pandemic was

an exogenous event, rather than a domestic shock triggered by

economic imbalances, even if revenues in selected sectors such as

travel could take years to recover to pre-COVID-19 levels. Second,

deleveraging pressures are likely to be moderate given that the share

ofglobal household liabilities in the economy has been lowered since

the 2008 Global Financial Crisis. Moreover, the US Federal Reserve’s

corporate credit facility launched in March reduces the need for firms

to trim debt levels. Third, significant monetary and fiscal policy,

coordinated between central banks and governments, provides an

effective means to boost the recovery. We estimate that the

combined monetary and fiscal stimulus of the major economies

announced so far is worth around 26% of GDP.

Given the disproportionate impact of COVID-19 on lower-income

households, combined with high unemployment rates, continued

accommodative policy support is likely to be necessary. With so much

economic uncertainty, including a host of political and geopolitical

risks, the recovery is unlikely to be smooth sailing. However, on

balance, we believe ongoing central bank and government support

should mitigate macro risks in the second half of 2020 to provide uplift

for equities.

4



Investment process

Source: Smith & Williamson Investment Management LLP

Factset as at 30.06.20

David Amphlett-Lewis

Head of Passive Research,

Partner

James Burns

Head of Investment

Companies Research,

Partner

The MPS team

Open Ended Funds

Distribution Technology

Risk Graded

Strategic Asset

Allocation

Smith & Williamson

research

Tactical Asset

Allocation

Security

Selection

Passives

The Process

Your Smith & Williamson Portfolio

The Result

Supported by a network of over 55

investment professionals responsible for

investment research.

Genevra Banszky

von Ambroz, CAIA

Chair of Collective

Investments Group,

Partner

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Defensive IncomeOE

Balanced IncomeOE

Balanced GrowthOE

Growth OE

Cash Bonds - Sovereign

Bonds - Index Linked Bonds - Corporate

Equities - Developing International Equities - Developed International

Equities - UK Alternatives

Property

5



The strategy aims to deliver defensive total returns with an

emphasis on also offering higher than average income. The

portfolio may invest between 35% and 60% in global stock market

investments subject to market conditions with the remainder in

defensive asset classes.

Defensive Income (OE) Portfolio Profile

Estimated yield** 2.63%

Portfolio expense estimate** 0.70%

Product mixAsset breakdown

Note: Investors should note that this discretionary strategy is actively managed with a view to ensuring volatility remains consistent

with the risk level. The asset allocation is likely to change in order to offer exposure to favoured asset classes and regions in line

with Smith & Williamson’s strategic views, and with the risk levels associated with the portfolio’s objective. As a result the current

mix of defensive and growth investments within the portfolio will change and therefore differ significantly over time. *Source: Smith

& Williamson Investment Management as at 30.06.20. Benchmark updated as at Jan 2019. Benchmark: Smith & Williamson Multi-

Asset Composite Benchmark. **Estimated yield and Portfolio expense estimate (%) as at 30.06.20 Source: Smith & Williamson

Investment Management, Financial Express and Morningstar. Pie chart data as at 30.06.20.

Past performance is not a guide to future performance

% r

etu

rn

4.2%

40.9%

47.7%

7.2%

Cash Bonds Equities Alternatives

4.2%6.0%

89.8%

Cash Passive OEIC / Unit Trust

Asset Class Portfolio (%) Benchmark (%) Active (%)

Cash 4.2 10.0 -5.8

Sovereign 3.6 5.0 -1.4

Index Linked 10.3 8.0 2.3

UK Corporate 22.8 20.0 2.8

Global High Yield 1.5 0.0 1.5

International Bonds 2.7 8.0 -5.3

Property 1.3 5.0 -3.7

Other Alternatives 5.9 0.0 5.9

UK 18.5 18.0 0.5

North America 13.4 12.0 1.4

Europe 5.1 5.0 0.1

Japan 5.3 5.0 0.3

Asia Pacific 5.5 4.0 1.5

S&W 4 - Defensive Income portfolio profile*

6



The strategy aims to deliver balanced returns through a

combination of investment income and capital growth. The

portfolio is diversified across major asset classes and may invest

between 55% and 70% in global stock market investments subject

to market conditions.

Balanced Income (OE) Portfolio Profile







mix of defensive and growth investments within the portfolio will change and therefore differ significantly over time. *Source:

Smith & Williamson Investment Management as at 30.06.20. Benchmark updated as at Jan 2019. Benchmark: Smith & Williamson

Multi-Asset Composite Benchmark. **Estimated yield and Portfolio expense estimate (%) as at 30.06.20 Source: Smith & Williamson



% r

etu

rn

2.0%

26.7%

65.4%

5.9%


2.0% 7.6%

90.3%


Asset Class Portfolio (%)

Benchmark

(%) Active (%)

Cash 2.0 5.0 -3.0

Sovereign 0.0 3.0 -3.0


UK Corporate 17.1 18.0 -0.9

Global High Yield 1.2 0.0 1.2


Property 1.4 5.0 -3.6


UK 21.6 22.0 -0.4


Europe 5.3 5.0 0.3

Japan 8.0 6.0 2.0

Asia Pacific 4.8 5.0 -0.2

Emerging Markets 6.0 5.0 1.0

S&W 5 – Balanced Income portfolio profile*

7



The strategy aims to deliver balanced growth through investing

actively across defensive and riskier asset classes. The portfolio is

biased towards global stock market investments and may invest

between 65% and 85% in equities with the remainder diversified

across defensive asset classes.

Balanced Growth (OE) Portfolio Profile












% r

etu

rn

1.2%

15.2%

78.2%

5.4%


1.2%10.0%

88.8%


Asset Class Portfolio (%)

Benchmark

(%) Active (%)

Cash 1.2 4.0 -2.8

Sovereign -- -- --



Global High Yield 0.9 3.0 -2.1


Property 1.4 5.0 -3.6


UK 24.3 25.0 -0.7


Europe 6.3 6.0 0.3

Japan 8.5 7.0 1.5


Emerging Markets 8.6 9.0 -0.4

S&W 6 – Balanced Growth portfolio profile*

8



The strategy aims to deliver long-term growth by investing

predominantly in stock markets across a wide range of

geographic regions. The portfolio will always retain an emphasis

on developed markets, and in particular investments in UK

company shares. The portfolio will normally be more than 90%

invested in stock markets but may be up to 15% in defensive

asset classes.

Growth (OE) Portfolio Profile










Investment Management , Financial Express and Morningstar. Pie chart data as at 30.06.20.


% r

etu

rn

Asset Class Portfolio (%) Benchmark (%) Active (%)

Cash 0.6 0.0 0.6

Sovereign -- -- --

Index Linked -- -- --


Global High Yield 0.9 4.0 -3.1


Property 1.4 5.0 -3.6


UK 31.8 35.0 -3.2


Europe 6.7 6.0 0.7

Japan 9.2 8.0 1.2


Emerging Markets 12.1 12.0 0.1

S&W 7 –Growth portfolio profile*

0.6% 3.0%

91.4%

5.1%


0.6% 7.1%

92.3%


9



Performance - cumulative

Source: Factset as at 30.06.20.

All figures total return only. * Launch date 31.07.15.

Benchmark: Smith & Williamson Multi-Asset Composite Benchmark.

Performance calculated net of underlying holding charges and platform fees and gross of Smith & Williamson fee.

Including the Smith & Williamson fee will reduce returns. Past performance is not a guide to future performance.

Defensive

Income OE4 10.42 9.13 -2.07 -0.63 1.04 1.80 9.76 13.11 24.79 33.98

Balanced

Income OE5 12.62 11.28 -3.23 -2.42 0.68 0.59 10.61 12.74 29.73 38.02

Balanced

Growth OE6 14.89 12.67 -4.29 -4.20 0.39 -0.93 12.24 11.32 36.90 39.73

Growth OE 7 16.08 13.47 -5.58 -6.78 -0.53 -3.54 11.63 9.25 40.16 40.29

3 Year

Multi-Asset

Composite

Benchmark

(%)

3 months

Multi-Asset

Composite

Benchmark

(%)

1 Year

Multi-Asset

Composite

Benchmark

(%)

Since

launch

Multi-Asset

Composite

Benchmark

(%)

Since

launch (%)*

Portfolio

profile

Distribution

Technology

Risk score

3 months

(%)

6 months

(%)

6 months

Multi-Asset

Composite

Benchmark

(%)

1 Year (%) 3 Year (%)

10



Performance - annual

Source: Factset as at 30.06.20.

All figures total return only. * Launch date 31.07.15.

Benchmark: Smith & Williamson Multi-Asset Composite Benchmark.



30/06/2020 30/06/2019 30/06/2018 30/06/2017

Benchmark

(%)

Benchmark

(%)

Benchmark

(%)

Benchmark

(%)

Defensive

Income

OE

4 1.04 1.80 3.94 5.86 4.52 4.95 11.19 11.04

Balanced

Income

OE

5 0.68 0.59 3.64 5.67 6.01 6.07 15.49 14.45

Balanced

Growth

OE

6 0.39 -0.93 3.59 5.40 7.93 6.61 19.86 17.37

Growth

OE7 -0.53 -3.54 3.20 5.28 8.75 7.58 23.12 20.21

1 Year to

30/06/201730/06/2018Portfolio

profile

Distribution

Technology

Risk score

30/06/2020 30/06/2019

11



S&W Range activity highlights – Past 12 Months

Note: The above is representative of transactions widely executed across the S&W range and should not be construed as

comprehensive of all transactions in all models. Individual holdings changes in specific S&W strategies may therefore not be

detailed. Those shown will be those which have been applied across more than one of the S&W strategies and seek to capture

the direction of travel of asset allocation of the S&W range over the period shown. Source: Smith & Williamson Investment

Management as at 30.06.20

Name Reasons for trade Rationale Driver

Apr’ 20 Reduced AXA Sterling Index-Linked Held up well in sell-off, UK Linkers looking expensive

Allocation MacroApr’ 20 Reduced M&G Emerging Markets Bond Reducing risk and proceeds going into UK corporate bonds

Apr’ 20 Increased BlackRock Corporate Bond Recycling proceeds from index-linked bonds, attractive income levels

Apr’ 20 Sold ASI UK Real Estate Shares Outlook for UK commercial property uncertain, NAV growth unlikelyAllocation Macro

Apr’ 20 Bought Schroder Global Cities Globally diversifed exposure to real estate

Apr’ 20 Sold Man GLG Japan Core Alpha Exiting large cap value Japan equities- outlook better for growth styleSwitch style Performance

Apr’ 20 Bought Jupiter Japan Income Proceeds from GLG Japan Core Alpha- offering a mixture of value and growth

Jan ‘20 Sold Aberdeen UK Property FeederConcerns over liquidity of open ended property funds Allocation Macro

Jan ‘20 Sold BMO Property Growth and Income

Dec ’19 Bought NB Uncorrelated Strategies Preferred vehicle in the open ended hedge fund space Switch Style Manager

Dec ’19 Sold Invesco Global Targeted Returns Disappointing returns. Lack of conviction in position

Dec ’19 Bought Liontrust Special Situations Increasing market sensitivity to the UK equity allocationSwitch Style Macro

Dec ’19 Sold Janus Henderson UK Absolute Return Exiting low beta holding within UK equity allocation

Sep ’19 Sold Kames Investment Grade Bond Further management change reiterates concernsAllocation Manager

Sep ’19 Increased BlackRock Corporate Bond Reallocating capital from Kames into preferred alternative manager

Sep ‘19 Reduced Man GLG Japan Core AlphaReducing to recycle capital into higher yielding, more flexible alternative

Switch Style ManagerSep ‘19 Reduced JP Morgan Japan

Sep ‘19 Bought Jupiter Japan Income Introducing high yielding Japanese exposure

Sep ‘19 Reduced Miton Multi Cap Income Reducing position to manage liquidity concerns in small capSwitch Style Manager

Sep ‘19 Increased Man GLG Undervalued Assets Maintaing domestic UK exposure in larger cap names

12



Stock stories

Past performance is not a guide to future performance.

Royal London Corporate Bond

Jonathan Platt, Head of Fixed Income at Royal London Asset Management, has been responsible for managing this UK

corporate bond fund since inception in 1999. It is a differentiated proposition to its peers given that approximately 40%

of its holdings are credits which are typically less well covered by analysts owing to their not having credit ratings or

not being included in the benchmark. Often, these are secured against physical assets. These characteristics tend to

offer more attractive return characteristics than the more widely-held names.

Schroder Global Cities

This thematic fund is run by Tom Walker and Hugo Machin, who are both very experienced and have built up a solid

long-term track record. They invest in property companies operating in global cities where rapid economic growth

supports long term property price appreciation. They spend a significant amount of time identifying these cities and

stock selection is focused on a narrow universe of companies that operate in these locations. The focus is on long term

capital growth and as such the fund does not have a dividend yield of any significance. They are agnostic to sector

weights in the benchmark and are happy to hold off-benchmark positions.

Ninety One UK Alpha

This open-ended fund run by Simon Brazier is a core UK equity proposition. The portfolio will have at least 50%

exposure to the FTSE 100 at all times through a diversified list of 50-90 holdings. Stock selection drives the process

with an emphasis on identifying company management able to re-invest retained earnings profitably, alongside a view

that short-term volatility in the market can lead to long-term valuation opportunities. There is no particular style bias,

with the portfolio containing a mixture of both value and growth stocks.

Artemis US Extended Alpha

An open-ended fund run by Will Warren, with a strong track record in both strong and weak markets. He has the ability

to go both long and short of stocks with the fund being run on a 130/30 basis and giving typical gross exposure of 160%.

We believe the ability to profit from falling prices could add additional value at a time when the US market looks more

expensive than most of its developed peers. The portfolio is well diversified with between 60 and 95 long positions and

50 and 95 shorts.

Jupiter Japan Income

This open-ended fund aims to provide long-term capital and dividend growth from companies that perform well

regardless of the macroeconomic environment. Growth and valuation considerations are evenly balanced and we find

this flexibility attractive. The philosophy of manager Dan Carter is focused on corporate governance improvements:

the fund aims to benefit from the return of capital to shareholders from cash generative (and cash heavy) companies,

as management teams become more shareholder friendly and accountable. There is a strong bias towards lower-beta

domestically focused stocks with competitive advantages and significant barriers to entry. The portfolio is typically

fairly concentrated with between 40 and 50 positions and tends to have a high active share.

Source: Smith and Williamson 30th June 2020

13



The value of investments can go down as well as up and investors may not receive back the original amount invested.


There can be no assurance that any portfolio will achieve its investment objective, the target return or any volatility target. Any target return or volatility

target shown is neither guaranteed nor binding on the Manager.

When investments are made in overseas securities, movements in exchange rates may have an effect on the value of that investment. The effect may be

favourable or unfavourable.

Investing in alternative assets involves higher risks than traditional investments and may also be highly leveraged and engage in speculative investment

techniques, which can magnify the potential for investment loss or gain.

Investments in emerging markets may involve a higher element of risk due to political and economic instability and underdeveloped markets and systems.

Please note that bond funds may not behave like direct investments in the underlying bonds themselves. By investing in bond funds the certainty of a fixed

income for a fixed period with a fixed return of capital are lost.

These profiles are tailored to the output of a Distribution Technology (DT) risk profiling process which is complex and not for use without assistance from a

financial adviser. Performance outcomes will depend on the rebalancing and timing of entry and exit to the strategy on the platform.

This document contains information believed to be reliable but no guarantee, warranty or representation, express or implied, is given as to their accuracy or

completeness. This is neither an offer nor a solicitation to buy or sell any investment referred to in this document. Smith & Williamson Investment Management

documents may contain future statements which are based on our current opinions, expectations and projections. Smith & Williamson Investment Management

does not undertake any obligation to update or revise any future statements. Actual results could differ materially from those anticipated. Appropriate advice

should be taken before entering into transactions. No responsibility can be accepted for any loss arising from action taken or refrained from based on this

publication. In relation to these Smith & Williamson’s portfolio profiles, Smith & Williamson Investment Management is unable to assess or provide advice on the

suitability of this profile for individual circumstances. No consideration has been given to the suitability of any investment profile for the particular needs of any

recipient. SWIM will not be responsible to any other person for providing the protections afforded to retail investors or for advising on any investment, as a

result of using this information.

Smith & Williamson Investment Management LLP. Authorised and regulated by the Financial Conduct Authority (registration number is 580531).

Ref: 103520lw

Important Information

Appendix

15



Awards


Charity Times Awards 2018 – Winner, Investment Management

Citywealth Magic Circle Awards 2017 - Winner - Best Private Wealth Manager

Citywire Wealth Manager, Investment Performance Awards 2017 - Winner - Best Overall Large Firm

Investors Chronicle, Investment & Wealth Management Awards 2016 - Winner - Best Wealth Manager for Tax Efficiency and Advice

Private Asset Managers (PAM) Awards 2018 – Winner Investment Performance, Defensive Portfolios

Portfolio Adviser Wealth Management awards 2015 (Large Firm): Platinum Winners – Best Balanced Portfolio Manager and Best Aggressive Portfolio Manager

Spear’s Wealth Management Awards 2018 – Family Office Services Provider of the Year

STEP award 2014/15: Winner of the Private Client Multi-Family Office Team of the Year

STEP awards 2013/14: Winner of Investment Team of the Year

Wealth Adviser Awards 2018 – Best High Net Worth Team

Wealth Adviser Awards 2018 – Best Wealth Manager - Charities

Wealth Adviser Awards 2015 - Winner - Best Multi-Family Office Asset Manager


16



MPS Range characteristics

4 –

Defensive Income

5 –

Balanced Income

6 –

Balanced Growth

7 –

Growth

S&W MAC allocation

equity weight(%)44 61 74 88

DT long-term volatility

estimate (%) 17.4 9.6 11.6 13.7

Multi-Asset Composite

volatility (since launch)

(%) 2, 3

6.4 8.0 9.5 11.0

S&W volatility (since

launch) (%) 2, 36.7 8.3 10.0 11.3

Multi-Asset Composite

volatility (1 Year) (%) 39.7 12.1 13.8 15.7

S&W portfolio volatility

(1 year) (%) 311.5 13.7 16.1 17.7

Underlying portfolio

yield estimate (%) 42.63 2.52 2.07 1.90

Portfolio expense

estimate (%) 40.70 0.78 0.82 0.89

Portfolio security count 3 28 28 31 30

1 Distribution Technology; Q2 2016 Capital Markets Assumption Update 2 Launch date as at 31.07.2015 3 Smith & Williamson Investment Management (unaudited) and Factset as at 30.06.20. 4 Smith & Williamson Investment Management (unaudited) and Morningstar as at 30.06.20.



17



Lucy MitchellAssociate Director

t: 020 7131 4811

e: [email protected]

Lucy joined Smith & Williamson in April 2015 as Associate

Director primarily to develop further the Managed

Portfolio Service via platforms as well as the Bespoke

DFM offering for the intermediary market. Lucy

graduated from the University of Birmingham with a BSc

in Economics and Political Science. She has also

completed the IMC and Investment Advice Diploma (IAD).

Contact us

Mickey MorrisseyPartner, Head of Retails Sales

t: 020 7131 4693


Mickey joined Smith & Williamson in December 2012 as

Head of UK IFA Sales and was appointed Head of

Distribution in July 2014. He is responsible for growing

intermediated sales into the DFM, Managed Portfolio

Service and MultiManager business lines. Previously

Mickey was Head of Distribution at Liontrust Asset

Management for ten years and prior to that worked at

Merrill Lynch Investment Managers for 12 years.

Julian PolnikDFM Business Development

t: 020 7131 4628


Julian joined Smith and Williamson Investment

Management in November 2011 as Head of Broker

Desk. Julian has a BA Honours degree in Politics and

Social Psychology from Loughborough University and a

Diploma in Management Studies from the University of

Westminster. He is a Chartered Fellow of the

Chartered Institute for Securities and Investment.

Matthew FinchAssociate Director

t: 020 7131 8975


Matthew joined Smith & Williamson as an Associate

director in September 2017 to develop further the

Managed portfolio service offered via platforms as

well as our Discretionary fund management (DFM)

offering. Matthew works closely with financial

intermediaries based in both London and the south

east. Previously Matthew was Associate director at

Barings for nine years and prior to that worked at

Credit Suisse Asset Management for seven years.

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