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WEALTHSELECT MANAGED PORTFOLIO SERVICEPerformance Summary – November 2020

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PORTFOLIO MANAGERCOMMENTARYNovember 2020

STUART CLARKWealthSelect Portfolio Manager

The portfolios suffered small losses in October as

developed equity markets declined

Manager selection in the portfolios helped mitigate

market losses

Our Asian and emerging market equity, and

alternatives exposure provided positive returns

Market review

Global equity markets enjoyed a robust start to October, but by mid-month sentiment had soured as investors became concerned about rising coronavirus cases. The sell-off accelerated during the final week of October as a number of European countries announced a return to lockdown restrictions, albeit less strict than those in March. The US dollar, Japanese yen and other ‘safe haven’ currencies were in high demand as risk aversion became the order of the day.

European ex UK equities were the worst performer over the month, with the IA Europe ex UK sector average falling by 6.2%. The recovery in the services sector has lost steam since the summer, with October’s services PMI reading falling to 46.9 (a reading below 50 indicates a contraction in activity).

Meanwhile, eurozone gross domestic product (GDP) in the third quarter rose by 12.7% quarter-on-quarter, better than consensus estimates. Despite the rebound, which was expected as economies reopened after lockdowns, overall economic output in the region remains well below pre-pandemic levels.

In the UK, the IA UK All Companies performed better, but ended the month down by 3.2%. The International Monetary Fund (IMF) called for an “additional fiscal policy push” in the UK as it cut its forecasts for UK growth. The UK economy grew by a less-than-expected 2.1% in August, leaving GDP 9.2% below its level in February.

On the other side of the Atlantic, the IA North America sector average also lost ground for a second straight month in October, falling by 1.8%.

Polls continued to show a strong lead for Biden over Trump in the race for US President, while the odds of a ‘blue wave’ where the Democrats win the Presidency, the

House and the Senate seemingly increased as well, implying more chance of significant fiscal stimulus. These hopes of fiscal stimulus drove much of the optimism at the start of the month, but equity investors’ conviction waned as the election neared.

Meanwhile, advance estimates showed that US GDP rebounded in the third quarter by 33.1% quarter-on-quarter annualised (or 7.4% if reported on an unannualised basis as per the eurozone). However, economic growth has still only recovered about two-thirds of the activity lost since the coronavirus erupted in March.

Notably though, the recovery appears to be more durable in the US than other developed nations, with consumer spending still growing at elevated levels and consumer confidence indicators rebounding.

China boasted the top performing major equity market in October, with the IA China sector average posting total returns of 3.9%, while broader emerging markets also held onto their early month gains, even as risk sentiment softened, with the IA Global Emerging Markets sector average delivering a return of 1.7%.

The Chinese economy grew by 4.9% year-on-year in the third quarter, driven mainly by the industrial sector, but there are positive signs that household consumption is recovering too. The IMF projects China’s GDP will grow at 1.9% in 2020, and 8.2% in 2021.

Government bond markets were weaker over the month as the bond market starting to price in fiscal stimulus under a Biden presidency and a possible ‘blue wave’ scenario, which would mean more debt issuance from the Treasury, stronger growth outcomes, and consequently, higher government bond yields.

Interestingly, the US Treasury market did not respond to the risk-off mood in the equity market later in the month, which would generally be expected to push bond prices higher.

UK gilt prices were lower too in spite of the Bank of England’s engagement with financial institutions to ask how they would cope if interest rates – currently at a record low of 0.1% – were cut to negative territory.

Elsewhere, the European Central Bank (ECB) president, Christine Lagarde, noted the ECB planned to “recalibrate our instruments at our next governing council meeting”, which suggests further monetary stimulus will be announced in December.(All figures in sterling terms unless otherwise stated. Sector performance is represented by the appropriate IA sector average.)

Performance review

October was a volatile month for the majority of markets as a resurgence of coronavirus infections weighed on investors. Earlier in the month equities largely made modest gains driven by the US and the seemingly increased likelihood of Democratic candidate Joe Biden gaining the presidency.

However, as much of Europe went back into national lockdowns and with Brexit again appearing in the headlines, equity markets retreated towards the end of the month. This delivered a negative month for the WealthSelect managed portfolios with losses from around 0.7% at the lower-risk levels to 2.0% in the higher-risk portfolios.

During October, the developed market equity component of the portfolios was ahead of the global index, despite a poor month for the Quilter Investors Precious Metals Equity (BlackRock) fund, which lost 7.6%. Much of the outperformance was attributable to manager selection within Asia and the US.

continued

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Indeed, Asia was a bright spot with both the Quilter Investors Asia Pacific (Jupiter) and Quilter Investors Asia Pacific (ex Japan) Large Cap Equity (Invesco) funds also outperforming their regional benchmarks. The Quilter Investors Asia Pacific (ex Japan) Equity (Fidelity) fund was also a positive performer, although it lagged its benchmark slightly due to an overweight position in industrial stocks.

Elsewhere, the majority of our US managers outperformed, particularly the Quilter Investors US Equity Growth Fund, run by JP Morgan, thanks to strong technology stock picks.

In general, small and mid-cap names did better than their larger peers in October which led to both the Quilter Investors US Equity Small Mid Cap Fund (Schroders) posting a positive return and the Quilter Investors Europe (ex UK) Small Mid Cap Fund (Jupiter) outperforming its benchmark index.

Notable laggards during the month included the European funds. Although Europe underperformed as a region, the Quilter Investors Europe (ex UK) Equity fund, managed by Janus Henderson, and the Quilter Investors Europe (ex UK) Equity Income fund, run by Schroders, had an especially tough time. The former suffered due to its industrial stock picks, while the latter struggled with some of its healthcare holdings and its overweight exposure to Germany, which lagged its neighbours in October.

The emerging market equity component of the portfolio was very strong; it was significantly ahead of the regional market index in October and the only equity bucket to be positive in aggregate during the month. All four holdings in this space were positive with the Quilter Investors Emerging Markets Equity Growth (JPMorgan) fund and the Quilter Investors Emerging Markets Equity (Jupiter) fund both being standout performers. For the former, it was financial sector holdings that made the difference while the latter prospered due to generally strong stock picking across the board.

Meanwhile, the Quilter Investors Emerging Markets Equity Income Fund, run by Wells Fargo, underperformed the index; it was held back by some poor Chinese stock picks and communication services names.

The UK equity component of the portfolio also outperformed its benchmark, although the UK underperformed most other regions in sterling terms. The Quilter Investors UK Equity Income Fund, managed by Jupiter, was overweight utility stocks while the Quilter Investors UK Equity Opportunities fund (Artemis), was overweight to consumer discretionary stocks helping both funds to beat the UK index. The Quilter Investors UK Equity fund, managed by Jupiter, was the poorest performer in the UK portfolio; it struggled due to its financial sector exposure.

The alternatives portfolio made pleasing progress with all holdings making a positive return. The Quilter Investors Global Equity Absolute Return fund, run by Jupiter, led the way with a return in excess of 1%. Meanwhile, the Quilter Investors Absolute Return Bond Fund (Janus Henderson) and the PIMCO Dynamic Bond Fund both added a little less than 0.5%.

The fixed income basket of the portfolio lagged the index a touch with bond markets either flat or declining by around half a percent. That said, the Quilter Investors Diversified Bond fund managed by Jupiter, the Quilter Investors Sterling Corporate Bond Fund (Fidelity) and the Quilter Investors Investment Grade Corporate Bond Fund (Invesco) all made positive headway.

Only the Quilter Investors UK Gilt fund, managed by BlackRock, and the Quilter Investors Corporate Bond Fund, managed by Jupiter, lost money in October. Towards the end of the month, the manager on the Quilter Investors Diversified Bond Fund and the Quilter Investors Corporate Bond Fund was changed from Jupiter to Premier Miton, reuniting the holding with its previous management team following the move from Merian to their new employer.

(All figures in sterling terms and rounded to one decimal point unless otherwise stated.)

Outlook

By the time of publication, the press had called for Joe Biden as President-elect, but the Democrats did less well than election polling had suggested, which means they now look unlikely to take control of the Senate from the Republicans, leading to a split government. This will only be confirmed in January, when the run-off vote for Georgia’s two seats is scheduled to occur.

As a result, we expect more gridlock and less action from US politicians moving forward. In particular a smaller stimulus is likely (as Senate Republicans are inclined to block anything too large), while corporate taxes are less likely to be meaningfully raised. The market’s initial reaction has been positive, with both equities and bonds rallying.

A smaller stimulus might also mean lower economic growth. Meanwhile, from a sector perspective healthcare and financial stocks may be able to avoid the increased regulation that Biden had made a feature of his campaign while the unwinding of Trump’s tax reform may also be somewhat slower.

With the US election now behind us, the coronavirus pandemic is likely to return to the top of the agenda for investors over the next two months as we await information on the impact of renewed lockdowns in Europe on infections, fatalities and economic activity.

It is encouraging that, so far, the UK seems to have materially slowed the growth in new infections, possibly due to the initial tiering restrictions. Let’s hope that this will allow ‘normality’ to resume sooner rather than later.

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ACTIVE MANAGED PORTFOLIOS

FIVE YEAR PERFORMANCE (ACTIVE MANAGED PORTFOLIOS 3-6)

FIVE YEAR PERFORMANCE (ACTIVE MANAGED PORTFOLIOS 7-10)

Source: Quilter Investors. Total return over period 31/10/2015 to 31/10/2020.


––––– Active Managed 3




––––– IA Mixed 0-30% Shares








––––– IA Flexible

––––– IA Global

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ANNUALISED RISK AND RETURN (ACTIVE MANAGED PORTFOLIOS)

Cumulative performance Discrete calendar performance

YTD 1 year 3 year 5 year Since launch

2019 2018 2017 2016 2015

Active Managed Portfolio 3 1.7 3.0 8.9 22.4 32.8 9.9 -3.2 5.9 6.2 2.6

IA Mixed 0-35% Shares -0.8 0.4 4.9 19.4 25.6 8.8 -3.4 5.0 9.1 0.9

Active Managed Portfolio 4 0.8 2.5 8.7 25.5 38.0 11.4 -3.8 7.1 7.8 3.2

Active Managed Portfolio 5 -0.2 1.9 8.4 28.1 42.4 13.0 -4.6 8.2 9.2 3.9

IA Mixed 20-60% Shares -4.1 -1.7 2.9 21.0 28.0 12.1 -5.1 7.2 10.6 1.5



IA Mixed 40-85% Shares -4.0 -0.7 5.7 31.0 39.9 15.9 -6.1 10.0 13.3 2.8



IA Flexible -2.9 0.7 5.9 33.8 42.6 15.6 -6.6 11.1 14.2 2.1


IA Global 2.7 6.8 20.0 69.0 84.3 22.0 -5.7 13.9 23.9 2.9

PERFORMANCE SUMMARY (ACTIVE MANAGED PORTFOLIOS)

Source: Quilter Investors. Total return, percentage growth over time periods shown. Cumulative returns are time periods shown to 31/10/2020. The WealthSelect Managed Portfolio Service launched on 24/02/2014.

Active 3Active 4

Active 5Active 6

Active 7Active 8

Active 9

Active 10

IA Mixed 0-35% Shares IA Mixed 20-60% SharesIA Mixed 40-85% Shares

IA Flexible

IA Global

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2.0 4.0 6.0 8.0 10.0 12.0 14.0

Retu

rn (%

)

Volatility

Source: Quilter Investors. Total return and weekly volatility (annualised) over period 31/10/2015 to 31/10/2020.

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FIVE YEAR PERFORMANCE (BLEND MANAGED PORTFOLIOS 3-6)

FIVE YEAR PERFORMANCE (BLEND MANAGED PORTFOLIOS 7-10)

BLEND MANAGED PORTFOLIOS

––––– Blend Managed 3












––––– IA Flexible

––––– IA Global

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Continued

Cumulative performance Discrete calendar performance

YTD 1 year 3 year 5 year Since launch

2019 2018 2017 2016 2015

Blend Managed Portfolio 3 2.1 3.5 9.3 23.6 33.7 10.2 -3.4 6.1 6.8 2.3

IA Mixed 0-35% Shares -0.8 0.4 4.9 19.4 25.6 8.8 -3.4 5.0 9.1 0.9



IA Mixed 20-60% Shares -4.1 -1.7 2.9 21.0 28.0 12.1 -5.1 7.2 10.6 1.5

Blend Managed Portfolio 6 -0.5 2.2 9.3 34.8 48.7 14.8 -5.1 10.0 12.5 3.1


IA Mixed 40-85% Shares -4.0 -0.7 5.7 31.0 39.9 15.9 -6.1 10.0 13.3 2.8



IA Flexible -2.9 0.7 5.9 33.8 42.6 15.6 -6.6 11.1 14.2 2.1


IA Global 2.7 6.8 20.0 69.0 84.3 22.0 -5.7 13.9 23.9 2.9

PERFORMANCE SUMMARY (BLEND MANAGED PORTFOLIOS)

Source: Quilter Investors. Total return, percentage growth over time periods shown. Cumulative returns are time periods shown to 31/10/2020. The WealthSelect Managed Portfolio Service launched on 24/02/2014.

Source: Quilter Investors. Total return and weekly volatility (annualised) over period 31/10/2015 to 31/10/2020.

ANNUALISED RISK AND RETURN (BLEND MANAGED PORTFOLIOS)

Blend 3Blend 4

Blend 5Blend 6

Blend 7Blend 8

Blend 9

Blend 10

IA Mixed 0-35% Shares IA Mixed 20-60% Shares

IA Mixed 40-85% Shares

IA Flexible

IA Global

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2.0 4.0 6.0 8.0 10.0 12.0 14.0

Retu

rn(%

)

Volatility

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Further information on the WealthSelect Managed Portfolio Service can be found at www.oldmutualwealth.co.uk/wealthselect

Important informationPlease remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested.

www.oldmutualwealth.co.ukPlease be aware that calls and electronic communications may be recorded for monitoring, regulatory and training purposes and records are available for at least five years.

Old Mutual Wealth is the trading name of Old Mutual Wealth Limited which provides an Individual Savings Account (ISA) and Collective Investment Account (CIA) and Old Mutual Wealth Life & Pensions Limited which provides a Collective Retirement Account (CRA) and Collective Investment Bond (CIB).

The WealthSelect Managed Portfolio Service is provided by Old Mutual Wealth Limited and Old Mutual Wealth Life & Pensions Limited.

Old Mutual Wealth Limited and Old Mutual Wealth Life & Pensions Limited are registered in England and Wales under numbers 1680071 and 4163431 respectively. Registered Office at Old Mutual House, Portland Terrace, Southampton, SO14 7EJ, United Kingdom.

Old Mutual Wealth Limited is authorised and regulated by the Financial Conduct Authority. Old Mutual Wealth Life & Pensions Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Their Financial Services register numbers are 165359 and 207977 respectively. VAT number 386 1301 59.

Quilter Investors is a trading name of Quilter Investors Limited. Authorised and regulated by the Financial Conduct Authority with FCA register number 208543. Registered in England & Wales under number 4227837. Registered office: Senator House, 85 Queen Victoria Street, London, England, EC4V 4AB.

11661/220-1716/November 2020

http://www.oldmutualwealth.co.uk/Adviser/investment-and-funds/multi-asset-solutions/wealthselect/

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