Wealth Mangement Special Report 2017

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INDEPENDENT PUBLICATION BY 12 02 2016 #0431 raconteur.net trade-weighted basis during the year to its lowest level since 1990. The wealth of sterling-based investors may have increased on a local currency ba - sis. But the international buying power of their wealth fell significantly. Furthermore, the ARC PCI returns for 2016 are signifi- cantly higher than the longer-term average. The ARC Sterling Cautious PCI has gen- erated an annualised return of 4.4 per cent since its inception in 2004, the ARC Sterling Balanced PCI 5.5 per cent, the ARC Sterling Steady Growth PCI 6.4 per cent and the ARC Sterling Equity Risk PCI 7.2 per cent. On this basis, moving forward into 2017, it seems rather unlikely that ster - ling-based private investors will receive the returns experienced during 2016. Nonetheless, returns could still be posi- tive in both nominal and real terms. "Private investors should expect an on- going abundance of gloomy prognoses, but a good chance of another respectable inf lation-beating outcome for balanced portfolios," says Kevin Gardiner, Roth - schild Wealth Management's global in- vestment strategist. For Mr Gardiner the most obvious risks are political, not least in the United States. "A new and idiosyncratic president of the United States is calling into ques - tion many long-standing assumptions about how the world works, and his pro- tectionist instincts are indeed unsettling. However, it is not yet clear how they will be put into practice, nor what US trading partners' responses will be. And any US ta x cuts could be positively expansionary. We advise keeping an open mind," he says. Equities still look good value, although bonds are expensive. "Global stock mar - kets have risen further, but do not yet count yielded 5 per cent; today equities may struggle to achieve that," he says. "Still opportunities are ever-present. When they arise investors should maximise them. In - creasing dispersion in market returns sim- ply means investors should be more careful and discerning than in the recent past." According to Mohammad Syed, a Coutts managing director, and head of financial advice and investment solutions, sterling's recent depreciation, short-dated credit, financial debt, European equities, global healthcare and US technology should all provide useful sources of portfolio returns. UBS Wealth Management, one of the world's biggest wealth managers, also highlights the challenges posed by gener - ating returns of more than 5 per cent a year in the current investment environment. Investing in riskier assets, such as emerging market equities, adding lever - age or seeking alternative risk premiums through exposure to "alternative" invest- ments and hedge funds, provides one solution, although it may not be neces- sarily be appropriate for all sterling-based private client investors. Investment managers and strategists tend to be optimists by nature. As far as private client portfolio returns are concerned, this optimism is reflected in most of their fore - casts for 2017. As usual, time will tell. Specialist global investment managers for UK, US* and international clients. Designing an investment strategy to suit each client's needs is central to our approach. Good relationships are based on mutual trust and our commitment to matching expectations of performance and service. For more information, please contact Sophie Jewson at sophie.jewson@sarasin.co.uk or on +44 (0)20 7038 7289. www.sarasinandpartners.com *US Clients serviced by Sarasin Asset Management Ltd, a subsidiary of Sarasin & Partners LLP Please note that the value of shares and the income from them can fall as well as rise and you may not get back the amount originally invested. This can be a result of market movements and also of variations in the exchange rates between currencies. Sarasin & Partners LLP is a limited liability partnership registered in England and Wales with registered number OC329859 and is authorised and regulated by the Financial Conduct Authority. © 2017 Sarasin & Partners LLP – all rights reserved. Experts in global investment WEALTH MANAGEMENT Investors need nerves of steel – and an open mind The outlook for UK private investors remains positive, although returns may not reach the unexpected heights of 2016 amid the uncertainties of Brexit and Trump OVERVIEW TURBULENT TRADING ON THE WORLD FINANCIAL MARKETS Charting the best and worst performing returns of 2016 with expert analysis 03 Despite the uncertainties of Brexit and new legislation, the housing market is still a good bet Wealth management of the future will be a balance of technology and the human touch With growing inequality, avoidance and evasion of tax is a hot issue still to be fully addressed 'SAFE AS HOUSES' BUT WITH SOME STRINGS ATTACHED CHATBOTS DO THE TALKING BUT MEET YOUR ADVISER IS THE UK AVOIDING THE REAL ISSUE ON TAXATION? 04 05 06 E xamination of the investment re- turns received by UK private clients during 2016 would appear to under- mine the contention that we are liv- ing in a low-return environment. According to the private client indices (PCIs) produced by Guernsey-based Asset Risk Consultants (ARC), sterling-based in - vestors enjoyed a good year during 2016. All four PCIs, which are based on the performance of more than 100,000 port- folios managed by 69 UK and Channel Is- lands-based private client investment man- agement firms, generated strong returns during the year. The ARC Sterling Cautious PCI, which has a risk relative to world equities of between 0 and 40 per cent, produced a return of 5.1 per cent, while the ARC Sterling Balanced Asset PCI, with a risk relative to world equities of between 40 per cent and 60 per cent, generated 8.6 per cent. The ARC Sterling Steady Grow th PCI, with a relative risk of between 60 per cent and 80 per cent, post - ed 12.0 per cent; the ARC Sterling Equity Risk PCI, with a relative risk of 80 per cent to 110 per cent, recorded 14.8 per cent. These returns appear all the more im - pressive given the turmoil that financial markets experienced during the first six weeks of 2016 when global equities fell by around 11 per cent. By the end of March, however, global equity markets had recovered most, if not all, of these losses. They then surged ahead, ignoring in the process the poten - tial setbacks posed by the shock result of the Brexit referendum in June and Donald Trump's victory in the US presidential election in November. Indeed, anyone who held the ster - ling-based MSCI World Index during 2016, rather than the more diversified multi-as- set class portfolios that private client in- vestment managers tend to provide, would have enjoyed a return of 25.62 per cent. Unfortunately, however, these figures do not tell the whole story as far as invest - ment returns are concerned both in 2016 and over the longer-term. A significant proportion of the returns enjoyed by sterling-based investors re - f lected favourable foreign exchange movements, not least a depreciation of the pound by more than 15 per cent on a IAN ORTON MARKET MOVEMENTS PERCENTAGE CHANGE IN SELECTED ASSETS IN 2016* Thomson Reuters Although this publication is funded through advertising and sponsorship, all editorial is without bias and sponsored features are clearly labelled. For an upcoming schedule, partnership inquiries or feedback, please call +44 (0)20 8616 7400 or e-mail info@raconteur.net. Raconteur is a leading pub- lisher of special-interest content and research. Its publications and articles cover a wide range of topics, including business, finance, sustainability, healthcare, lifestyle and technology. Raconteur special reports are published exclusively in The Times and The Sunday Times as well as online at raconteur.net. The information contained in this publication has been obtained from sources the Proprietors believe to be correct. However, no legal liability can be accepted for any errors. No part of this publication may be reproduced without the prior consent of the Publisher. © Raconteur Media 0% 10% 20% 30% 40% 50% 60% -20% -10% January 2016 February March April May June FTSE 100 S&P 500 Pound sterling SSE Shanghai Composite Xetra Dax ICE Brent crude Comex gold TRISTAN BLYTHE Group editor at PAM Insight, he oversees thewealthnet, a real-time online information site, and eprivateclient website and news service. PÁDRAIG FLOYD Former editor in chief of the UK pensions and investment group at the Financial Times, and ex-editor of Pensions Management, he is now a freelance business writer. IAN FRASER Author of Shredded: Inside RBS, The Bank That Broke Britain, he was business editor at The Sunday Times in Scotland. CLARE GASCOIGNE Formerly on the staff of the Financial Times, she is now a freelance journalist specialising in City and financial features. IAN ORTON Editor at large of thewealthnet and founder of research consultancy Slump Associates, he specialises in the banking financial services sector. SAM SHAW Formerly an editor at FT Business, she is now a freelance writer on a range of topics, including business, finance, marketing and technology. PUBLISHING MANAGER Misha Jessel-Kenyon DIGITAL CONTENT MANAGER Jessica McGreal DESIGN Samuele Motta Grant Chapman Kellie Jerrard PRODUCTION EDITOR Benjamin Chiou MANAGING EDITOR Peter Archer DISTRIBUTED IN PUBLISHED IN ASSOCIATION WITH RACONTEUR CONTRIBUTORS look especially expensive – profits are reviving," he continues. "We advise using setbacks as an opportunity to add to or to build long-term positions. Bonds, howev - er, do look pricey. With little inf lation, yet, they may remain so for a while and talk of a 'bubble' seems overly alarmist. But we doubt that many bonds will preserve in - vestors' real wealth from here." Both Coutts and Kleinwort Hambros are also sanguine about prospects going for- ward. Mouhammed Choukeir, Kleinwort Hambros chief investment officer, points out that markets have a habit of surmount- ing uncertainty and dire predictions. Over the past five years, global equities have ap- preciated by 55.6 per cent. While returns may be more difficult to achieve, they will not disappear, says Mr Choukeir. "Not too long ago, cash in a savings ac - Investment managers and strategists tend to be optimists by nature Private investors should expect an ongoing abundance of gloomy prognoses, but a good chance of another respectable inflation- beating outcome for balanced portfolios HEAD OF PRODUCTION Natalia Rosek

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