Model Portfolios annual review: can rocketing returns go higher in 2020?

Money Observer's 12 model investment portfolios returned to form with double-digit growth in 2019. In the annual review, the rocketing portfolios are recast for an uncertain outlook.

The climax to 2019 couldn’t have been more different from 2018. In the closing weeks of last year, the UK stock market soared, having taken comfort in the Conservative party’s landslide victory and Prime Minister Boris Johnson’s pledge to “get Brexit done”.

Further afield, the prospect of a US-China trade agreement assuaged stock markets that had been derailed at times – most notably in May and August – by the threat of increased US trade tariffs on China.

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Rates catalyst

In 2018, global stock markets closed out their worst year since the financial crisis, leaving investors bruised and braced for further volatility. After receiving a pounding in the final few months of the year, however, equity markets started 2019 in a more optimistic mood, buoyed by a concerted campaign from the US Federal Reserve to show that despite hiking interest rates in 2018, it would retrace its steps on the path to monetary tightening. That came to pass with three quarter-point interest rate cuts acting as a catalyst for stock prices and ‘risk on’ sentiment among investors.

While most of our model portfolios posted modest single-digit losses during 2018 in their first real test since their inception in January 2012, they rebounded sharply in 2019 with double-digit gains.

All 12 of them beat or matched their respective benchmark, with the top-performing models and constituent funds being those exposed to UK equities and benefiting from the ‘Boris bounce’ in December. Many hold smaller companies and other domestic stocks that were hardest hit amid the political uncertainty.

A total of 24 out of 55 portfolio members made returns of more than 20%, with eight of them returning more than 30%. Leading the pack were two investment trusts that focus on UK companies further down the market capitalisation scale: Mercantile and Henderson Smaller Companies gained 54% and 46% respectively over the year, and 25% and 26% during the final quarter alone.

Other UK-focused funds that rallied considerably during the fourth quarter were Temple Bar, Lowland and TB Wise Multi-Asset Income, which fish in unpopular waters for unloved stocks and turnaround tales. They rose between 12% and 18% during the final three months of the year.

Several changes we made at the start of last year have served our models well. Most notable among them were allocations to value-oriented strategies such as Temple Bar and Murray International, and a move to ditch our remaining passive fund exposure and focus on active managers with proven stock-picking skills.

Looking over the course of their eight-year history, almost all of our models have now doubled in value while four of them are up by around 150% or more.

Mixed outlook

We are not resting on our laurels, however. There are reasons to be positive for 2020. Almost $750 billion (£574 billion) of goods have been weighed down by increased trade tariffs; US President Donald Trump’s signing of the first phase of a long-awaited deal with China, slated for mid-January, should serve to de-escalate the trade war between the world’s two biggest economies and lift investor sentiment.

Britain’s long-awaited departure from the European Union, scheduled for 31 January, should have a similar effect on UK stocks, which have been deeply unloved since 2016. The return of asset allocators to these shores should bode well.

There are reasons to be pessimistic too. Economic growth is slowing globally, Europe has been quietly drifting toward a recession and a pivotal US presidential election looms. Emerging markets have underperformed developed ones in recent years and could remain volatile as they are buffeted by short-term global political events.

It is in light of this mixed outlook that we are making a number of changes to our models. Some changes relate to our decision to use only Money Observer Rated Funds in our model portfolios. These were launched a year after our models in January 2013 and currently include around 200 active funds in which we have the highest conviction.

- For a table showing how each of the constituents has been performing - with portfolio changes highlighted, please click here.

The growth portfolios

Profit-hunting over three timeframes

Our first six models are designed for those looking to grow their money – there are three for medium-risk and three for higher-risk investors. The portfolio that is most appropriate also depends on the investment timeframe. Our shorter-term portfolios are suitable for those looking five to nine years ahead; medium-term for 10-14 years; and longer-term for 15 years or more.

Those with shorter timeframes have a greater focus on capital preservation, as they have less opportunity to recover in the aftermath of a serious market correction. Conversely, those focused on returns 15 years down the line have the scope to take more risk for potentially greater rewards, albeit with shorter-term risk.

The differences in performance during 2019 were as we would expect in a rising market – the longer the timeframe and higher the risk profile, the better the performance. Foxtrot and Echo, our riskiest portfolios, shared top bill- ing with a 26% gain over the year. Foxtrot, our punchiest portfolio of all, was the strongest over the past three and six months, with a 10% gain during the fourth quarter.

All our growth models outstripped a 17% rise in the FTSE UK Private Investor Growth index, posting gains ranging from 18% to 26%. Four of the six models beat a 19% rise in the FTSE All-Share index and three of them outperformed the 23% rise in the FTSE World index.

Growth portfolios regain their mojo

  Total return, income reinvested (%),
to 1 January 2020 after:
           
  3 mths 6 mths 1 year 3 yrs 5 yrs 8 yrs * Yield %
Alpha: Short Term Growth, Medium Risk 0.6 3.2 18.0 36.5 69.1 109.6 1.6
Bravo: Medium Term Growth, Medium Risk 3.3 5.2 19.8 39.8 76.0 145.1 1.68
Charlie: Longer Term Growth, Medium Risk 5.6 7.4 22.9 29.2 56.9 122.7 1.48
Delta: Short Term Growth, Higher Risk 3.1 4.4 18.3 29.6 60.8 122.4 1.67
Echo: Medium Term Growth, Higher Risk 5.5 6.1 25.9 34.5 57.2 104.7 1.13
Foxtrot: Longer Term Growth, Higher Risk 9.5 10.5 25.6 37.1 71.5 146.1 1.33
Benchmarks and indices              
FTSE UK Private Investor Growth index 1.5 4.1 16.7 25.0 53.4 110.2  
FTSE UK Private Investor Balanced index 1.2 3.6 14.0 21.5 46.2 95.2  

Notes: Historic yield and expense (each holding’s ongoing charges) figures are weighted. *Inception date of our Model Portfolios is 1 January 2012. Data source: FE Analytics as at 1 January 2020

 

Medium risk

Alpha: shorter-term growth

As the most conservative of our growth portfolios, Alpha was unsurprisingly the strongest model in 2018, being one of two to produce a positive return. As expected, it was the weakest of our growth portfolios in 2019. Although its 18% rise is respectable for a medium-risk portfolio.

A year ago, we put 10% of this portfolio into Mid Wynd International, a global equity trust that focuses on quality companies, to aid diversification; this was pleasingly its top performer last year, up 31%, followed by another global fund, Fundsmith Equity (+26%). Lindsell Train UK Equity (+23%), which invests in a small number of ‘exceptional’ UK companies, and Royal London Sustainable Diversified Trust (+22%), which holds a mix of equities and bonds in mainly UK companies (but also in the US and Europe) with products or services that benefit the environment, human welfare and sustainability, also performed very well.

Quilter Investors Cirilium Conservative Portfolio has exited our Rated Funds, having underperformed its peer group over both one and three-year periods. It is the weakest of our model portfolio constituents over a year and we are replacing it in Alpha with Baillie Gifford Multi-Asset Growth, a new entrant to Rated Funds and models for 2020. It has performed well since launch in December 2015 against stated aims of achieving positive returns over three years and annual gains of 3.5% above UK base rate over five years.

Bravo: medium-term growth

Bravo’s 2019 return of almost 20% compares well against the FTSE UK Private Investor Growth index’s 17% uplift and a 14% rise in the FTSE UK Private Investor Balanced index, which could be considered a better benchmark for some of our models, such as our short- and medium-term growth portfolios.

All bar one of its constituents put in a solid performance during the year, led by Fundsmith Equity and Castlefield SDL UK Buffettology (+25%). Only Artemis Global Growth was relatively disappointing with a 16.5% return. However, it has been a Rated Fund since 2014 and we retain our faith in manager Peter Saacke’s ‘SmartGarp’ strategy of screening for companies that are attractively valued but have the potential to grow.

Bravo has quite a high underlying exposure to US equities, at 33% of the total. Fundsmith Equity, which accounts for 23% of the portfolio, provides much of that exposure – two-thirds of its assets are in US companies. F&C Investment Trust also has a high exposure to the US at 55%.

We think that exposure to funds focused on sustainable dividends will be beneficial in what could be a volatile year ahead, due to the compounding effect of reinvesting dividends for growth, so we are increasing the portfolio weighting to Fidelity Global Dividend, which is underweight the US relative to the MSCI World index, by 5% and decreasing the weighting in Fundsmith Equity by the same amount.

Charlie: longer-term growth

Charlie has gained 23% in the past year, helped mainly by holding Mercantile, our top performer of 2019.

Fidelity Emerging Markets (+25%) also helped to keep the portfolio buoyant. It was a newcomer to our models at the start of last year on the strength of its focus on larger companies and ‘best of breed’ approach, which has served it well.

Although the changes we made at the last annual review have undoubtedly improved performance, we feel there is more we can do. We are replacing Merian Global Equity, which left Echo a year ago and now departs our models with its removal from Charlie. It accounted for 18% of Charlie and is superseded by a new Rated Fund,

Fidelity Global Focus, into which we are putting 15%. The incoming fund is more opportunistic than the outgoing one, which shares a focus on large companies with F&C investment trust, another constituent of this portfolio. We are shaving our allocation to F&C by 3% to 18%, to take some profits and keep it in line with our preference for having no more than 20% of each portfolio in a single fund.

We are using the remaining 6% to increase exposure to Lindsell Train UK Equity, taking its allocation from 9 to 15% – it is among our top 20 constituent funds over one, three, five and eight years and was under-represented in this model previously.

Growth-oriented portfolios

Constituents and new portfolios weightings

Medium risk

Alpha - Short Term Growth % Bravo - Medium Term Growth % Charlie - Longer Term Growth %
Baillie Gifford Multi Asset Growth
10.9 Artemis Global Growth 12.7 Capital Gearing IT 11.6
Capital Gearing IT 13.9 Capital Gearing IT 10.0 F&C IT
18.0
Fundsmith Equity 16.5 CFP SDL UK Buffettology 17.3 Fidelity Emerging Markets 10.2
Jupiter Strategic Bond 13.2 F&C IT 17.9
Fidelity Global Focus
15.0
LF Lindsell Train UK Equity 17.7 Fidelity Global Dividend
15.0
LF Lindsell Train UK Equity
14.9
Mid Wynd International IT 11.0 Fundsmith Equity
17.9
Mercantile IT 14.8
Royal London Sustainable Diversified 16.8 Jupiter Strategic Bond 9.2 Schroder Asian Total Return IT 15.5
Yield 1.6 Yield 1.7 Yield 1.5


Notes: † As at 6 January 2020. Holding or percentage in blue indicates new or increased holding. Percentage in red indicates reduced holding. See here for more information. Data source: FE Analytics as at 1 January 2020.

Higher risk

Delta: shorter-term growth

Delta is up 18% over one year. Fundsmith Equity has bragging honours as its top performer with a 26% return, closely followed by Royal London Sustainable Diversified and Witan investment trust at 22%.

This higher-risk model has performed in line with medium-risk Alpha and we are taking some remedial action to improve its returns in line with the higher risk investors are bearing here.

First, we are replacing Rathbone Income with an alternative equity income fund that has a total return focus and can venture down the market capitalisation scale into smaller companies that tend to boast better growth prospects. Franklin UK Rising Dividends, which sits in the UK all companies sector, fits the bill nicely.

Although its yield is below the average for funds in the UK equity income sector, its overall performance stacks up well against them. It has a decent slug of its assets (16%) in companies worth less than £2 billion and 15% in those worth £2 billion to £5 billion.

Second, we are reducing the portfolio’s exposure to UK equities, currently around 32%, and introducing more global exposure. To do this we are removing Schroder Recovery, which is focused on the UK and has not performed as well as we hoped when we introduced it last year. In its place is Rathbone Global Opportunities, which seeks easy-to-understand businesses with strong growth potential and able to control their own destiny, and therefore likely to be less influenced by cyclicality.

Echo: medium-term growth

Echo shares top billing with Foxtrot over the past year, returning 26%. LF Miton UK Value Opportunities, last year’s laggard for this model, is this year’s best performer with a return of 39%. It has almost 80% of its assets in small and medium-sized companies that have been battered by Brexit turmoil but rebounded strongly as markets reacted positively to the UK’s now near-certain departure from the EU.The fund was up 9% in December alone.

We made several changes in last year’s annual review, which have in turn significantly boosted Echo’s performance. New additions Monks investment trust (+32%), JP Morgan Emerging Markets (+26%) and Castlefield SDL UK Buffettology (+25%) were great switches.We also added to our holding in Ardevora Global Equity, which returned 30%.

The changes we made have gone a long way to improve this model’s three-year returns, both on an absolute basis and in relation to the level of risk being taken. Risk-adjusted returns are now broadly in line with that of the benchmark FTSE UK Private Investor Growth index.

Although we are a little disappointed in the performance of ASI Global Smaller Companies (+18%), we are confident of a return to form for this perennial good performer.

Foxtrot: longer-term growth

Although some of the gloss has come off the long-term performance of Foxtrot following setbacks in 2018, its returns are still very strong. It shares the top spot with Echo for 2019 with a 26% gain.

Its top performer was last year’s addition Henderson Smaller Companies investment trust, which returned 46%. Next best was Pantheon International, the private equity trust that we have held in this portfolio for several years. It returned 31%, followed by global equities trust Scottish Mortgage at 25%, which saw a welcome return to form.

In this review we are making two changes. Hermes Global Emerging Markets has lost its Rated Fund status for 2020 due to its growing size and focus on Asian technology giants. In its place we are adding JP Morgan Emerging Markets investment trust, which has a strong reputation.

In addition, we are replacing Seneca Global Income & Growth investment trust with some targeted European equities exposure, given that these are not as richly valued as other developed stock markets. We have been impressed with Miton European Opportunities fund since its managers moved from Thames River Capital and J O Hambro Capital Management in 2015, so it enters our models for 2020.

Growth-oriented portfolios

Constituents and new portfolios weightings

Higher risk

Delta - Short Term Growth % Echo - Medium Term Growth % Foxtrot - Longer Term Growth %
Capital Gearing IT 9.8 Ardevora Global Equity 16.3 ASI Global Smaller Companies 16.3
Franklin UK Rising Dividends
14.3 ASI Global Smaller Companies 16.3 Baillie Gifford Shin Nippon IT 9.0
Fundsmith Equity 19.8 CFP SDL UK Buffettology 13.0 Henderson Smaller Companies IT 20.5
Rathbone Global Opportunities
11.0 JPMorgan Emerging Markets IT 12.0
JPMorgan Emerging Markets IT
12.8
Royal London Sustainable Diversified 11.6 LF Miton UK Value Opportunities 10.5
LF Miton European Opportunities
9.6
Schroder Asian Total Return IT 16.6 Monks IT 16.2 Pantheon International IT 13.9
Witan IT 16.9 Seneca Global Income & Growth IT 15.7 Scottish Mortgage IT 17.9
Yield 1.7 Yield 1.1 Yield 1.3

Notes: † As at 6 January 2020. Holding or percentage in blue indicates new or increased holding. Percentage in red indicates reduced holding. See here for more information. Data source: FE Analytics as at 1 January 2020.

The income portfolios

Choices to suit different income needs

Six models are designed for those looking for an income – again, three for medium-risk and three for higher-risk investors. Two offer immediate income and make considerable use of bonds, property and derivatives. Our growing income portfolios prioritise capital growth to support future dividend increases, so mainly rely on equity income funds and trusts, while our balanced income portfolios seek to strike a balance between current income and future capital growth.

All bar one of our income- focused portfolios comfortably beat the FTSE UK Private Investor Income index return of 12%. Only Golf, the immediate income, medium-risk portfolio, was in line with the index return.

Our benchmark indices have changed little in terms of asset allocation since last year, with the notable exception of global bonds (excluding the UK) in the UK Private Investor Income index, which has risen from 18.9% to 23.5%. India and Lima, our growing income portfolios, lead the way among our income models in 2019 with returns of 19%. They are by far the best-performing income portfolios over three and five yers as well. Lima is the best-performing portfolio overall since inception eight years ago, returning 167%, while India’s return of 144% is similar to that of the Foxtrot and Bravo growth portfolios – showing the power of reinvesting dividends over time.

Income portfolios benefit from equities bias

  Total return, income reinvested
(%), to 1 January 2020 after:
           
  3 mths 6 mths 1 year 3 yrs 5 yrs 8 yrs * Yield %
Golf: Immediate Income, Medium Risk 3.9 3.7 12.2 16.4 27.7 83.5 1.6
Hotel: Balanced Income, Medium Risk 3.4 5.4 16.5 18.7 38.2 97.1 3.92
India: Growing Income, Medium Risk 4.0 5.6 19.0 27.3 56.8 144.5 3.68
Juliet: Immediate Income, Higher Risk 6.0 5.7 15.5 17.5 37.9 105.7 5.27
Kilo: Balanced Income, Higher Risk 6.5 7.2 14.5 16.3 39.1 118.5 4.24
Lima: Growing Income, Higher Risk 4.4 3.2 19.1 32.3 59.7 167.2 3.14
Benchmarks and indices              
FTSE UK Private Investor Income index 0.7 3.0 12.0 18.2 38.7 77.2  
FTSE UK Private Investor Balanced index 1.2 3.6 14.0 21.5 46.2 95.2  
FTSE All Share index 4.2 5.5 19.2 22.0 43.8 97.5  
FTSE World index 1.4 5.2 22.8 34.9 82.4 177.7  

Notes: Historic yield and expense (each holding’s ongoing charges) figures are weighted. *Inception date of our Model Portfolios is 1 January 2012. Data source: FE Analytics as at 1 January 2020.

Medium risk

Golf: immediate income

Golf ’s 45% allocation to fixed interest securities helps to dampen volatility and provides the bedrock of portfolio income. The model currently yields 4.7%, with an 8.9% yield from Schroder Income Maximiser making up for low-yielding holdings elsewhere.

In performance terms, City of London (+21%) led the pack, followed by Picton Property Income (+17%) and Fidelity Multi-Asset Income (+12%) which we introduced last year and has since been one of the top performers in its sector.

The Picton investment trust adopted real estate investment trust status and it is no longer recognised by the Association of Investment Companies, so we need to find a replacement that can hopefully do as well as it has. BMO Commercial Property investment trust, which yields in excess of 5% and pays dividends monthly, is our choice. The yield compares well against the Picton fund, where strong demand has increased the trust’s rat- ing and compressed its yield in the process.

A near 13% weighting to UK property is a bit too high in the current environment so we are reducing this to 10% and allocating the difference to Artemis High Income, one of the portfolio’s relatively high-yielding members.

Hotel: balanced income

In last year’s review we doubled Hotel’s portfolio weighting to fixed interest, which now stands at 34%. This portfolio has less exposure to bonds than Golf, which helps to explain its superior return of nearly 17%, well ahead of the benchmark index. The trade-off is slightly higher volatility than the benchmark over the past three years.

Only Fidelity Multi-Asset Income (+16%) has been relatively disappointing, but we believe its exposure to undervalued shares around the world – including in emerging markets – will come good sooner rather than later.

We have removed Rated Fund status from Sarasin Global Higher Dividend because its performance and yield were not sufficiently compelling in relation to other global equity income funds. Its replacement is an investment trust because these vehicles are under-represented in this portfolio.

There remains a link between our new choice, Securities Trust of Scotland, and the Sarasin fund as manager Mark Whitehead helped develop Sarasin’s thematic range of funds, including Global Higher Dividend, before joining management group Martin Currie in 2015 as head of income.

Elsewhere, performance was led by UK-focused Man GLG UK Income (+22%), City of London (21%) and Kames Diversified Monthly Income, with an 18% rise, very good for a mixed-asset fund.

India: growing income

Although India has performed well, returning 17%, we note the comparative lower performance of some of its constituents.

We continue to like Henderson International Income (+15%), which has no exposure to the UK and has fulfilled its aim of producing annual dividend increases since its first full year in 2012. The trust has a high exposure to Europe, which has held it back somewhat over the past year or so.

Guinness Asian Equity Income (+16%) has performed better than many other dividend focused funds in the region. However, we are more impressed with the returns generated by a rival fund, Fidelity Asian Dividend. Jochen Breuer runs an unconstrained, concentrated portfolio of high-quality, cash-generative businesses. The approach has resulted in returns of more than 18% in 2019 and 40% over the past three years. The fund’s current yield is 3.5%.We will make a direct swap from the Guinness fund to this one.

India’s top performer in 2019 is Bankers investment trust (+30%). Hard on its heels are Troy Income & Growth and Man GLG UK Income, which both made almost 22%.

This portfolio now has exposure to UK equities which is a little lower than we would like at just over 16%, so we are trimming the holding in Artemis Global Income by 5% to 12% and allocating this equally between the Troy and ManGLG funds.

Income-oriented portfolios

Constituents and new portfolios weightings

Medium risk

Golf - Immediate Income % Hotel - Balanced Income % India - Growing Income %
Artemis High Income
18.4
Artemis Global Income 15.9 Artemis Global Income
12.2
Baillie Gifford Strategic Bond 13.8 Baillie Gifford Strategic Bond 17.2 Bankers IT 19.2
BMO Commercial
Property
9.7
City of London IT 14.7
Fidelity Asian 
Dividend
13.2
City of London IT 18.9 Kames Diversified Monthly Income 10.1 Henderson International Income IT 15.2
Fidelity Multi-Asset Income 15.0 Man GLG Strategic Bond 13.5 Man GLG UK Income
13.4
Jupiter Strategic Bond 11.1 Man GLG UK Income 13.6 Royal London Sterling Extra Yield 12.3
Schroder Income Maximiser 13.1
Securities Trust
of Scotland IT
15.0 Troy Income & Growth IT
14.5
Yield 4.9 Yield 3.9 Yield 3.7

Notes: † As at 6 January 2020. Holding or percentage in blue indicates new or increased holding. Percentage in red indicates reduced holding. See here for more information. Data source: FE Analytics as at 1 January 2020.

Higher risk

Juliet: immediate income

A high immediate income is the prime objective of Juliet (+15.5%) and it now yields 5%. Property has historically been an important contributor to the overall yield, but in line with Golf we are replacing Picton Property Income with BMO Commercial Property, which yields 5% compared to 3% for the Picton fund, but reducing its weight in the portfolio to 10% from 13% and adding that difference to a bond fund.

Like Golf, the highest-yielding constituent is Schroder Income Maximiser at 8.9%. This fund sacrifices some capital gains to achieve this ultra-high yield, and a total return of 9% over the year demonstrates this fact. That was the second-worst performance in the portfolio, just above Royal London Global Bond Opportunities, which returned 8%. This latter fund, which yields more than 5%, is under-represented so receives the extra allocation from UK property, taking its weight to 12.5%. Fellow fixed-interest fund Man GLG Strategic Bond returned 11%.

Value-focused TB Wise Multi-Asset Income had a difficult 2018 and first half of 2019. However, its focus on undervalued UK opportunities saw its return rocket to almost 20% in 2019, while investors can also benefit from a near 6% yield. Axa Framlington Monthly Income, which yields 4.5% and has the highest weighting in the portfolio at around 18%, made a solid return of 18%.

Although Artemis Global Income(+16%) is letting the side down in terms of comparative performance, we are hopeful that 2020 will see something of a turnaround in its fortunes, similar to that experienced by the Wise fund in 2019.

Kilo: balanced income

Kilo’s 14.5% rise was better than the benchmark, but its medium-term performance remains lacklustre and this is largely due to its focus on value-oriented strategies. This has sometimes proved highly beneficial, such as the switch at the last annual review into Murray International, which returned nearly 17% in 2019.

Both this trust and Artemis Global Income (+16%) are highly value-oriented and quite similar in terms of where they invest. We are keeping the Artemis fund in other portfolios but feel this one could benefit from a bit more diversity in approach. To that end we are replacing it with Fidelity Global Dividend, which is already in Bravo. Manager Dan Roberts recently said the portfolio is cheaper than the market on a dividend yield and free cash flow yield basis, which should afford a margin of safety if market valuations come under pressure.

A similar comparison in value-oriented strategies is true of Kilo’s UK equity holdings, Schroder Income (+8%) and Lowland investment trust (+14%). Lowland made a late surge in the final quarter of the year and we feel this uptick could have further to go, so are replacing the underperforming Schroder fund with Royal London UK Equity Income. Despite its decent yield of 4.3%, it is total return-oriented. We are confident that these changes will strike a better balance in the equity investment strategies used in Kilo.

Lima: growing income

Lima’s 19% rise in 2019 has been achieved with comparatively higher volatility than the benchmark, which is to be expected from this equities-heavy portfolio.

Last year’s switch into Temple Bar investment trust proved to be a very good move, as it returned 34% in 2019, making it the portfolio’s top performer. Our other UK equity income pick, Lowland, performed well towards the end of the year but we are removing the trust from Lima to make way for some targeted US equity income exposure, which is lacking here.

Fundsmith Equity (+26%) gives the portfolio some US exposure, but it pays little in the way of income. We will reduce its weight in the portfolio from 18% to 14%.

With the near 9% weight we get from selling Lowland, we can put 13% into North American Income investment trust. Managed by Aberdeen Standard Investments, it has a progressive dividend policy and has a current yield of 2.8%, paid quarterly. Its shares are standing at a small premium but have traded close to par or a small discount over the past year.

We no longer rate Schroder Oriental Income investment trust, so are replacing this with Fidelity Asian Dividend, as we did in India.

Income-oriented portfolios

Constituents and new portfolios weightings

Higher risk

Juliet - Immediate Income % Kilo - Balanced Income % Lima - Growing Income %
Artemis Global Income 14.4 Baillie Gifford Strategic Bond 11.5 Baillie Gifford Strategic Bond 12.6
Axa Framlington Monthly Income 18.5
Fidelity Global 
Dividend
15.4
Fidelity Asian
Dividend
16.3
BMO Commercial 
Property
10.2
Lowland IT 16.8 Fundsmith Equity
14.1
Man GLG Strategic Bond 15.8 Man GLG Strategic Bond 11.6 JP Morgan European IT - Income 15.6
Royal London Global Bond Opps
12.6
Murray International IT 12.6
North American 
Income IT
13.1
Schroder Income Maximiser
10.4
Royal London UK 
Equity Income
15.3 Temple Bar IT 12.7
TB Wise Multi-Asset Income 18.1 TB Wise Multi-Asset Income 16.8 Utilico Emerging Markets IT 15.6
Yield 5.3 Yield 4.2 Yield 3.1

Notes: † As at 6 January 2020. Holding or percentage in blue indicates new or increased holding. Percentage in red indicates reduced holding. See here for more information. Data source: FE Analytics as at 1 January 2020.

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Comments

Conclusion from your analysis

From the data provided for your portfolios your message to the reader should be - put your money into a cheap FTSE word tracker. It compounds better returns and is much cheaper than most funds and trusts in your portfolios.

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