As Americans celebrate 4th July, a timely reminder of the benefits of a diversified portfolio

We look into the importance of diversification and investing on a global basis

240 years ago today the Continental Congress declared American independence from Great Britain. As Americans in the US and around the world celebrate with friends and family, the recent tumultuous events this side of the pond provide the perfect opportunity for investors to consider one of the central tenets of successful investing. Diversification. US Dollar holdings have been key to our clients’ portfolios seeing positive absolute returns during these very challenging markets.

Waverton celebrates its 30th anniversary this year and since 1986 we have sought to find the best investment ideas for our clients from around the world. Picking the best equity and bond ideas on a global basis has always been at the core of our investment process. This has allowed us to construct tailor made portfolios for our clients from a diversified collection of quality companies. Over time this approach has allowed the portfolios that we manage on behalf of our clients to overcome inevitable periods of instability and uncertainty. Carefully balancing equities, bonds, cash and other investments in various currencies has allowed us to achieve our clients’ desired investment goals with an appropriate level of risk.

The recent volatility in equity, bond and currency markets associated with Brexit has confirmed the wisdom of this approach to managing money. Our long history of expertise in investing not just in the UK but also in the US, Europe and Asia has proved invaluable.

During the month of June, Sterling is down -8.2% against the US Dollar and -8.4% against the Euro. In Sterling terms the FTSE All World Equity Index is up 8.3%. The FTSE UK Gilts Index is up 10.1% and the Citigroup World Government Bond Index is up 12.9%. Our global approach has outweighed this Sterling weakness.

The divergent performance of these different asset classes shows the importance of diversifying risk. Waverton believes strongly in active management, meaning that we will not choose every stock in an Index and we will change our allocations over time. The markets will continue to rise and fall as the historic events of 23rd June continue to unfold. Clients can take comfort in these uncertain times that Waverton’s active management of a diversified portfolio of Global best ideas has proved over the medium and long term to overcome political and economic cycles.

Andrew Vaughan-Payne

All market data sourced from Factset as at 30.06.16

Risk Warnings

The views and opinions expressed are the views of Waverton Investment Management Limited and are subject to change based on market and other conditions.  The information provided does not constitute investment advice and it should not be relied on as such.  All material(s) have been obtained from sources believed to be reliable, but its accuracy is not guaranteed.  There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.

Changes in rates of exchange may have an adverse effect on the value, price or income of an investment.

Past performance is no guarantee of future results and the value of such investments and their strategies may fall as well as rise.  Capital security is not guaranteed