What’s the last 3 months done for Drawdown fund sectors?

Posted By: Phil Handley DipPFS AwPETR On October 3, 2015 Category: Drawdown Fund Performance

So we are fresh into the new investment drawdown world and the worst possible scenario is playing out on global stock markets. An immediate decline and the need to take an income will mean those who haven’t structured their portfolios correctly are going to run out of funds earlier than planned.

In this blog we are going to have a look at what the last 3 months has done to the various fund sectors in an attempt to highlight to those who aren’t already invested, the benefits of diversifying a portfolio.

Lets start with the sectors which is arguably responsible for the global sell off. The Asian Pacific which includes China has seen its bubble pop.  The Chinese stock market which went on an unbelievable run in the first half of 2015 has fallen of a cliff. Fear that China is slowing down has ramifications throughout the rest of the world which supplies it. The mining sector suddenly doesn’t need to produce as many materials and has been one of the biggest casualties. In late August, the Shanghai main share index lost 8.4% and 7% on the 24th and 25th respectively.

UK Gilt 4.3%

When we look at asset classes other than equities, it highlights the need to hold a well-diversified portfolio. The UK Gilts funds averaged the highest growth of any sector during the last 3 months. Investors have been looking for more stable returns from fixed interest investments amid the stock market turmoil.  This may be a short term safe haven though, both the US and UK continue to toy with increasing their respective interest rates.

Property 0.7%

Another positive return from the last 3 months has been the property sector. Over recent years this probably hasn’t been the largest part of anyone’s portfolio but again it highlights the advantages of a multi-asset class strategy. In current market conditions it’s sometimes more about limiting downsides rather than trying to seek out massive returns.

Europe excluding the UK (3.9%)

Despite Greece finally coming to an agreement with the rest of Europe to repay its debt, the stability in the markets didn’t last long. Fears from China crippled any earlier positive sentiment and late in the quarter the issues with VW seem to have further reaching consequences. Declining energy prices continue to weigh on upside growth.

America (5.1%)

Arguably 2nd to the Chinese crisis is the impending interest rate decision by the Federal Reserve to increase rates in the US. American markets have had a fairly long upwards run since the financial uncertainty largely caused by their institution in 2007/8. The DOW JONES far exceeded the pace of growth in the FTSE, to the point where commentators we calling their stocks expensive. By this they meant their share prices were probably above the actual current and future value of the companies. The has lead to a big sell off over the last 3 months with the DOW declining around 9%.

UK All Companies (4.9%)

The FTSE 100 reached an all-time high in April of 7122 but then got cold feet along with the rest of global markets. The selloff has been pretty rapid with the FTSE now hovering around 6000.

The UK market is broken down into a number of sub-sectors. Although the UK All Companies sector averaged a decline of -4.9% the UK Smaller Companies only declined by -0.2%. The Smaller companies sector has doubled the growth of the All Share Sector over the last 5 years which suggests some resilience to resent volatile conditions.

For a snapshot of the recent historic performance of all sectors, view this page from Trustnet

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