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Quarterly Investment 

Report

Second Quarter 2016

As At 30th June 2016

Having thought that the first quarter was eventful, nothing quite prepared us for what we saw in the second. The vote to leave the European Union on 23 June was largely unexpected, and the ramifications for both financial markets and the real economy remain unclear.

The ensuing uncertainty has driven a sharp drop in the pound, and put commercial property and sectors exposed to the domestic economy under pressure. At the same time, the prospect of imported inflation has emerged. In the years to come, the UK will have to redefine its relationship with its European neighbours and the rest of the world.

In times of political instability and economic unease, we firmly believe that it is vital to retain consistent investment principles and a robust process.

However, this historic vote has reinforced our belief that trying to base investment decisions on the outcome of largely binary and opaque events (be they geopolitical or economic) is at best risky, and at worst reckless.

Instead, in times of political instability and economic unease, we firmly believe that it is vital to retain consistent investment principles and a robust process. Despite the events of the past few weeks, we at Adam & Company have not, and will not, change our approach towards managing your money – though, of course, we remain alert to any opportunities the turbulence brings.

We continue to believe in:

  • High quality companies

Our team of portfolio managers use their collective experience to seek out companies that can allocate capital effectively and generate strong cash flows. We also look for management teams with a proven track record in navigating a cautious path in various market conditions.

  • Diversification

We construct your portfolios to provide broad exposure across asset classes, geographies and sectors. This approach has shielded us from the sharp sell-off in banking and property stocks in recent weeks and ensures that we have access to international markets while the UK adjusts to the post-Brexit reality.

  • Long-term horizon

At times like these the importance of adopting a long-term approach towards investing increases. We actively look to distance ourselves from the media hysteria and short-term market sentiment, and retain our belief that long-term shareholders in high quality companies will ultimately outperform those who try to time the markets.
 

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In addition, with government bond yields at unprecedented lows, we struggle to see value in government bond markets. Instead, we view the fixed-income component of portfolios as a means of providing diversification, capital protection and a secure income stream in excess of that provided by cash.

Uncertainty and volatility are not new phenomena

Of course, we cannot predict with any degree of conviction what will happen in the months and years ahead, but a look to the past demonstrates that uncertainty and volatility are not new phenomena. We designed our investment process precisely for times like these. We are therefore confident that we are well positioned to ride out the current upheaval and emerge well placed to capitalise on the opportunities that will undoubtedly emerge in the post-Brexit world.

As ever, speak to your Portfolio Manager with any questions about your investments, and do refer to adambank.com for more insight.

Please remember that the value of investments and the income from them may go down as well as up and that you may not get back the amount originally invested. Past performance should not be seen as an indication of future performance.
Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it, to go up or down.

Important information

Issued by Adam & Company Investment Management Limited, which is authorised and regulated by the Financial Services Authority. Adam & Company Investment Management Limited is registered in Scotland Number 102144. Registered Office: 25 St Andrew Square, Edinburgh EH2 1AF.

The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment. Past performance should not be taken as a guide to future performance. Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it, to go up or down.

The information in this webpage is not intended as an offer or solicitation to buy or sell securities or any other investment or banking product, nor does it constitute a personal recommendation. The information is believed to be correct but cannot be guaranteed. Any opinion or forecast constitutes our judgement as at the date of issue and is subject to change without notice. Any Adam company, or a connected company, its clients and officers may have a position or engage in transactions in any of the securities mentioned.

The analysis contained in this webpage has been procured, and may have been acted upon, by Adam & Company Investment Management Limited and connected companies for their own purposes, and the results are being made available to you on this understanding. To the extent permitted by law and without being inconsistent with any applicable regulation, neither Adam & Company Investment Management Limited nor any connected company accepts responsibility for any direct or indirect or consequential loss suffered by you or any other person as a result of your acting, or deciding not to act, in reliance upon such analysis.

Not all products and services offered by the individual Adam companies are available in all jurisdictions, and some products and services may be available only through particular Adam companies.

None of the overseas Adam companies or offices is an Authorised Person subject to the rules and regulations made under the Financial Services and Markets Act 2000 for the protection of investors and depositors, and compensation under the Financial Services Compensation Scheme will not be available in respect of business transacted with them.

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