As Boris and Donald dominate the headlines, markets continued through July in an upbeat mood

Executive Summary

• In July the performance of equities was broadly positive, continuing the strong rebound for the year, with large US firms leading, and emerging markets lagging. Government bond markets overall fared well in an environment of falling rates in many major markets. Corporate bonds outperformed, as did those with a higher yield profile. Emerging markets fixed income overall delivered the best returns.

• Considering the Stability-Focused Strategic Portfolios, an overweight to credit in the global investment grade asset classes was beneficial, as was an overweight to higher yielding fixed income and emerging market debt. The strategic allocation to US high yield fixed income and emerging markets fixed income also contributed over the month. Consistent with its objective, the Global Managed Volatility Equities building block was able to provide meaningful risk reduction; as a consequence naturally lagging in a positive equity market environment.

• For the Growth-Focused Strategic Portfolios, stock selection was handsomely rewarded; so much so that they outperformed in an environment where most of the long-term alpha sources suffered continued pressure, as investors rewarded expensive, large cap, high sales ‘growth’ stocks.  As a reminder, the SEI Strategic Portfolios employ positioning within the portfolios through alpha sources lenses; the best method in which to implement that positioning is through well-sourced investment managers and July was proof that skilful stock selection by the managers can generate attractive returns.

• Both on a strategic (long-term) and tactical (short-term entry point) basis, SEI firmly stands by the belief that the valuation-focused investment approach works - that investors will ultimately see markets revert to the mean and therefore benefit from this positioning. Patience and discipline are required for this; SEI intends to exercise both of these virtues. The programme has seen periods like this before and exercising discipline served clients well in those times, and SEI continues to believe it will do so now as well.

Despite the market reversal and the challenges around valuation-focused managers, the SEI Strategic Portfolios maintained their highly competitive position against peer groups, with the Stability-Focused portfolios delivering on their mandate of drawdown protection through the challenging last quarter of 2018 and in periods of market reversal in 2019, while the Growth-Focused portfolios provided above-average returns against peers, with the Aggressive Fund outperforming the average of its peers by 2.44% in the first seven months of 2019, as well as remaining ahead between 2.5% and 3.0% per annum over the 3- and 5-year periods to end of July 2019. (Wealth A Distributing Share Class, in GBP, net of all fees).