CAERUS Select
Quarter four 2014
Investment Review
2 | CAERUS Select
Contents
Chief Executive’s Statement4.
Managing Director’s Review5.
Important Notes6.
Contact Details7.
Market Commentary8.
Featured Article: Oil Price Fall – The Only Certainty is Increased Uncertainty
9.
CAERUS Active and Passive Portfolios
10.
CAERUS Blends14.
CAERUS Tactical Income18.
CAERUS Strategic Ethical Active Portfolios: Profile A-D
22.
Portfolio Changes30.
Index and Peer Group Returns
31.
CAERUS Select | 3
Chief Executive’s Statement
Integrated Wealth Management
Keith Carby
Chief Executive
CAERUS Capital Group Limited
In this edition of CAERUS Select, we consider the impact of, and possible outcomes from,
the extraordinary and unpredicted fall in the price of crude oil over the last quarter of 2014,
and look at the possible timing of a rise in UK interest rates.
At the end of the third quarter of 2014, I promised we would look at the market corrections
that had occurred. Indeed the markets moved, with the FTSE 100 falling by around 10% at
the start of the final quarter, climbing back by nearly 9% at the end of November only to
plunge back down again and, finally, return to close to its third quarter peak. So, more of a
roller coaster than a steady correction for Investors who are in funds tracking the London
Stock Exchange indices.
each Portfolio is checked and adjusted, where necessary, and the Client’s objectives are
reviewed, to make sure the Portfolio remains aligned to the Client.
The markets and indices, and the individual shares within the markets, will rise and fall,
often dramatically, giving the direct Investor a significant challenge in staying on course.
The Select Portfolios provide a less stressful and far better balanced approach to
Investment.
Of course, this a very short-term view, whereas CAERUS Clients are for the most part
invested for the medium to long term, with specific objectives for their money.
As an Integrated Wealth Manager, we have the resources of specialists and experts to build
and manage the Select Portfolio solutions to deliver, as closely as possible, the Client’s
chosen objectives.
‘Strategic Asset Allocation’ is the foundation of the Select Portfolios, with the proportions
of assets in each Portfolio being determined by the needs of the Client and by taking into
account very specific factors, so as to match Client to Portfolio. The asset allocation for
4 | CAERUS Select
Keith Carby
Chief Executive
CAERUS Capital Group Limited
Managing Director’s Review
Andy Ferns
Managing Director
CAERUS Capital Group Limited
The outlook for 2015 may be tough for Investment markets, but great for Advisers and
their Clients.
From April 2015, a new era in financial planning begins, springing from the tax changes and
structuring options, under the banner of Pensions Freedom.
Still not out of the woods
Pensions Freedom
After seven years, the Financial Crisis that destroyed the banking system and shook the world
economy to its core has still not faded from the headlines. The impacts of the credit crunch are
still working themselves out, most obviously in Europe. The Euro is falling in value and, once
again, Greece is on the cusp of renouncing the common currency. We see falling prices across the
continent and a weak outlook for growth reflected in oil at $50 a barrel. In the UK, the prospect of a
hung Parliament will hold back equity valuations until some clarity emerges from the electorate.
The first thing to say about the reform of pensions is that with freedom comes responsibility. And
risk. And that’s why it pays to access the highest quality of Advice.
But markets are seldom calm, and investing is a long-term proposition. So, where’s the good
news for Advisers, and their Clients?
America’s recovery is on track. Cheap oil and lower commodity prices will boost consumer
spending in the wealthier nations. Money is cheap and, with the European Central Bank finally
opting for Quantitative Easing, likely to get cheaper.
Despite all the anxiety of the moment, most serious forecasters expect global growth to accelerate
in 2015. And there’s even better news.
But with the prospect of new rights for savers to access their capital, as and when they see fit, and
to pass Defined Contribution pension funds down to their children and grandchildren, free of tax,
the landscape looking forward, has changed out of all recognition. A savings wrapper designed to
provide a secure income in retirement may, at a stroke, become a primary tool in estate planning
with ISAs to follow.
As Custodians of our Clients’ wealth, CAERUS Advisers offer the perfect blend of choice across
the entire spectrum of risk and Investment style.
Whatever the markets throw at us, CAERUS has the right solution for every Investor, whether
cautious or adventurous, seeking an income or planning a secure future for another generation.
The prospects for 2015 look bright indeed.
CAERUS Select | 5
Important Notes
Views and Opinions
Ongoing Charge Figure (OCF)
The views and opinions expressed in this document are those of CAERUS Portfolio Management
Limited and Parmenion Investment Management. They should not be taken as a personal
recommendation to buy or sell, or as Advice on how any Investment mentioned is likely to
perform. Every care has been taken to ensure the accuracy of the information published in this
document. It cannot, however, be guaranteed.
OCF means Ongoing Charge Figure, defined as the expected total cost of managing and
operating the fund for the coming year. OCF includes the Annual Management Charge paid to the
fund manager plus the additional operational charges of the fund (custody, distribution, audit,
registration and regulatory fees).
Performance Data
OCF does not include an estimate of performance fees unlike the old measure, Total Expense
Ratio, or TER, which was based on the experience over the prior year.
Unless otherwise stated, all performance figures are from FE, formerly Financial Express
Analytics, and are calculated on a total return, bid to bid basis (no initial charges) to 31st
December 2014 (net income reinvested). Performance figures include the underlying funds’
Annual Management Charges and exclude rebates and external charges from Parmenion
or the introducing Adviser.
The OCF figures quoted in this report are net of any rebates paid to Parmenion from the Annual
Management Charge. Any such rebates received are credited to the Client’s Portfolio. OCF figures
in this report do not include Parmenion’s own charges or those of the introducing Adviser; neither
do they include any dealing costs associated with buying or selling the funds.
Where performance data is not available for a period of five years or more, this is quoted from
inception date. Where no performance figures are shown, no data is available which we have
labelled as N/A for the purposes of this document.
The tables in this document provide past performance data and should not be taken as a guide to
future returns. The data represents the period over which Parmenion Investment Management
has operated the funds in their stated configuration. CAERUS Portfolios have been operating
using the same formulation since 3rd March 2014.
The value of Investments and the income that can be earned from them may go down as well
as up and a Client may not get back the full amount invested. Rates and bases of taxation are
subject to change. The risks of Investment associated with different asset classes, for example,
overseas equity, property, corporate debt, commodities and alternative assets vary in their nature.
Yield
The Quarterly Investment Review quotes the historic yield, which reflects distribution declared
over the past twelve months as a percentage of the unit price. It is based on a snapshot of the
Portfolio on that day.
6 | CAERUS Select
Seeking appropriate Financial Advice
Parmenion is not authorised to provide Investment Advice to individuals. It is important
that Clients take a medium to long term view when investing and are realistic about
performance outcomes.
If a Client wishes to obtain Financial Advice as to whether an Investment is suitable for their
needs, they should consult an authorised Financial Adviser.
Clients should ensure they have understood the contents of their Adviser’s suitability report
before proceeding with any proposed Investment.
Regulatory
CAERUS Portfolio Management Limited is authorised and regulated by the Financial Conduct
Authority, registration number 175524.
Parmenion Investment Management Ltd is a subsidiary of Parmenion Capital Partners LLP. Parmenion Capital Partners LLP is authorised and regulated by the Financial Conduct Authority,
registration number: 462085. Parmenion Capital Partners LLP is registered in England and
Wales OC322243.
Contact details
CPML Contact Details
Parmenion Contact Details
Head Office: Building 120,
Windmill Hill Business Park,
Swindon, SN5 6NX.
Head Office: 2 College Square,
Anchor Road,
Bristol, BS1 5UE.
Office: 01793 733 800
Website: www.caeruspm.com
Email: info.cpml@caeruswealth.com
Office: 0845 519 0100
Website: www.parmenion-im.co.uk
Email: invest@parmenion-im.co.uk
Your Financial Adviser Firm is:
Finura Partners LLP
Head Office: Level 2,
Juxon House,
100 St Paul’s Churchyard,
London,
EC4M 8BU.
Office: 02037 133 352
Website: www.finurapartners.com
Email: enquiries@finurapartners.com
CAERUS Select | 7
Market Commentary
Simon Brett
Director & Chief Investment Officer
Parmenion Investment Management
For over five years now, we have got used to 300-year low interest rates, at
0.5%. With the UK economy, along with the United States, leading
the developed world in terms of growth, it is no surprise that there is so
much speculation as to when, and by how much, interest rates will rise in
both countries.
Over the past couple of years, the forecast date of any rise has been pushed further out in time.
Last year, there was an expectation that rates would rise before the Election in May 2015. Now, the
consensus is the latter half of 2015. Some of the factors that will influence the extent and timing of
any rate rise in the UK are discussed in the paragraphs below, and they may not even rise at all.
The financial crisis of 2008 was the catalyst for the dramatic fall in rates, a response to stop the
economy falling into a depression. At the time, it was seen as an emergency response along with
Quantitative Easing i.e. the ‘printing of money’. There was no expectation that rates would be at the
same level almost six years later. However, the contraction in the economy has been severe, worse
than the 1930s and, for that matter, worse than any other post-war recession. It is only in the past
few months that output reached its pre-crisis levels.
So what are the triggers that will prompt a rise in rates? The Canadian-born Bank of England
Governor, Mark Carney, imported the concept of ‘forward guidance’ to the UK from his previous
role in Canada. It is a tool to help companies and individuals plan for the future by knowing the
likely causes of a rate rise. In 2013, the first forward guidance was that a fall in the unemployment
rate to 7% might be followed by a rate rise. However, rapid jobs growth meant this target was
reached earlier than expected and no rate rise occurred. Therefore, a range of indicators is to be
used but with a particular emphasis on the ‘output gap’- the difference between the potential and
actual output of the economy. When the gap narrows, inflation is usually expected to rise as the
supply of goods/services cannot keep pace with the demand.
How quickly the output gap closes will obviously depend upon the speed of economic growth. And
there are some uncertainties in 2015 that may dampen growth. The result of the May 2015 General
Election is difficult to predict. With the likelihood of another coalition Government being high,
political instability is not a promising backdrop for consumers to continue to spend, companies
8 | CAERUS Select
To raise or not to raise?
to invest and overseas Investors to find the UK attractive. Add in a slowing housing market, as
evidenced by falling mortgage approvals and the already high indebtedness of the UK consumer,
any rate rise may cut short the recovery if the consumer reduces spending as a result. In the
background, the woes of the Eurozone (our largest trading partner) continue with the European
Central Bank reaching the point where it will initiate a substantial programme of Quantitative
Easing across the EU. The long-term problems caused by a single currency don’t look like they will
be resolved in the near future.
For now, inflation is not a problem. As explained by Harry Garrett in his article, the dramatic fall in
oil prices and other commodities have given a fillip to the income of the UK consumer. Inflation in
November was just 1%, below the Bank of England target of 2%, resulting in Mark Carney having to
write to the Chancellor to explain why inflation is 1% below its target. Should the oil price fall even
farther, inflation will not be the cause of the first rate rise. On a positive note, it does allow wages to
rise faster than inflation, meaning real wage growth for the first time since 2008.
Given the caution in the paragraphs above, perhaps rates will not rise in 2015. Remember Japan
twenty years ago and its drop in rates as a ‘temporary’ measure. Low rates became entrenched as
that economy suffered deflation. There is now a growing consensus that the ‘new normal’ for UK
rates will lie between 2% and 3%. This is far below the long-term post-war averages and may be
the final consequence of the financial crisis of 2008. Depending upon your age, such low levels are
surprising, but to younger savers and borrowers they may become the new reference point as to
what is expensive or cheap money in the years ahead.
Figure 1. United Kingdom Interest Rate
Benchmark Interest Rate
6
4
2
0
JAN ‘08
JAN ‘10
Source: www.tradingeconomics.com | Bank of England
JAN ‘12
JAN ‘14
Featured Article
The situation obviously affects different countries, economies and individual companies in
different ways. Very simplistically, net users gain and producers don’t. Generally the global
economy should benefit with the most obvious impact for many being a marginal boost to
household incomes as cars can be filled up for less, heating bills decline and manufacturing
costs fall. Similarly, near-term inflationary pressures subside, which reduces pressure for
interest rates to rise, providing a further shot in the arm to the UK consumer through continued
low mortgage costs. However one major concern is that this simply feeds an ever increasing feelgood-factor, potentially fuelling the current debt binge that’s still prevalent throughout the
western world.
Further afield, many Emerging Market (EM) economies rely on imported oil and lower prices
are good news for their competitiveness, however the story is very different for EM oil exporters.
The grey bars and left-hand scale in the chart opposite show the individual breakeven prices
per barrel for different oil producing EM countries in order to balance their budgets. From this
it’s fair to say to avoid unwanted financial stress, the price of oil needs to shift back up towards
$90+, and soon. If on the other hand the current situation continues then the probability of ratings
downgrades increase, which may lead to increases in debt servicing costs and spikes in foreign
exchange volatility.
Fiscal Breakeven Oil Price (USD/b) (LHS)
2014 general govt budget balance (% of GDP) (RHS)
ECUADOR
ANGOLA
-10.0
BAHRAIN
-5.0
0
VENEZUELA
0.0
20
RUSSIA
5.0
40
NIGERIA
10.0
60
GABON
15.0
80
AZERBAIJAN
20.0
100
SAUDI
ARABIA
25.0
120
NORWAY
30.0
140
REPUBLIC
OF CONGO
% of GDP
160
KAZAKHSTAN
There is no one single reason to explain the dramatic slide, in fact quite the opposite. To name
a few; weak economic data, the switch from oil to alternative energy sources, slowing Chinese
GDP growth and increasing domestic US energy production. OPEC’s recent confirmation that
they would not reduce supply in an attempt to stop the slump led to a further decline in the price.
Therefore working with an assumption that a lower oil price is here to stay, we now look at the
effect this has caused throughout the Investment world.
USD/b
KUWAIT
For the majority of 2014 the oil price was underpinned by global
geopolitical uncertainty. So much so, that only a brave and irrational
Investor would have bet that the price would plunge over 40% within
six months.
Figure 2. 2014 Fiscal Breakeven Oil Price (USD/b) and forecast budget balances
ABU DHABI
Harry Garrett
Investment Analyst
Parmenion Investment Management
Oil Price Fall – The Only Certainty is Increased Uncertainty
Source: Fitch. Note Abu Dhabi includes Fitch’s estimate of the ADNOC dividend. Venezuela and Ecuador breakeven estimates are for 2013.
Historically, consensus would lead us to believe the oil price is a lagging economic indicator due
to its sensitivity to published economic data, but consensus isn’t always right. If, as some are
beginning to think, oil is a leading indicator then the above paints an unpleasant picture for oil
producers and many EMs. But also in this heavily globalised Investment world the effects are
unlikely to be confined to just the vulnerable EM.
High Yield debt is a less obvious casualty of this swift oil price correction. The US is now the
largest oil producer in the world, ahead of Saudi Arabia and Russia, due to the transformational
technology called ‘fracking’ which has caused this upsurge in production. However this is more
expensive than traditional drilling methods and needs higher oil prices to justify the greater costs.
Smaller independent oil companies have tended to develop the new oil fields, often financed
through the High Yield debt market. Following the fall in the price of oil, their profitability is under
threat raising the possibility that they may not be able to finance the debt. Considering the energy
sector now makes up around 15% of the US High Yield debt market, the stability of the asset class
may be called into question, with prices already beginning to slide in the last quarter of 2014.
This overview barely scratches the surface of how the oil price can affect many different
economies, consumers and Investment asset classes. The oil price is just one of many links
between economies and financial markets that rarely stay stable over time. This reinforces the
necessity to maintain a diversified Portfolio across multiple asset classes to align an Investment
outcome with a Client’s attitude to risk and capacity for loss. Something which CAERUS Advisers
with the benefit of Parmenion’s Investment capabilities can achieve regardless of the uncertain
Investment landscape that awaits them.
CAERUS Select | 9
CAERUS Active and Passive Portfolios
The CAERUS offering is built around seven asset classes; Managed Liquidity, Fixed Interest,
Property, UK Value and Income, UK Growth, Developed Markets and Emerging Markets. An
Investor in the CAERUS offering assumes that the risk and return relationships between the
various asset classes are stable over the long term. Thus, the asset allocations for the ten
Risk Graded Portfolios will not change frequently.
The fund OCF and historic yield for each Risk Grade are shown below. The data included will vary
from month to month, depending on the fund selection of the Investment Manager and the expenses
of the underlying funds themselves. These figures are therefore only included for the purposes
of transparency.
3
15%
55%
10%
10%
5%
5%
0%
100%
4
15%
35%
10%
20%
10%
10%
0%
100%
5
5%
30%
10%
20%
15%
20%
0%
100%
6
0%
25%
10%
20%
20%
25%
0%
100%
7
0%
15%
15%
20%
20%
25%
5%
100%
8
0%
0%
15%
20%
15%
35%
15%
100%
9
0%
0%
10%
15%
15%
35%
25%
100%
10
0%
0%
0%
10%
15%
40%
35%
100%
Ris
kG
rade
10
Ris
kG
rade
9
8
7
Ris
kG
rade
Ris
kG
rade
Ris
kG
rade
6
5
4
Ris
kG
rade
Ris
kG
rade
0.98%
Historic Yield
1.34%
2.35%
2.48%
2.48%
2.43%
2.39%
2.38%
2.10%
1.83%
1.41%
CAERUS Passive
Ris
kG
rade
Ris
kG
rade
Portfolios are rebalanced to their asset allocation on a quarterly basis.
Fund OCF*
0.38%
0.25%
0.22%
0.22%
0.18%
0.16%
0.20%
0.21%
0.19%
0.14%
Historic Yield
1.25%
2.17%
2.36%
2.58%
2.72%
2.81%
2.90%
2.82%
2.65%
2.38%
*Correct as of 24th December 2014
10 | CAERUS Select
3
2
0.94%
10
100%
0.91%
Ris
kG
rade
0%
0.84%
9
0%
0.82%
Ris
kG
rade
5%
0.78%
8
5%
0.72%
7
10%
0.67%
Ris
kG
rade
55%
0.63%
6
25%
0.49%
Ris
kG
rade
2
Fund OCF*
5
100%
Ris
kG
rade
0%
4
0%
Ris
kG
rade
0%
3
0%
Ris
kG
rade
0%
2
20%
Ris
kG
rade
80%
1
1
Ris
kG
rade
Ris
kG
rade
TOT
AL
Risk
Ris
kG
rade
1
MA
RK
ETS
EM
ER
GIN
G
DE
VEL
OP
ED
MA
RK
ETS
CAERUS Active
UK
VAL
UE
AN
D IN
CO
ME
UK
GR
OW
TH
MA
NA
GE
D
LIQ
UID
ITY
FIX
ED
INT
ER
EST
PR
OP
ER
TY
CAERUS Active & Passive Portfolios
Net Ongoing Charge Figure (OCF) and Historic Yield by Risk Grade
Portfolio Holdings as of 31st December 2014
The current Portfolio holdings for CAERUS Active and Passive are shown in the tables below, as of 31st December 2014. Please refer to page 30 for details on fund changes over the period.
Vanguard
FTSE
UK Equity
Income
Index
AXA
Sterling
Credit Short
Duration
Bond
Allianz Gilt
Yield
Ignis UK
Property
Feeder
Artemis
Income
Artemis
UK Smaller
Companies Aberdeen
Japan Equity
Aberdeen
Emerging
Markets
Equity
AXA Sterling
Credit Short
Duration
Bond
Vanguard
UK
Investment
Grade Bond
Index Ignis UK
Property
Feeder
Vanguard
US Equity
Index
Dimensional
Global Ultra
Short Fixed
Income
Fidelity
Moneybuilder
Income
L&G UK
Property
Feeder
Franklin UK
Equity Income
JOHCM UK
Opportunities
JPM US Equity
Income
Fidelity
Emerging
Europe
Middle East
and Africa
Dimensional
Global Ultra
Short Fixed
Income
L&G All
Stocks Index
Linked Gilt
Index
L&G UK
Property
Feeder
M&G Short
Dated
Corporate
Bond
Invesco
Perpetual
Corporate
Bond
Threadneedle
UK Property
Invesco
Perpetual
Income
Jupiter UK
Special
Situations
Pioneer
SICAV US
Fundmental
Growth
M&G Global
Emerging
Markets
Vanguard
FTSE
Developed
Europe ex
UK Equity
Index
Vanguard
Global Bond
Index Hedge
Threadneedle
UK Property
Vanguard
Japan Stock
Index
Aberdeen
Defensive Gilt
M&G Index
Linked Bond
Investec UK
Special
Situations
Liontrust
Special
Situations
First State
Asia Pacific
Leaders
Schroder
Global
Emerging
Markets
M&G Short
Dated
Corporate
Bond
SWIP
Defensive
Gilt
M&G
Optimal
Income
Threadneedle
UK Equity
Income
Schroder
UK Smaller
Companies
Jupiter
European
Vanguard
UK
Government
Bond Index
Jupiter
Strategic
Bond
Troy Asset
Management
Ltd Trojan
Income
Jupiter North
American
Income
PFS
TwentyFour
Dynamic
Bond
Unicorn UK
Income
Threadneedle
European
Select
MA
RK
ETS
EM
ER
GIN
G
MA
RK
ETS
Vanguard
FTSE UK All
Share Index
DE
VEL
OP
ED
UK
GR
OW
TH
UK
VAL
UE
AN
D IN
CO
ME
PR
OP
ER
TY
FIX
ED
INT
ER
EST
MA
NA
GE
D
MA
RK
ETS
EM
ER
GIN
G
MA
RK
ETS
DE
VEL
OP
ED
UK
GR
OW
TH
UK
VAL
UE
AN
D IN
CO
ME
PR
OP
ER
TY
FIX
ED
INT
ER
EST
LIQ
UID
ITY
MA
NA
GE
D
LIQ
UID
ITY
CAERUS Passive
CAERUS Active
Vanguard
Emerging
Markets
Stock Index
Vanguard
Pacific ex
Japan Stock
Index
CAERUS Select | 11
5Y
EAR
RE
TUR
N
return
3 year
2 year
return
1 year
6 month
return
3 month
5Y
EAR
RE
TUR
N
return
3 year
2 year
return
1 year
6 month
return
3 month
return
For the shorter time periods of 3 months to 1 year, the lower Risk Grades retrun more than the
higher Risk Grades owing to the strong performance of Fixed Interest and Property versus other
asset classes. For longer time periods the poor relative performance of Emerging Markets has
impacted the performance of the higher Risk Grades.
return
For the periods 2 and 3 years, the Portfolios rise in value up to Risk Grade 8 and then drop in line.
This is due to the high weighting in Emerging Markets in Risk Grades 9 and 10 and its
underperformance versus other equity asset classes. For all other time periods, the Risk Grades
have been distorted by the strong performance of Property and Developed Markets. Risk Grade 7
is the only exception with a slight underperformance over 5 years.
return
CAERUS Passive - Portfolio Returns to period end 31st December 2014
return
CAERUS Active - Portfolio Returns to period end 31st December 2014
Passive
Active
1
1.22%
1.83%
3.06%
3.70%
6.46%
14.51%
1
1.39%
2.16%
3.72%
4.02%
6.78%
15.06%
2
2.60%
3.90%
6.35%
10.11%
16.15%
29.71%
2
2.89%
4.64%
8.00%
10.49%
16.66%
31.40%
3
3.03%
4.49%
7.19%
13.41%
20.62%
35.98%
3
3.16%
4.97%
8.52%
13.28%
20.97%
37.78%
4
2.95%
4.18%
6.87%
18.01%
26.65%
42.24%
4
2.61%
3.87%
6.97%
16.39%
25.94%
42.66%
5
3.48%
4.92%
7.76%
22.57%
32.81%
49.80%
5
2.85%
4.20%
7.40%
20.53%
31.96%
50.06%
6
3.67%
5.12%
7.99%
25.31%
36.66%
54.35%
6
2.83%
4.13%
7.31%
22.95%
35.55%
54.11%
7
3.39%
4.84%
7.98%
25.66%
37.16%
53.96%
7
2.52%
3.85%
7.03%
22.85%
35.45%
52.31%
8
3.38%
5.01%
8.54%
27.50%
39.86%
54.65%
8
2.42%
3.91%
6.99%
23.89%
37.55%
51.38%
9
2.93%
4.34%
7.90%
24.95%
38.17%
51.93%
9
2.14%
3.67%
6.67%
21.39%
35.35%
46.90%
10
2.67%
3.86%
7.33%
23.33%
37.93%
50.52%
10
1.97%
3.52%
6.28%
19.75%
34.71%
43.98%
Please note that Portfolio returns prior to 1st March 2014 are based on the performance of the PIM Strategic
Multi-Option Portfolios, upon which the structure of the CAERUS Portfolios is based.
These returns simulate the performance that would have been achieved by these Portfolios had they been in
existence during these periods.
Please refer to Important Notes on page 6 for how performance figures are calculated. Performance data is correct
as of 31st December 2014. Past performance is not an indication of future returns. The value of Investments and any
income from them is not guaranteed and can go down as well as up.
12 | CAERUS Select
CAERUS Active and Passive Portfolios
CAERUS - Asset Class Returns to period end 31st December 2014 The CAERUS Risk Graded Portfolios are built through a weighted exposure to seven underlying asset classes. For transparency purposes the returns of each asset class are given below. These returns
should not be considered in isolation as the asset class risk and return characteristics are taken into account within the construction of each Risk Graded Portfolio.
0.99%
2.46%
4.15%
6.60%
Managed Liquidity
0.64%
0.99%
2.46%
return
4.15%
5Y
EAR
RE
TUR
N
1.88%
3 year
return
return
6M
ON
TH
RE
TUR
N
3M
ON
TH
RE
TUR
N
5Y
EAR
RE
TUR
N
return
3 year
2 year
return
return
1 year
1.88%
2 year
0.64%
1 year
Managed Liquidity
6M
ON
TH
RE
TUR
N
CAERUS Passive
3M
ON
TH
RE
TUR
N
CAERUS Active
6.60%
Fixed Interest
3.53%
5.21%
7.89%
8.73%
16.47%
34.28%
Fixed Interest
3.84%
6.59%
11.01%
10.07%
17.46%
37.68%
Property
3.42%
7.19%
13.24%
20.81%
21.70%
34.53%
Property
3.42%
7.19%
13.24%
20.81%
21.70%
35.91%
UK Value and Income
2.11%
1.86%
5.02%
33.01%
48.54%
71.36%
UK Value and Income
0.74%
-0.56%
1.48%
22.81%
41.90%
65.75%
UK Growth
0.59%
-0.94%
-0.15%
22.62%
40.59%
59.21%
UK Growth
0.25%
-0.76%
0.75%
21.65%
36.51%
50.69%
Developed Markets
7.51%
11.67%
15.01%
40.86%
52.11%
63.47%
Developed Markets
5.65%
8.76%
12.03%
39.15%
55.00%
69.01%
Emerging Markets
-1.52%
-1.92%
2.45%
3.17%
18.80%
27.43%
Emerging Markets
-0.68%
0.94%
3.51%
-1.29%
11.07%
10.52%
Please note that asset class returns prior to 1st March 2014 are based on the performance of the PIM Strategic
Multi-Option asset classes, upon which the structure of the CAERUS Portfolios is based.
CAERUS Select | 13
CAERUS Blends
CAERUS 75% Active & 25% Passive - Portfolio Returns to period end 31st December 2014
The CAERUS Blended Portfolios are built around the seven asset classes used in CAERUS
Active and CAERUS Passive; Managed Liquidity, Fixed Interest, Property, UK Value and
Income, UK Growth, Developed Markets and Emerging Markets. An Investor in the CAERUS
Blended Portfolios assumes that the risk and return relationships between the various asset
classes are stable over the long term. Thus, the asset allocations for the ten Risk Graded
Portfolios will not change frequently. Please refer to pages 10-11 for details on the asset
weightings and underlying funds used in the solution.
10
Ris
kG
rade
9
Ris
kG
rade
8
Ris
kG
rade
Ris
kG
rade
7
6
Ris
kG
rade
Ris
kG
rade
5
4
3
Ris
kG
rade
2
Ris
kG
rade
1
Ris
kG
rade
Ris
kG
rade
0.46%
0.53%
0.56%
0.60%
0.63%
0.65%
0.68%
0.74%
0.75%
0.77%
Historic Yield
1.32%
2.30%
2.45%
2.51%
2.51%
2.50%
2.51%
2.28%
2.03%
1.65%
*
Correct as of 24th December 2014
CAERUS 50% Active & 50% Passive
Fund OCF*
0.44%
0.44%
0.45%
0.47%
0.48%
0.49%
0.52%
0.56%
0.57%
0.56%
Historic Yield
1.29%
2.26%
2.42%
2.53%
2.58%
2.60%
2.64%
2.46%
2.24%
1.90%
*
Correct as of 24th December 2014
Fund OCF*
0.41%
0.35%
0.33%
0.35%
0.33%
0.33%
0.36%
0.39%
0.38%
0.35%
Historic Yield
1.27%
2.22%
2.39%
2.56%
2.65%
2.71%
2.77%
2.64%
2.44%
2.14%
Correct as of 24th December 2014
14 | CAERUS Select
return
5 year
3 year
return
return
2 year
1
1.26%
1.91%
3.23%
3.78%
6.54%
14.61%
2
2.68%
4.09%
6.77%
10.21%
16.28%
30.13%
3
3.07%
4.62%
7.54%
13.40%
20.73%
36.46%
4
2.88%
4.12%
6.91%
17.63%
26.50%
42.39%
5
3.34%
4.75%
7.69%
22.09%
32.63%
49.92%
6
3.47%
4.88%
7.83%
24.75%
36.42%
54.38%
7
3.18%
4.60%
7.75%
24.97%
36.75%
53.61%
8
3.14%
4.73%
8.15%
26.59%
39.27%
53.85%
9
2.73%
4.17%
7.59%
24.04%
37.44%
50.67%
10
2.48%
3.76%
7.06%
22.40%
37.08%
48.85%
Please note that Portfolio returns prior to 1st March 2014 are based on the performance of the PIM Strategic
Multi-Option Portfolios, upon which the structure of the CAERUS Portfolios is based.
These returns simulate the performance that would have been achieved by these Portfolios had they been in
existence during these periods.
Please refer to Important Notes on page 6 for how performance figures are calculated. Performance data is correct
as of 31st December 2014. Past performance is not an indication of future returns. The value of Investments and any
income from them is not guaranteed and can go down as well as up.
CAERUS 25% Active & 75% Passive
*
return
Risk Grade
CAERUS 75% Active & 25% Passive
Fund OCF*
1Y
ear
3 month
The fund OCF and historic yield for each Risk Grade are shown below. The data included will
vary from month to month, depending on the fund selection of the Investment manager and
the expenses of the underlying funds themselves. These figures are therefore only included
for the purposes of transparency.
6 month
return
Net Ongoing Charge Figure (OCF) and Historic Yield by Risk Grade
return
For periods 3 months to 1 year the strong relative performance of Fixed Interest and Property
have distorted the performance of the lower Risk Grades. The higher Risk Grades in all other
periods have suffered from the poor performance of Emerging Markets versus other equity
asset classes.
return
5 year
3 year
2 year
return
return
1Y
ear
6 month
return
3 month
return
5 year
return
3 year
2 year
return
1Y
ear
6 month
return
3 month
Risk Grade
return
For time periods up to 1 year, strong performances from Fixed Interest, Property and
Developed Markets have distorted the Risk Grades up to 5/6. For all other time periods the
higher Risk Grades have suffered from the poor performance of Emerging Markets versus
other equity asset classes.
return
For periods 3 months to 1 year the strong relative performance of Fixed Interest and Property
have distorted the performance of the lower Risk Grades. The higher Risk Grades in all other
periods have suffered from the poor performance of Emerging Markets versus other equity
asset classes.
return
CAERUS 25% Active & 75% Passive - Portfolio Returns to period end 31st December 2014
return
CAERUS 50% Active & 50% Passive - Portfolio Returns to period end 31st December 2014
Risk Grade
1
1.30%
2.00%
3.39%
3.86%
6.62%
14.76%
1
1.35%
2.08%
3.56%
3.95%
6.70%
14.91%
2
2.76%
4.28%
7.18%
10.32%
16.41%
30.57%
2
2.84%
4.47%
7.60%
10.42%
16.54%
30.99%
3
3.12%
4.75%
7.88%
13.38%
20.83%
36.93%
3
3.16%
4.88%
8.22%
13.36%
20.93%
37.39%
4
2.81%
4.05%
6.95%
17.24%
26.34%
42.53%
4
2.74%
3.99%
6.99%
16.86%
26.18%
42.66%
5
3.19%
4.58%
7.61%
21.59%
32.44%
50.02%
5
3.04%
4.42%
7.53%
21.11%
32.25%
50.12%
6
3.27%
4.65%
7.67%
24.18%
36.17%
54.38%
6
3.07%
4.41%
7.51%
23.61%
35.91%
54.36%
7
2.97%
4.36%
7.52%
24.28%
36.33%
53.23%
7
2.76%
4.12%
7.29%
23.59%
35.90%
52.84%
8
2.90%
4.45%
7.76%
25.67%
38.67%
53.02%
8
2.66%
4.17%
7.37%
24.75%
38.06%
52.17%
9
2.53%
3.99%
7.27%
23.13%
36.69%
49.38%
9
2.32%
3.82%
6.96%
22.21%
35.93%
48.06%
10
2.30%
3.66%
6.78%
21.46%
36.21%
47.15%
10
2.12%
3.56%
6.50%
20.53%
35.33%
45.42%
Please note that Portfolio returns prior to 1st March 2014 are based on the performance of the PIM Strategic
Multi-Option Portfolios, upon which the structure of the CAERUS Portfolios is based.
These returns simulate the performance that would have been achieved by these Portfolios had they been in
existence during these periods.
Please refer to Important Notes on page 6 for how performance figures are calculated. Performance data is correct
as of 31st December 2014. Past performance is not an indication of future returns. The value of Investments and any
income from them is not guaranteed and can go down as well as up.
CAERUS Select | 15
CAERUS - Asset Class Returns to period end 31st December 2014
The CAERUS Risk Graded Portfolios are built through a weighted exposure to seven underlying asset classes. For transparency purposes the returns of each asset class are given below. These returns
should not be considered in isolation as the asset class risk and return characteristics are taken into account within the construction of each Risk Graded Portfolio.
2.46%
4.15%
6.60%
Managed Liquidity
0.64%
0.99%
2.46%
RE
TUR
N
RE
TUR
N
4.15%
5 year
1.88%
3 year
RE
TUR
N
RE
TUR
N
6M
ON
TH
RE
TUR
N
5 year
RE
TUR
N
RE
TUR
N
3 year
RE
TUR
N
2 year
RE
TUR
N
1 year
1.88%
2 year
0.99%
1 year
0.64%
6M
ON
TH
RE
TUR
N
3M
ON
TH
RE
TUR
N
Managed Liquidity
3M
ON
TH
RE
TUR
N
CAERUS 50% Active & 50% Passive
CAERUS 75% Active & 25% Passive
6.60%
Fixed Interest
3.61%
5.56%
8.67%
9.07%
16.72%
35.13%
Fixed Interest
3.69%
5.90%
9.45%
9.40%
16.97%
35.98%
Property
3.42%
7.19%
13.24%
20.81%
21.70%
34.88%
Property
3.42%
7.19%
13.24%
20.81%
21.70%
35.22%
UK Value and Income
1.77%
1.26%
4.14%
30.46%
46.88%
69.96%
UK Value and Income
1.43%
0.65%
3.25%
27.91%
45.22%
68.56%
UK Growth
0.51%
-0.90%
0.08%
22.38%
39.57%
57.08%
UK Growth
0.42%
-0.85%
0.30%
22.14%
38.55%
54.95%
Developed Markets
7.05%
10.94%
14.27%
40.43%
52.83%
64.86%
Developed Markets
6.58%
10.22%
13.52%
40.01%
53.56%
66.24%
Emerging Markets
-1.31%
-1.21%
2.72%
2.06%
16.87%
23.20%
Emerging Markets
-1.10%
-0.49%
2.98%
0.94%
14.94%
18.98%
16 | CAERUS Select
CAERUS Blends
5 year
RE
TUR
N
RE
TUR
N
3 year
RE
TUR
N
2 year
RE
TUR
N
1 year
6M
ON
TH
RE
TUR
N
3M
ON
TH
RE
TUR
N
CAERUS 25% Active & 75% Passive
Managed Liquidity
0.64%
0.99%
1.88%
2.46%
4.15%
6.60%
Fixed Interest
3.76%
6.25%
10.23%
9.74%
17.21%
36.83%
Property
3.42%
7.19%
13.24%
20.81%
21.70%
35.57%
UK Value and Income
1.08%
0.05%
2.37%
25.36%
43.56%
67.15%
UK Growth
0.34%
-0.81%
0.53%
21.89%
37.53%
52.82%
Developed Markets
6.12%
9.49%
12.78%
39.58%
54.28%
67.63%
Emerging Markets
-0.89%
0.23%
3.25%
-0.18%
13.00%
14.75%
Please note that Portfolio returns prior to 1st March 2014 are based on the performance of the PIM Strategic
Multi-Option Portfolios, upon which the structure of the CAERUS Portfolios is based.
These returns simulate the performance that would have been achieved by these Portfolios had they been in
existence during these periods.
Please refer to Important Notes on page 6 for how performance figures are calculated. Performance data is correct
as of 31st December 2014. Past performance is not an indication of future returns. The value of Investments and any
income from them is not guaranteed and can go down as well as up.
CAERUS Select | 17
CAERUS Tactical Income
The CAERUS Tactical Income Portfolios aim to deliver a set of target yields while
controlling the level of Portfolio volatility. Parmenion will use Tactical Asset Allocation
to both achieve the target yields and to keep Portfolio volatility within the constraints
identified for each Risk Grade.
The CAERUS Tactical Income Portfolios have, as their name suggests, the flexibility
to adopt tactical asset allocations. This means the Investment manager (PIM) has
the capability to alter the asset allocation of the Portfolios in light of changing
market conditions.
This flexibility enhances PIM’s ability to increase allocations to income generating assets
to meet the target yields, when it is prudent to do so, while simultaneously managing the
Portfolios’ volatility and exposure to risk. All changes to asset allocation are made within
prescribed limits only.
Key Benefits
• 10 Risk Graded Portfolios
• Rising target yields, rising from 3% to 5.25%
• Tactical asset allocation to make the targeted yields achievable
• Proactive blending of Passive and Active funds
• Natural income planned to arise throughout the calendar year
• Controlled use of Maximiser Funds.
18 | CAERUS Select
What are Maximiser Funds?
Up to 35% of a Tactical Income Portfolio may be invested in Maximiser Funds to help
ensure an attractive level of income. It is important that Clients understand this.
A Maximiser Fund is a Portfolio of stocks in which the fund manager has a high level
of conviction.
Derivatives contracts are written on a select number of the underlying companies,
carefully managed by a derivatives specialist, generating additional income in return for
giving up some potential return on a stock above the level specified in the contract. In this
way, Maximiser Funds can generate an income greater than that achieved by only
investing in stocks. It can also improve stability, since the higher income acts as a
dampener on any Portfolio losses.
Tactical Asset Allocation
The CAERUS Tactical Income Portfolios use a range of neutral strategic asset
allocations as their starting point. These strategic asset allocations are based around
the performance and volatilities of various asset class indices over a 20 year period and
combined with a qualitative overlay to ensure diversification. As market conditions
change over time, so do the relative volatility and valuations of different asset classes.
When prudent to do so, the CAERUS Tactical Income Portfolio asset allocations can adapt
to ensure that target yields are achieved with the least anticipated risk and within the
acceptable range of volatility for each particular Risk Grade.
ocf *
12m
Ga
in
max
MA
X1
2m
LOS
S
AN
N
Dev UAL
iat ISED
ion
Standard
AN
NU
ALI
SED
RE
TUR
N
histor
(12
ic y
Months
ield
)
target
yield
CAERUS Tactical Income Portfolios Summary Data
Risk Grade
1
3.00%
2.57%
4.78%
3.52%
-5.25%
9.33%
0.56%
2
3.25%
3.29%
5.53%
4.92%
-8.77%
11.41%
0.63%
3
3.50%
3.82%
6.18%
6.64%
-12.47%
14.23%
0.69%
4
3.75%
4.20%
6.69%
7.89%
-15.44%
16.97%
0.73%
5
4.00%
4.46%
7.00%
8.90%
-17.82%
19.67%
0.76%
6
4.25%
4.57%
7.09%
10.14%
-19.84%
23.49%
0.77%
7
4.50%
4.73%
7.32%
11.55%
-22.45%
26.44%
0.79%
8
4.75%
4.95%
7.42%
12.52%
-24.09%
28.35%
0.80%
9
5.00%
5.18%
7.46%
13.50%
-25.66%
30.42%
0.81%
10
5.25%
5.26%
7.37%
14.43%
-26.16%
33.15%
0.81%
Correct as of 5th January 2014
*
Please note, the Annualised Return, Standard Deviation, Maximum Loss and Gain figures are based
on the simulated returns, of the Portfolio’s neutral asset weightings over the last 20 years to December
2013. Figures are based on indices and therefore exclude the effect of taxes or fees from Parmenion
or the Adviser. Charges are however taken from Portfolio liquidity and therefore will not affect the
income distributed.
CAERUS Select | 19
Portfolio Holdings as of 31st December 2014
The current fund holdings for CAERUS Tactical Income Portfolios are shown in the table below, as of 31st December 2014. Please refer to page 30 for details on fund changes over the period.
Asset Group
Holdings
Managed Liquidity
Dimensional Global Ultra Short Fixed Income
Corporate Bonds
1
2
3
4
5
6
7
8
9
10
18.34%
11.67%
5.00%
1.67%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
AXA Sterling Credit Short Duration Bond
18.33%
11.67%
5.00%
1.67%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
M&G Short Dated Corporate Bond
18.33%
11.66%
5.00%
1.66%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
Fidelity Moneybuilder Income
7.50%
7.50%
11.25%
11.25%
10.00%
7.50%
5.00%
2.50%
0.00%
0.00%
M&G Corporate Bond
7.50%
7.50%
11.25%
11.25%
10.00%
7.50%
5.00%
2.50%
0.00%
0.00%
Jupiter Strategic Bond
7.50%
7.50%
11.25%
11.25%
10.00%
7.50%
5.00%
2.50%
0.00%
0.00%
PFS TwentyFour Dynamic Bond
7.50%
7.50%
11.25%
11.25%
10.00%
7.50%
5.00%
2.50%
0.00%
0.00%
High Yield Bonds
Kames High Yield Bond
0.00%
0.00%
1.00%
1.50%
2.00%
3.00%
3.50%
4.00%
4.50%
5.00%
JPM Global High Yield Bond
0.00%
0.00%
1.00%
1.50%
2.00%
3.00%
3.50%
4.00%
4.50%
5.00%
Property
Henderson UK Property OEIC
3.25%
4.33%
3.25%
3.25%
3.25%
2.17%
2.17%
2.17%
2.17%
0.00%
UK Equity Income
US Equity
Europe ex UK
Asia Pacific ex Japan
Global Maximiser
Total
20 | CAERUS Select
L&G UK Property Feeder
3.25%
4.34%
3.25%
3.25%
3.25%
2.17%
2.17%
2.17%
2.17%
0.00%
Threadneedle UK Property
3.25%
4.33%
3.25%
3.25%
3.25%
2.16%
2.16%
2.16%
2.16%
0.00%
Schroder Global Property Income Maximiser
5.25%
7.00%
5.25%
5.25%
5.25%
3.50%
3.50%
3.50%
3.50%
0.00%
Rathbone Income
0.00%
1.00%
1.50%
1.90%
2.20%
2.60%
2.90%
3.30%
3.50%
3.80%
Vanguard FTSE UK Equity Income Index
0.00%
3.50%
5.25%
6.65%
7.70%
9.10%
10.15%
11.55%
12.25%
13.30%
Troy Asset Management Ltd Trojan Income
0.00%
1.00%
1.50%
1.90%
2.20%
2.60%
2.90%
3.30%
3.50%
3.80%
Artemis Income
0.00%
1.00%
1.50%
1.90%
2.20%
2.26%
2.90%
3.30%
3.50%
3.80%
Fidelity Enhanced Income
0.00%
3.50%
5.25%
6.65%
7.70%
9.10%
10.15%
11.55%
12.25%
13.30%
JPM US Equity Income
0.00%
1.00%
1.50%
2.00%
2.50%
3.50%
4.00%
3.50%
3.00%
2.50%
Aviva Inv US Equity Income II 2
0.00%
1.00%
1.50%
2.00%
2.50%
3.50%
4.00%
3.50%
3.00%
2.50%
Standard Life Investments European Equity Income
0.00%
1.00%
2.00%
3.00%
4.00%
6.00%
7.00%
8.00%
10.00%
12.00%
Newton Asian Income
0.00%
0.00%
0.00%
0.67%
1.67%
2.67%
3.33%
4.33%
5.67%
6.67%
Henderson Asian Dividend Income
0.00%
0.00%
0.00%
0.66%
1.66%
2.66%
3.33%
4.33%
5.66%
6.66%
Schroder Asian Income Maximiser
0.00%
0.00%
0.00%
0.67%
1.67%
2.67%
3.34%
4.34%
5.67%
6.67%
Schroder ISF Global Dividend Maximiser
0.00%
2.00%
3.00%
4.00%
5.00%
7.00%
9.00%
11.00%
13.00%
15.00%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
CAERUS Tactical Income Solution
6 month
return
3 month
6 month
return
3 month
Risk Grade
from
i
(01
.02 ncept
.20
ion
14)
The CAERUS Tactical Income Risk Graded Portfolios are built through a weighted exposure
to nine underlying asset classes. For transparency purposes the returns of each asset class
are given below. These returns should not be considered in isolation as the asset class risk
and return characteristics are taken into account within the construction of each Risk
Graded Portfolio.
return
Since inception all Risk Grades rise in line to Risk Grade 9. Over 3 and 6 months, the strong
performance of US equities, Property and Global Equity Income Maximiser has distorted the
Risk Grades.
from
i
(01
.02 ncept
.20
ion
14)
CAERUS Tactical Income - Asset Class Returns to period end 31st December 2014
return
CAERUS Tactical Income - Portfolio Returns to period end 31st December 2014
Risk Grade
1
2.14%
3.12%
5.38%
Managed Liquidity
0.58%
0.92%
1.68%
2
2.59%
3.74%
6.71%
Corporate Bonds
2.57%
3.83%
6.91%
3
2.88%
4.02%
7.61%
Property
5.44%
7.67%
12.78%
4
3.09%
4.19%
8.31%
UK Equity Income
1.43%
0.90%
7.29%
5
3.29%
4.43%
9.08%
US Equity
9.66%
15.25%
22.92%
6
3.25%
4.12%
9.51%
High Yield Bonds
0.41%
-2.09%
2.06%
7
3.46%
4.32%
9.97%
Europe ex UK
2.58%
0.39%
5.90%
8
3.49%
4.29%
10.29%
Asia Pacific ex Japan
3.33%
5.75%
15.13%
9
3.50%
4.22%
10.55%
Global Equity Income Maximiser
6.21%
8.07%
14.11%
10
3.25%
3.82%
10.28%
Please refer to Important Notes on page 6 for how performance figures are calculated. Performance data is correct
as of 31st December 2014. Past performance is not an indication of future returns. The value of Investments and any
income from them is not guaranteed and can go down as well as up.
CAERUS Select | 21
CAERUS Strategic Ethical Active Portfolios: profile A-D
Armaments (Strategic)
Ethical Investment provides the opportunity to invest in ethically sound Investment solutions
that cater for a range of ethical preferences. It gives Investors the option to avoid companies
that engage in activities that they could not usually support, and proactively invest in
companies that recognise their corporate responsibilities. Investing ethically is now one of the
fastest growing areas in Financial Services with funds under management having grown to
approximately $3.74 trillion in the United States alone (Source: http://ussif.org).
Each asset class is populated with funds according to their ethical profile and risk adjusted
returns. Incorporated within the solution are four ethical profiles (A to D) and ten Risk Graded
Portfolios (1 to 10), which are designed to capture over 80% of Clients’ ethical preferences.
Each ethical grade incorporates an increasing number of positive and negative ethical
criteria, and a rising level of adherence to these criteria. An Ethical Fact Find is available to
assist the Adviser in identifying the appropriate ethical profile.
22 | CAERUS Select
p
eth
ical
eth
ical
p
prof
ile
prof
ile
c
b
prof
ile
eth
ical
p
p
Pornography (Production)
p
p
p
p
Human Rights (Evidenced/Country Based)
p
p
p
p
Environmental Management / Technology**
p
p
p
p
Animal Testing (Non-Medical)
p
p
p
p
Tobacco (Production)
p
Environmental Impact
p
p
p
p
p
p
p
p
Gambling
Solution Description
The CAERUS Strategic Ethical Active Investment Solution offers the discretionary
management of Active funds across eight distinct asset class groups. There is an independent
ethical overlay provided by the Ethical Oversight Committee, which includes Julian Parrott
and Julia Dreblow. Both Julian and Julia are Ethical specialists, with over 20 years’ experience
in Ethical Investing, previously holding the positions of Chair of the EIA and Director of
UKSIF, respectively.
prof
ile
SCR
E
cr ENIN
iter G
ia *
a
Ethical Investment is known by a variety of terms including: ‘Green Investment’, ‘Socially
Responsible Investment’ (SRI) and ‘Sustainable Finance’. All of these terms refer to financial
or Investment services which strive to maximise Investment performance and social
welfare. In general, ethical Investment looks to encourage corporate practices that promote
environmental stewardship, consumer protection, human rights and diversity, although
additional criteria such as the avoidance of weapons, alcohol, tobacco, gambling and
pornography are often included as legitimate areas of concern. These criteria can be broadly
summarised as environmental, social justice and corporate governance issues or ESG criteria.
d
Ethical Screening Criteria by Ethical Grade
eth
ical
What is Ethical Investing?
Alcohol Production
p
Nuclear (Power)
p
Number of Criteria considered
6
7
8
10
Target Screening Threshold (%)
50%
75%
100%
100%
Minimum number of Screen Criteria
3
5
8
10
Any funds which fail these criteria are excluded from the Portfolio. This decision is determined by the Ethical Oversight Committee (EOC).
*
As this is a positive criteria, funds are required to have this approach to warrant inclusion in the selectable funds for each Ethical Grade.
**
Please note: ‘avoidance criteria’ does not always mean ‘zero involvement’ as most ethical funds have deminimus limits which allow for
limited (normally non-manufacturing or wholesale related) exposure to excluded areas. This allows funds to be manageable and support
otherwise positive larger companies.
CAERUS Strategic Ethical Active - Asset Class Weightings as of 31st December 2014
The CAERUS Strategic Ethical Active Portfolios are constructed using up to eight asset classes, each with their own distinctive risk and reward characteristics. Ten Risk Graded Portfolios (1-10) are
produced, by varying the percentage exposure to each asset class, to match the risk tolerance of a particular Client. UK Government Bonds are currently excluded from Ethical Profile B, whilst Ethical
Profiles C-D also exclude Property due to the restrictions in sourcing a suitable ethical fund. The current split between the asset classes for each of the Portfolios are detailed in the table below. Strategic
Investors assume relatively constant long-term risk and return characteristics, and as such the underlying asset allocations will only vary where these have materially changed.
CAERUS Strategic Ethical Active - Profile A
Asset Group
1
2
3
4
5
6
7
8
9
10
Managed Liquidity (Unscreened)
70.00%
45.00%
15.00%
5.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
UK Ethical Corporate Bonds
24.00%
28.00%
40.00%
40.00%
32.00%
24.00%
12.00%
4.00%
0.00%
0.00%
UK Gilts
6.00%
7.00%
10.00%
10.00%
8.00%
6.00%
3.00%
1.00%
0.00%
0.00%
UK Property
0.00%
10.00%
15.00%
15.00%
15.00%
10.00%
10.00%
10.00%
5.00%
0.00%
UK Ethical Equity Growth
0.00%
3.00%
6.00%
9.00%
15.00%
18.00%
21.00%
21.00%
24.00%
24.00%
UK Ethical Equity Income
0.00%
2.00%
4.00%
6.00%
10.00%
12.00%
14.00%
14.00%
16.00%
16.00%
International Ethical Equity
0.00%
5.00%
10.00%
15.00%
15.00%
20.00%
25.00%
30.00%
30.00%
30.00%
Emerging Markets Equity
0.00%
0.00%
0.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
1
2
3
4
5
6
7
8
9
10
Managed Liquidity (Unscreened)
70.00%
45.00%
15.00%
5.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
UK Ethical Corporate Bonds
30.00%
35.00%
50.00%
50.00%
40.00%
30.00%
15.00%
5.00%
0.00%
0.00%
UK Property
0.00%
10.00%
15.00%
15.00%
15.00%
10.00%
10.00%
10.00%
5.00%
0.00%
UK Ethical Equity Growth
0.00%
3.00%
6.00%
9.00%
15.00%
18.00%
21.00%
21.00%
24.00%
24.00%
UK Ethical Equity Income
0.00%
2.00%
4.00%
6.00%
10.00%
12.00%
14.00%
14.00%
16.00%
16.00%
International Ethical Equity
0.00%
5.00%
10.00%
15.00%
15.00%
20.00%
25.00%
30.00%
30.00%
30.00%
Ethical Emerging Markets Equity
0.00%
0.00%
0.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
CAERUS Strategic Ethical Active - Profile B
Asset Group
CAERUS Select | 23
CAERUS Strategic Ethical Active - Profile C
Asset Group
1
2
3
4
5
6
7
8
9
10
Managed Liquidity (Unscreened)
70.00%
45.00%
15.00%
5.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
UK Ethical Corporate Bonds
30.00%
45.00%
65.00%
65.00%
55.00%
40.00%
25.00%
15.00%
5.00%
0.00%
UK Ethical Equity Growth
0.00%
3.00%
6.00%
9.00%
15.00%
18.00%
21.00%
21.00%
24.00%
24.00%
UK Ethical Equity Income
0.00%
2.00%
4.00%
6.00%
10.00%
12.00%
14.00%
14.00%
16.00%
16.00%
International Ethical Equity
0.00%
5.00%
10.00%
15.00%
15.00%
20.00%
25.00%
30.00%
30.00%
30.00%
Ethical Emerging Markets Equity
0.00%
0.00%
0.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
1
2
3
4
5
6
7
8
9
10
Managed Liquidity (Unscreened)
70.00%
45.00%
15.00%
5.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
UK Ethical Corporate Bonds
30.00%
45.00%
65.00%
65.00%
55.00%
40.00%
25.00%
15.00%
5.00%
0.00%
UK Ethical Equity Growth
0.00%
3.00%
6.00%
9.00%
15.00%
18.00%
21.00%
21.00%
24.00%
24.00%
UK Ethical Equity Income
0.00%
2.00%
4.00%
6.00%
10.00%
12.00%
14.00%
14.00%
16.00%
16.00%
International Ethical Equity
0.00%
5.00%
10.00%
15.00%
15.00%
20.00%
25.00%
30.00%
30.00%
30.00%
Ethical Emerging Markets Equity
0.00%
0.00%
0.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
CAERUS Strategic Ethical Active - Profile D
Asset Group
Portfolios are rebalanced to their asset allocation on a periodic basis.
24 | CAERUS Select
CAERUS Strategic Ethical Active Portfolios
Net Ongoing Charge Figure (OCF) and Historic Yield by Risk Grade
The fund OCF and historic yield for each Risk Grade are shown below. The data included will vary from month to month, depending on the fund selection of the Investment manager and the expenses of
the underlying funds themselves. These figures are therefore only included for the purposes of transparency.
0.52%
0.57%
0.62%
0.65%
0.69%
0.73%
0.77%
0.80%
0.82%
0.84%
Historic Yield
2.06%
2.43%
2.83%
2.87%
2.78%
2.50%
2.27%
2.06%
1.88%
1.71%
Correct as of 24th December 2014
*
10
Ris
kG
rade
9
Ris
kG
rade
8
Ris
kG
rade
7
Ris
kG
rade
6
5
Ris
kG
rade
Ris
kG
rade
Ris
kG
rade
4
3
Ris
kG
rade
2
Ris
kG
rade
Fund OCF
0.53%
0.58%
0.64%
0.66%
0.70%
0.74%
0.77%
0.80%
0.82%
0.84%
Historic Yield
2.24%
2.64%
3.12%
3.16%
3.02%
2.68%
2.36%
2.09%
1.88%
1.71%
Correct as of 24th December 2014
10
Ris
kG
rade
Ris
kG
rade
9
8
Ris
kG
rade
Ris
kG
rade
7
6
5
Ris
kG
rade
Ris
kG
rade
4
Ris
kG
rade
Ris
kG
rade
3
2
Ris
kG
rade
Ris
kG
rade
1
10
Ris
kG
rade
9
8
Ris
kG
rade
Ris
kG
rade
Ris
kG
rade
7
6
Ris
kG
rade
Ris
kG
rade
4
5
CAERUS Strategic Ethical Active - Profile D
Ris
kG
rade
3
2
Ris
kG
rade
Ris
kG
rade
1
Ris
kG
rade
1
Ris
kG
rade
Fund OCF
CAERUS Strategic Ethical Active - Profile C
*
Ris
kG
rade
9
8
Ris
kG
rade
7
Ris
kG
rade
Ris
kG
rade
6
Ris
kG
rade
5
Ris
kG
rade
Ris
kG
rade
10
CAERUS Strategic Ethical Active - Profile B
4
2
Ris
kG
rade
Ris
kG
rade
1
Ris
kG
rade
*
3
CAERUS Strategic Ethical Active - Profile A
Fund OCF
0.53%
0.57%
0.61%
0.64%
0.68%
0.72%
0.76%
0.79%
0.82%
0.84%
Fund OCF
0.54%
0.58%
0.63%
0.67%
0.71%
0.75%
0.79%
0.82%
0.85%
0.87%
Historic Yield
2.24%
2.60%
3.06%
3.10%
2.96%
2.64%
2.32%
2.05%
1.86%
1.71%
Historic Yield
2.16%
2.44%
2.81%
2.81%
2.69%
2.37%
2.06%
1.78%
1.61%
1.48%
Correct as of 24th December 2014
*
Correct as of 24th December 2014
CAERUS Select | 25
CAERUS Strategic Ethical Active (A-D): Portfolio Holdings as of 31st December 2014*
The fund universe for each of the Ethical Profiles is determined by the Ethical Oversight Committee (EOC) as per the ethical screening criteria defined on page 22. The table below shows the current
holdings for each Ethical Profile (A-D), to demonstrate the impact of the ethical screening on fund selection and for the purposes of transparency. Please note these holdings may change over the
period, depending on the views of the Investment manager. Details of any fund changes over the period are available on page 30 of this document.
Asset Class
Managed Liquidity
(unscreened)
Asset Class
AXA Sterling Credit Short Duration Bond
Ethical UK Equity Income
M&G Short Dated Corporate Bond
Ethical Corporate Bonds
Ethical International Equity
Pictet Water
F&C Ethical Bond
Alliance Trust Sustainable Future
Global Growth
Alliance Trust Sustainable Future
European Growth
Ecclesiastical Amity European
Standard Life Investments Ethical Corporate Bond
Henderson UK Property OEIC
L&G UK Property Feeder
F&C Stewardship Growth
Standard Life UK Ethical
Kames Ethical Equity
Alliance Trust Sustainable Future UK Growth
Ecclesiastical Amity UK
26 | CAERUS Select
Emerging Market Equity
Allianz Gilt Yield
M&G Index Linked Bond
Ethical UK Equity Growth
Henderson Global Care Growth
Kames Ethical Corporate Bond
Ecclesiastical Amity Sterling Bond
Property
F&C Stewardship Income
Henderson Global Care UK Income
Rathbone Ethical Bond
Alliance Trust Sustainable Future Corporate Bond
UK Government / Inflation
Linked Bonds
*
First State Asia Pacific Sustainability
Fund weightings are excluded, as it would depend upon the Risk Grade selected.
D
c
b
A
fund
D
c
b
A
fund
Illustration of the Impact of Ethical Screening on Portfolio Holdings as of 31st December 2014
CAERUS Strategic Ethical Active Portfolios
CAERUS Strategic Ethical Active (Profile A-D): Portfolio Returns to period end 31st December 2014
Over 2 years, and since inception, Ethical Profiles B-D have performed in line. One year returns for Ethical Profiles A-C have been disrupted as Ethical Corporate Bonds and Property have outperformed UK
Ethical and International Ethical equities. Over 6 months, all Risk Grades across all Ethical Profiles are perfroming in line, and over 3 months, other than the relative underperformance of Emerging Markets
dragging down returns for Risk Grade 10 in Ethical Profiles, A,B & D, are all in line.
from
i
(01
.03 ncept
.20
ion
12)
return
2Y
Ear
2.40%
return
6 month
1.55%
1Y
Ear
3 month
1
return
from
i
(01
.03 ncept
.20
ion
12)
return
2Y
Ear
return
1Y
Ear
6 month
return
return
3 month
Risk Grade
return
CAERUS Strategic Ethical Active - Profile B
CAERUS Strategic Ethical Active - Profile A
Risk Grade
1.77%
2.76%
5.20%
7.05%
12.45%
1
4.91%
7.02%
12.87%
2
2.63%
3.88%
6.78%
11.44%
17.21%
2
2.36%
3.46%
6.43%
11.44%
18.16%
3
3.65%
5.21%
9.17%
14.72%
22.64%
3
3.27%
4.60%
8.92%
14.56%
25.37%
4
4.04%
5.49%
9.12%
18.49%
26.44%
4
3.65%
4.89%
8.79%
18.39%
29.15%
5
4.27%
6.02%
8.98%
21.29%
29.61%
5
3.96%
5.53%
9.01%
22.04%
33.03%
6
4.31%
6.18%
8.49%
22.94%
31.70%
6
4.08%
5.81%
8.80%
24.89%
35.48%
7
4.41%
6.45%
7.76%
24.72%
33.78%
7
4.23%
6.20%
8.81%
28.02%
38.36%
8
4.33%
6.67%
7.84%
25.49%
32.01%
8
4.29%
6.61%
8.85%
29.69%
39.30%
9
4.36%
6.97%
7.67%
26.24%
33.15%
9
4.36%
6.97%
9.01%
31.52%
41.92%
10
4.34%
7.35%
7.88%
25.81%
33.10%
10
4.34%
7.35%
9.51%
32.13%
43.38%
Please refer to Important Notes on page 6 for how performance figures are calculated. Performance data is correct
as of 31st December 2014. Past performance is not an indication of future returns. The value of Investments and any
income from them is not guaranteed and can go down as well as up.
CAERUS Select | 27
CAERUS Strategic Ethical Active (Profile A-D): Portfolio Returns to period end 31st December 2014
from
i
(01
.03 ncept
.20
ion
12)
return
2Y
Ear
return
1Y
Ear
6 month
3 month
return
from
(01
i
.03 ncept
.20
ion
12)
return
2Y
Ear
return
1Y
Ear
6 month
return
return
3 month
Risk Grade
return
CAERUS Strategic Ethical Active - Profile D
CAERUS Strategic Ethical Active - Profile C
Risk Grade
1
1.55%
2.40%
4.89%
7.02%
13.09%
1
1.65%
2.56%
5.05%
7.12%
13.13%
2
2.30%
3.24%
6.11%
10.42%
18.16%
2
2.55%
3.68%
6.75%
10.87%
18.60%
3
3.18%
4.28%
8.16%
13.62%
25.02%
3
3.60%
5.03%
9.39%
14.58%
26.02%
4
3.56%
4.56%
8.02%
17.18%
28.40%
4
4.09%
5.52%
9.66%
18.51%
29.92%
5
3.87%
5.20%
8.24%
20.59%
31.93%
5
4.30%
6.10%
9.87%
21.92%
33.56%
6
4.02%
5.59%
8.24%
23.59%
34.58%
6
4.50%
6.62%
10.20%
25.22%
36.64%
7
4.17%
5.98%
8.24%
26.64%
37.22%
7
4.69%
7.14%
10.54%
28.58%
39.74%
8
4.23%
6.39%
8.42%
27.71%
38.20%
8
4.84%
7.72%
10.98%
29.82%
40.95%
9
4.33%
6.86%
8.72%
29.95%
40.76%
9
4.87%
8.13%
11.24%
32.05%
43.58%
10
4.34%
7.35%
9.35%
31.09%
42.32%
10
4.86%
8.59%
11.85%
33.17%
45.15%
Please refer to Important Notes on page 6 for how performance figures are calculated. Performance data is correct
as of 31st December 2014. Past performance is not an indication of future returns. The value of Investments and any
income from them is not guaranteed and can go down as well as up.
28 | CAERUS Select
CAERUS Strategic Ethical Active Portfolios
CAERUS Strategic Ethical Active (Profile A-D): Asset Class Returns to period end 31st December 2014
Emerging Markets has performed well over all periods, for Ethical Profile B-D, owing to the outperformance of the First State Asia Pacific Sustainability fund. Over 3-6 months Property, Government and Corporate Bonds
have also performed well, whilst UK Equity Growth and Income outperform over 2 years and since inception.
from
(1.3 incept
.20
12)
ion
2 year
return
return
1 year
6 month
return
3 month
from
(1.3 incept
.20
12)
ion
return
2 year
1 year
return
return
6 month
return
3 month
Asset Class
Asset Class
Managed Liquidity
return
CAERUS Strategic Ethical Active - Profile B
CAERUS Strategic Ethical Active - Profile A
0.81%
1.28%
2.69%
4.91%
8.44%
Managed Liquidity
0.81%
1.28%
2.69%
4.91%
8.44%
Ethical Corporate Bonds
3.28%
5.04%
10.26%
12.04%
23.72%
Ethical Corporate Bonds
3.28%
5.04%
10.26%
12.04%
23.72%
UK Government Bonds
7.16%
11.21%
15.24%
12.46%
16.17%
Property
3.87%
7.23%
12.90%
21.28%
25.91%
Property
3.87%
7.23%
13.08%
20.85%
21.24%
UK Ethical Equity Growth
5.23%
4.34%
1.96%
35.07%
45.31%
UK Ethical Equity Growth
5.23%
4.34%
1.96%
35.07%
45.31%
UK Ethical Equity Income
4.71%
5.18%
5.59%
35.51%
47.99%
UK Ethical Equity Income
4.71%
5.18%
5.59%
35.51%
47.99%
International Ethical Equity
4.27%
3.44%
4.31%
25.67%
27.29%
Emerging Ethical Equity
3.46%
14.74%
23.13%
33.06%
54.93%
International Ethical Equity
4.27%
3.44%
4.31%
25.67%
27.29%
Emerging Markets Equity
3.46%
14.74%
16.83%
12.30%
20.27%
from
(1.3 incept
.20
12)
ion
2 year
return
return
1 year
6 month
3 month
return
from
incept
(1.3
.20
12)
ion
return
2 year
1 year
return
return
6 month
return
3 month
Asset Class
Managed Liquidity
return
CAERUS Strategic Ethical Active - Profile D
CAERUS Strategic Ethical Active - Profile C
Asset Class
0.81%
1.28%
2.69%
4.91%
8.44%
Managed Liquidity
0.81%
1.28%
2.69%
4.91%
8.44%
Ethical Corporate Bonds
3.28%
5.04%
10.18%
12.03%
24.52%
Ethical Corporate Bonds
3.64%
5.57%
10.73%
12.38%
24.66%
UK Ethical Equity Growth
5.23%
4.34%
1.67%
34.54%
45.25%
UK Ethical Equity Growth
4.23%
4.04%
2.38%
34.34%
46.34%
UK Ethical Equity Income
4.71%
5.18%
5.89%
31.89%
43.74%
UK Ethical Equity Income
4.71%
5.18%
5.89%
31.89%
43.74%
International Ethical Equity
4.27%
3.44%
3.88%
24.59%
26.19%
International Ethical Equity
6.81%
7.78%
11.48%
31.59%
34.06%
Emerging Ethical Equity
3.46%
14.74%
23.13%
33.06%
54.93%
Emerging Ethical Equity
3.46%
14.74%
23.13%
33.06%
54.93%
CAERUS Select | 29
Portfolio Changes
Portfolios affected: CAERUS Active and Blended Portfolios
BUY
Sell
JPM US Equity Income
AXA Framlington American Growth
Along with many other US Active funds, the AXA fund has struggled of late. A switch
was therefore made into JPM US Equity Income, a bottom up stock picking fund with an
emphasis on quality companies. The fund manager does not like to overpay for companies
so therefore valuation is important. The fund invests in a wide range of sectors to spread
risk. However with a high ‘active share’ the holdings are quite different from the benchmark.
30 | CAERUS Select
Portfolios affected: Rebalancing of the Property Asset Class.
CHANGE
CAERUS Active and Blended Portfolios
Post a review of the Property sector, it was decided to equally weight the holdings
between the Threadneedle, Legal & General and Ignis UK Property funds. With large
money flows into London and South East property markets, this region appears to be
close to fair value. The Threadneedle fund (managed by the highly experienced Don
Jordinson) seeks out higher yielding properties in more secondary locations and as such
appears to offer more upside over the next couple of years.
Index and Peer Group Returns
Index and Peer Group Returns to period end 31st December 2014
1Y
EAR
return
3 year
return
5 year
return
IA Mixed Investment 0-35% Shares
2.02%
2.57%
4.84%
9.24%
16.03%
26.78%
IA Mixed Investment 20-60% Shares
2.06%
2.59%
4.85%
14.13%
23.66%
31.70%
IA Mixed Investment 40-85% Shares
2.69%
3.47%
4.87%
20.04%
32.01%
40.06%
IA Flexible Investment
2.64%
3.67%
4.89%
20.14%
32.31%
38.36%
LIBOR GBP 12m
0.25%
0.52%
0.98%
1.89%
3.49%
6.66%
iBoxx Sterling Gilts All Maturities
6.63%
10.84%
14.67%
9.86%
13.05%
41.91%
Citi UK Inflation-Linked Securities Index
6.82%
12.47%
17.24%
17.84%
18.68%
56.42%
iBoxx Sterling Corporates All Maturities
4.31%
7.19%
12.25%
14.42%
32.28%
51.51%
Barclays Global Aggregate GBP (H)
2.30%
3.55%
7.92%
7.97%
14.37%
26.84%
PIM Property Index
3.29%
6.67%
12.18%
20.43%
21.37%
33.00%
MSCI United Kingdom
-0.44%
-1.35%
0.50%
19.02%
31.15%
44.41%
IA UK Equity Income
2.14%
1.59%
3.16%
29.16%
47.25%
63.83%
MSCI North America
8.11%
14.50%
18.86%
51.15%
65.84%
98.56%
MSCI Europe ex UK
-0.61%
-2.98%
-0.73%
24.36%
44.20%
28.97%
MSCI Pacific ex Japan
2.39%
1.62%
5.72%
9.46%
30.37%
38.13%
MSCI Japan
1.45%
4.54%
1.95%
27.23%
31.60%
35.23%
MSCI World ex UK
5.52%
9.30%
12.52%
40.60%
55.78%
70.82%
MSCI Emerging Markets Index
-0.71%
1.06%
3.90%
-0.69%
12.26%
13.12%
2 year
return
6 mont
return H
3 mont
return H
Performance data for comparative indices is included below over various market periods.
Comparative Indices
Please refer to Important Notes on page 6 for how performance figures are calculated. Performance data is correct as of 31st December 2014. Past
performance is not an indication of future returns. The value of Investments and any income from them is not guaranteed and can go down as well as up.
CAERUS Select | 31
Notes
32 | CAERUS Select
CAERUS Select | 33
Notes
34 | CAERUS Select
CAERUS Select | 35
CAERUS Portfolio Management Limited
Building 120
Windmill Hill Business Park
Swindon
SN5 6NX.
Registered in England & Wales under No 03056894.
CAERUS Portfolio Management Limited is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fsa.gov.uk/register) under reference 175524.