AUGUST 2014
AUGUST 2014
FPI PREMIER SAVINGS PLAN
INVESTMENT OBJECTIVE
Amici International Corporation aims
to achieve long-term Capital Growth
by investing in a diversified portfolio
including emerging markets,
commodities, resources, energy,
precious metals and other high
growth opportunities.
Composition and Performance of Portfolio
1 Month
Investec Global Strategic Equities
DWS Global AgriBusiness
CGWM Select Global Opportunity
Vanguard US 500 Stock Index
Invesco Global Technology
Schroder US Smaller Companies
Invesco Global Healthcare
Invesco US Structured Equity
JPM USD Liquidity
3 Months
6 Months
YTD
-2.50%
1.34%
6.39%
5.04%
-3.87%
-3.59%
4.30%
1.22%
-2.34%
-0.77%
-0.33%
0.33%
-1.69%
2.93%
7.23%
5.04%
-2.91%
4.76%
0.49%
2.07%
-3.77%
1.54%
1.31%
-1.59%
-1.86%
5.33%
2.73%
6.13%
-3.98%
0.33%
4.24%
0.12%
-0.11%
-0.34%
-0.68%
-0.79%
AUGUST 2014
Portfolio Performance % P/L July
MARKET REVIEW JULY
Volatility returned to markets in July as a number of factors contributed to market instability. These included geopolitics,
sanctions against Russia and shocks to the Portuguese banking system. However, the overriding influence remains central
bank policy. Ultra loose monetary policy has reduced market volatility and explains why markets were unresponsive to the
increase in geopolitical tensions earlier in July.
However, as expectations change for rising interest rates, volatility has crept back in. By the end of July volatility had risen
to its highest level since April, while the yield on high yield bonds surged as fears rose over market liquidity should interest
rates start to increase.
Developed markets sold off in the last week of July erasing earlier gains. The MSCI World index fell by 0.8% over the
month, while global bond markets were also lower, with the Barclays Global Aggregate Index falling close to 1%. In
comparison, emerging market equities gained 3.1% as sentiment towards China improved.
The US economy rebounded in the second quarter, expanding by 4% on an annualised basis as we had predicted. The
underlying trend in economic growth is seemingly robust. The release of revised historical data showed the economy had
fared better than first thought, with an upward revision to 2013 numbers. Rising business and consumer surveys suggest
that the current momentum could continue throughout the rest of the year.
Meanwhile, stronger company fundamentals should support US equity markets. With 81% of the S&P 500 by market
capitalisation having reported earnings (at the time of writing), nearly 70% of companies have beaten analyst earnings
expectations. We expect some sort of recovery in markets before more volatility in the fall.
The MSCI Pacific Index returned 0.1% in the week to 1 August. In Japan, Industrial output for June fell at the fastest rate
since 2011, leading to concerns over the ability of the government’s Abenomics programme to end deflation and restore
growth.
AUGUST 2014
PORTFOLIO REVIEW.
We had been expecting some sort of correction to strong equity gains earlier this year, and we did indeed get a modest
correction the last week of July resulting in weak performance for the Funds in the portfolio. However, as of this writing,
markets have clawed back their losses and are pushing higher. Rather than trying to second-guess the markets, we stick
to our strategy of being modestly positive on risk assets, and overweight equities vs. bonds, while aiming to run lower
levels of portfolio risk.
PORTFOLIO CHANGES
None
FUND FEATURES AND PORTFOLIO OUTLOOK
Investec Global Strategic Equities
The Fund aims to provide long-term capital growth primarily through investment in equities of listed companies from
around the world.
Stocks fell sharply in the last week of July, amid further uncertainty over the timing of the first US interest rate increase.
Concern over Russian sanctions, Argentina’s sovereign default and the European financial sector also hit sentiment, with
the S&P 500 falling 2.7% and the Dow Jones down 2.8%. This was largely predicted and we think equities will rebound but
turbulence will remain. Hold
Investec Global Strategic Equities Performance
Cumulative Performance to 25/07/2014
1 month
Growth %
-2.50%
3 months
1.34%
6 months
6.39%
YTD
5.04%
DWS Global Agribusiness
Invests globally in companies that are either in the agricultural sector or profit from this sector.
Volatility finally hit the markets and there was a general fall in equities across the board. Speculation over US interest rates
intensified as economic data strengthened and growth momentum appears to have carried through into the third quarter
so we expect the fund to recover in line with overall market trends. Importantly, the long term fundamentals remain in
place.-3.87% for the month. Hold.
DWS Global Agribusiness Performance
AUGUST 2014
Cumulative Performance to 25/07/2014
Growth %
1 month
3 months
6 months
YTD
-3.87%
-3.59%
4.30%
1.22%
CGWM Select Global Opportunities
Designed for those investors seeking a consistent total return from a combination of capital growth and income with the
prospect of moderate growth over the longer-term. The fund holds multiple asset classes to achieve its goal.
Select Global opportunities fund followed the market dip at the end of July as markets pulled back. We expect the fund to
rebound as economic data still seems reasonably strong although the turbulence of geo political events can easily upset
things. Hold
CGWM Select Global Opportunities performance
Cumulative Performance to 25/07/2014
Growth %
1 month
3 months
6 months
YTD
-2.34%
-0.77%
-0.33%
0.33%
Vanguard US 500 Stock Index
The fund seeks to track the performance of the Standard & Poor’s (”S&P”) 500 Index,
In the US, the S&P 500 posted a negative return for July. Macroeconomic data largely confirmed the ongoing improvement
in the US economy, particularly in the labour market, although this in turn raised concerns that US interest rates could rise
sooner than expected, making markets nervous. Combined with ongoing Political events, equities sold off at the end of July
resulting in an overall negative performance. Hold
Vanguard US 500 Performance
AUGUST 2014
Cumulative Performance to 25/07/2014
Growth %
1 month
3 months
6 months
YTD
-1.69%
2.93%
7.23%
5.04%
Invesco Global Technology
The objective of this Fund is to achieve long term capital growth by investing in technology companies throughout the
world.
The tech sector underwent a steep decline in July. The sector has had a good run and some of these prices may have
become over inflated. -2.91% for July but we expect prices to rebound. Hold
Invesco Global Technology Performance
Cumulative Performance to 25/07/2014
Growth %
1 month
3 months
6 months
YTD
-2.91%
4.76%
0.49%
2.07%
Schroder US smaller companies
AUGUST 2014
The fund's investment objective is to achieve capital appreciation through investment in US smaller companies.
Following another week of elevated volatility for the broad market, analysts seem unsure if we are positioned for a
prolonged market pullback. Small cap stocks have performed particularly well over the last year but unfortunately, they
seem to suffer more than most when volatility increases. -3.77% for the last month. Hold
Schroder US smaller companies performance
Cumulative Performance to 25/07/2014
Growth %
1 month
3 months
6 months
YTD
-3.77%
1.54%
1.31%
-1.59%
Invesco Global Healthcare
The aim of the fund is to achieve capital growth by investing in healthcare companies throughout the world.
Biotech Stocks took a hit as a-Risk Off sentiment hit the market. We expect the market trend to stay intact but expect a
choppy summer. The sell-off late in July seemed to hit most healthcare/ biotech stocks. Hold
Invesco Global Healthcare performance
Cumulative Performance to 25/07/2014
Growth %
1 month
3 months
6 months
YTD
-1.86%
5.33%
2.73%
6.13%
AUGUST 2014
Invesco US Structured Equity
Aim: achieve long term capital appreciation by investing in a diversified portfolio of large cap equities.
A sharp decline on the final trading day of the month pushed large-cap indexes to a loss for July, while small- and mid-cap
shares seemed to suffer more. Performance was -3.98 % for the month but we expect the trend to reverse. Be prepared
for rebound but volatility will never be far away. Hold.
Invesco US Structured Equity performance
Cumulative Performance to 25/07/2014
Growth %
1 month
3 months
6 months
YTD
-3.98%
0.33%
4.24%
0.12%
JPM USD Liquidity
The fund seeks to achieve a return in line with prevailing money market rates whilst aiming to preserve capital consistent
with such rates and to maintain a high degree of liquidity.
Cumulative Performance to 25/07/2014
Growth %
1 month
3 months
6 months
YTD
-0.11%
-0.34%
-0.68%
-0.79%
OUTLOOK
Markets ended July with risk assets selling off. Over the past 3-4 weeks, there has been a rotating pullback in several asset
classes, headed by U.S. high yield, European periphery bond spreads and commodity prices. In contrast, the U.S. dollar has
risen by 2.8% since early May.
There are a number of explanations for this period of turbulence, with none of them being totally convincing in isolation.
The first is that expectations for Fed tightening have been brought forward, in response to relatively robust U.S. data. The
second is that there have been growing concerns about the Eurozone, as reflected in poor data at the end of July. Finally,
geopolitical risk has risen with the escalating tension in Ukraine and Gaza. However, no one explanation accounts for
moves in markets that we have seen recently, with equities and bond yields falling, European equities and peripheral
bonds underperforming global stocks, and commodities falling—rather than rising, as would be expected.
AUGUST 2014
We think that the markets are undergoing a “liquidity” shock; and analysis suggests that monetary conditions began
tightening from May 2013 onwards and volatility shocks should therefore be expected.
Global Growth Chart
Overall, we think the U.S. market will continue its bullish trend; we believe it to be fairly valued or slightly over-valued, and
expect at worst a 10 percent correction. A larger correction would likely be caused by rising interest rates, and the current
slow growth argues against higher rates near-term. We remain sceptical of the strength of Eurozone financial institutions,
and therefore have a negative outlook with regards to European growth prospects.