Levitas Update

Both Levitas A and Levitas B have been impacted by the market decline (by 6% and 1.9%, respectively since the start of October) with Levitas A slightly behind the IA Flexible sector and Levitas B’s fall broadly in line with movements of the IA Mixed Investment 0-35% sector. This portfolio does have a degree of exposure to equity markets, so when stocks come under pressure it is unlikely to be immune; the equity positions were the primary cause of the portfolio’s fall. Bond positions generally held up much better and it was good to see that those positions the portfolio provided some protection from difficult markets, as they fell by much less than equities. To some degree, this mirrors what we saw in February.

Levitas A has been affected to a greater extent, due to its much higher exposure to equities. The Fund is down over the month to date and behind the IA Flexible sector. None of the broad equity sectors within the portfolio have been immune to the market decline, and the main detractors have been elements of the portfolio that had been top drivers of returns up until October, namely technology and smaller companies. Standard Life Global Smaller Companies, Scottish Mortgage and Polar Capital Global Technology are all down in excess of 11% over the month, whilst US, European and Japanese smaller companies are all down nearly 10%. Momentum-based funds such as the Meridian UK Smaller Companies Focus have also been hit quite hard, but we have seen much better performance from positions in ‘value’ funds, such as Aberforth Smaller Companies, JO Hambro UK Equity Income, and GLG Undervalued.

In terms of portfolio outlook, we remain broadly happy with the positioning of both Levitas A and Levitas B. We feel that this recent market volatility is a temporary blip, and that economic data from the US remains solid. The expectations are for a solid set of Q3 earnings results and, assuming this turns out to be correct, that investors will re-focus on the fundamentals. Nevertheless, we think we are now in an environment where we could expect more instances of short, sharp market pull-backs and we acknowledge that some of the positions that have served the portfolio well may be more at risk in these scenarios. We also feel that we are heading towards the end of the current market cycle and whilst we remain positive over the prospects for equities in the near term, we need to be aware of the potential additional risks posed by this stage of the market cycle.

This document is intended for professional advisers only and should not be relied upon by any persons who do not have professional experience in matters relating to investments.

Investors should be aware that the price of investments and the income from them can go down as well as up and that neither is guaranteed. Past performance is not a reliable indicator of future results. Investors may not get back the amount invested. The information in this document does not constitute advice or a recommendation and you should not make any investment decisions on the basis of it.

Brooks Macdonald is a trading name of Brooks Macdonald Group plc used by various companies in the Brooks Macdonald group of companies. Brooks Macdonald Group plc is registered in England No 4402058. Registered office: 72 Welbeck Street, London  W1G 0AY.

Brooks Macdonald Asset Management Limited is authorised and regulated by the Financial Conduct Authority. Registered in England No 3417519. Registered office: 72 Welbeck Street, London  W1G 0AY.

More information about the Brooks Macdonald Group can be found at www.brooksmacdonald.com.

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