WealthSelect: Nine-years old and still growing strong
The WealthSelect Managed Portfolio Service celebrated its ninth anniversary in February 2023. In the years since launch, its track record for consistent outperformance, in both rising and falling markets, has seen it grow to become one of the largest managed portfolio services in the UK.
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Past performance is not a guide to future performance and may not be repeated. Investment involves risk. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. Because of this, an investor is not certain to make a profit on an investment and may lose money. Exchange rates may cause the value of overseas investments to rise or fall. www.quilter.com Please be aware that calls and electronic communications may be recorded for monitoring, regulatory and training purposes and records are available for at least five years. The WealthSelect Managed Portfolio Service is provided by Quilter Investment Platform Limited and Quilter Life & Pensions Limited. “Quilter” is the trading name of Quilter Investment Platform Limited (which also provides an Individual Savings Account (ISA), Junior ISA (JISA) and Collective Investment Account (CIA)) and Quilter Life & Pensions Limited (which also provides a Collective Retirement Account (CRA) and Collective Investment Bonds (CIB)). Quilter Investment Platform Limited and Quilter Life & Pensions Limited are registered in England and Wales under numbers 1680071 and 4163431 respectively. Registered office at Senator House, 85 Queen Victoria Street, London, United Kingdom, EC4V 4AB. Quilter Investment Platform Limited is authorised and regulated by the Financial Conduct Authority. Quilter Life & Pensions Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Their Financial Services register numbers are 165359 and 207977 respectively. VAT number 386 1301 59. Quilter uses all reasonable skill and care in compiling the information in this communication and in ensuring its accuracy, but no assurances or warranties are given. You should not rely on the information in this communication in making investment decisions. Nothing in this communication constitutes advice or personal recommendation. Data from third parties (“Third-Party Data”) may be included in this communication and those third parties do not accept any liability for errors and omissions. Therefore, you should make sure you understand certain important information, which can be found at www.quilter.com/third-party-data. Where this communication contains Third-Party Data, Quilter Investors cannot guarantee the accuracy, reliability or completeness of such Third-Party Data and accepts no responsibility or liability whatsoever in respect of such Third-Party Data. QIP 22792/April 2023
Data as at 31 March 2023.
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A safe pair of hands in falling markets
Adapting quickly to changing conditions
Staying within the lines
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WealthSelect is the first port of call for over 2,100 financial adviser firms across the UK.
WealthSelect is the investment of choice for more than 77,000 investors and their families.
WealthSelect is trusted with over £11bn of savings from investors.
2,100
financial adviser firms
77,000
investors and their families
£11bn
assets under management
The ongoing success enjoyed by the WealthSelect Managed Portfolios partly stems from its consistent track record of outperforming their IA sector performance comparators and, by extension, the peace of mind this provides to investors. Last year, was a prime example of this with the WealthSelect Managed Portfolios outperforming their IA sector performance comparators during the severe market declines of the first three quarters and also in the last quarter when markets rallied significantly.
Investing for the long term
The growth and success of WealthSelect has been driven by the efficiencies, risk reduction and performance we have delivered to adviser businesses like yours. We understand the intricacies of the advice process and have designed WealthSelect to give you the power to provide your clients with a personalised solution that matches their investment preferences. The WealthSelect Managed Portfolios use a disciplined, long-term asset allocation approach, designed to maximise the potential return for an expected level of risk. The portfolios seek to meet their objectives through a combination of strategic asset allocation, tactical asset allocation, and manager selection. The process is structured, but also allows the portfolio management team discretion to manage the portfolios as they believe is appropriate to achieve the best outcome for investors, in line with the objectives of the individual portfolios.
Investing through volatile times
2022 was a year of unrivalled turbulence: inflation hit 40-year highs; central banks embarked on the most aggressive rate-hiking cycle in decades; Russia invaded Ukraine causing a brutal war triggering both an energy and a cost-of-living crisis; and value stocks outperformed growth by more than 26% – an all-time record. Despite the economic backdrop and the extreme movements in markets, each of the WealthSelect Managed Portfolios notably outperformed their respective IA sector performance comparators during the first nine months of the year, and also captured the upside during the market rally in the fourth quarter of the year.
Source: Quilter Investors as at 31 December 2022. Total return, percentage growth over period 31 December 2021 to 31 December 2022. All performance figures are net of underlying fund charges, but gross of the Managed Portfolio Service charge. Deduction of this charge will impact on the performance shown.
Managing the risks
The WealthSelect Managed Portfolios started 2022 positioned more cautiously than their peers. However, by the March 2022 rebalance they were once again reducing investment risk. Equity exposure was cut across the risk level 4 to 7 portfolios and rotated in the risk level 3, 8, and 10 portfolios. Within this the portfolios reduced their UK equity exposure, took some profits from their commodity, emerging market, and value strategy holdings, and trimmed their UK gilt weighting in favour of increased global government bond exposure.
A balancing act
At the next rebalance in June 2022, the portfolios again added to their fixed-income weighting – further reducing the long-standing underweight to such assets at the expense of equities and cash. Except for the risk level 10 portfolios, all the remaining WealthSelect Managed Portfolios added to their traditional fixed-income exposure and topped up their higher-grade corporate bond holdings. In September, the portfolios further reduced their equity exposure, remaining underweight to UK equities, and once more topped-up their allocations to fixed income, further selling down their allocation to UK gilts and adding more global sovereign bond exposure. The decision to hold cash, alternatives, and total-return funds over conventional bond funds demonstrated its value in 2022. Although returns were often modest, they significantly outperformed both equity and fixed-income holdings in the first half of 2022, underlining the benefit of the diversified approach of WealthSelect and delivering the additional capital boost required when the portfolios were rebalanced to capture greater returns in October 2022.
Ready to outperform
Following the extreme sell-off seen in government bonds, something that was greatly exacerbated in the UK by the calamitous budget announcement from the short-lived Liz Truss government, the portfolio management team decided it was time to take advantage of mispricing opportunities in both equity and bond markets and start adding risk back to the portfolios. The ad hoc rebalance in October of 2022 set the scene for the WealthSelect Managed Portfolios to again outperform their IA sector performance comparators during the last quarter of 2022 and into 2023.
Managed Active 5
IA Mixed 20-60% Shares
The disciplined and consistent way in which the portfolio management team approach the regular portfolio rebalances is a good part of the investment success enjoyed by the WealthSelect Managed Portfolios in the nine years since their launch. Another factor of the continued success is the freedom given to the portfolio management team to make additional ad hoc rebalances when market conditions require more timely action.
The WealthSelect Managed Portfolios are actively managed with regularly scheduled rebalances at the end of each quarter. These ensure the asset allocation remains in line with the views of the portfolio management team and the total risk for each portfolio remains well within the stated boundaries. However, in times of acute market stress, the portfolio management team can also make ad hoc asset allocation adjustments to avoid the worst of a potential downturn or to participate more fully in any opportunities that may arise.
Business as usual
A good example of the portfolio management team’s flexibility was the ad hoc rebalance of the WealthSelect Managed Portfolios in October 2022. This was only a matter of weeks after the regular September rebalance had seen the portfolio managers ‘battening down the hatches’ by reducing equity exposure – especially to the UK – and topping-up fixed-income weightings while further reducing UK gilt exposure in the wake of September’s calamitous UK budget announcement. The September 2022 rebalance reflected the headwinds facing the UK in terms of spiralling inflation, aggressively rising interest rates, a crash in sterling, and the expectation of still more government borrowing to support households through the cost-of-living crisis. However, by late October markets had moved to such an extent that the potential opportunity for investors warranted a further, ad hoc, rebalance.
Responding to the conditions
Although WealthSelect investors had historically been well-rewarded for the portfolios’ distinctive underweight to traditional fixed-income assets, by October pricing opportunities in government bond markets were too good to ignore.
The October 2022 ad hoc rebalance is just one of numerous examples where timely intervention by the portfolio management team has added real value for investors over the years. Other good examples include keeping fixed-income exposures at around half their launch levels until recently or the decision to increase the WealthSelect Managed Portfolios weighting to developed market equities at the expense of UK equities in early 2017 following the Brexit vote. They also took profits from numerous alternatives holdings to add to their global equity weightings and to go overweight to UK equities for the first time in more than six years.
Acting swiftly
The active asset allocation has added great value for investors over the years by improving total returns while keeping risk well within the boundaries advisers have agreed with their clients.
Investors didn’t have long to wait to enjoy the benefits of this timely move. Equity and bond markets rallied significantly in both October and November 2022 thanks to broad hopes that central banks would soon start to relent in their interest-rate increases following consecutive monthly declines in US inflation; the new UK government successfully walked back most of the September budget announcement allowing both UK government gilts and sterling to bounce back considerably, and in China there was positive news that it was finally dismantling its ‘zero-covid’ regime.
Enjoying the upside
In the nine years since the launch of WealthSelect, all the Managed Portfolios have generated an enviable track record of outperforming their respective IA sector performance comparators. This outperformance has been achieved whilst ensuring the portfolios have always stayed within the eight clearly defined risk targets.
Since launch the WealthSelect Managed Portfolios have generated an enviable track record of outperforming their respective IA sector performance comparators. Importantly, the total returns since launch for WealthSelect Managed Active 3 to Managed Active 10 have risen sequentially in line with the total level of risk in each portfolio.
An enviable track record
Click here to view the complete performance of the Managed Porfolios
Source: Quilter Investors as at 31 March 2023. Total return, percentage growth rounded to one decimal place over time periods shown. All performance figures are net of underlying fund charges, but gross of the Managed Portfolio Service charge. Deduction of this charge will impact on the performance shown. The WealthSelect Managed Active Portfolios launched on 24 February 2014.
The sequential increase of reward in line with the increased level of risk is an encouraging trait for any prospective investor as it shows that the portfolio management team have a disciplined, repeatable, and successful approach to managing risk. This ensures that, over the long term, investors are rewarded for each additional unit of risk in their portfolio. This can be seen from the relative outperformance of both the lowest-risk portfolio, the Managed Active 3 Portfolio, and the highest-risk portfolio, the Managed Active 10 Portfolio. The outperformance of the WealthSelect Managed Active 10 Portfolio over its IA Global sector performance comparator is an especially impressive illustration of the ability of the portfolio management team to manage a ‘risk budget’, namely assessing where best to take investment risk. This is because, unlike its peers in the IA Global sector, which are 100% equity funds, the Managed Active 10 Portfolio includes an allocation to both fixed income and alternatives. This means that in the nine years since its launch, the portfolio has managed to outperform the average fund in the IA Global sector but for significantly less investment risk.
A disciplined, repeatable, and successful approach
Source: Quilter Investors as at 31 March 2023. Annualised return, percentage growth and annualised volatility over period 24 February 2014 to 31 March 2023. All performance figures are net of underlying fund charges, but gross of the Managed Portfolio Service charge. Deduction of this charge will impact on the performance shown. The WealthSelect Managed Active Portfolios launched on 24 February 2014.
The consistent outperformance has been achieved whilst remaining within the volatility targets set out in the objectives of the portfolios and promised to investors. The chart below shows how the portfolio management team have consistently added value for investors over the years by expressing their investment views in the portfolios while remaining safely within the stated risk boundaries agreed with clients. Each dot represents the forward-looking 10-year volatility of the Managed Active 5 Portfolio at the start of each quarter since launch.
Constant monitoring delivers long-term outperformance
Source: Quilter Investors as at 28 February 2023. 10-year forward looking volatility of the WealthSelect Managed Active 5 Portfolio over period 24 February 2014 to 28 February 2023. The WealthSelect Managed Active Portfolios launched on 24 February 2014.
The risk management of the WealthSelect Managed Portfolios is achieved by actively adjusting the asset allocation in the portfolios, both at the regular quarterly rebalances and by using ad hoc rebalances implemented when the portfolio managers believe market conditions warrant a more immediate response. As the chart shows, the portfolio management team consistently reduced risk in the Managed Active Portfolios in the run-up to the UK Brexit vote in 2016, bringing total portfolio risk to its lowest levels in the immediate wake of the referendum. Over the course of the coming year, investment risk was steadily increased towards the upper limit of the volatility target. Incremental additions to investment risk throughout the course of 2017 and 2018 brought it to its highest level late in that year before being substantially reduced coming into 2019.
A pragmatic approach
Such nip and tuck is characteristic of the WealthSelect approach. The benefits were clear in March 2020 when the portfolio management team reduced equity risk to help shield investors from the worst declines triggered by the pandemic lockdown, only to return later in the month with an ad hoc rebalance which added risk back into the portfolios, allowing clients to participate in the subsequent market rally. Another good example came in 2022, when the portfolio management team commenced the year with a cautious stance after having consistently reduced risk across the portfolios over the course of 2021. Thanks to one of the most volatile starts to a year in living memory, investors were rewarded for this caution with the portfolio management team further trimming risk throughout the course of 2022, only to return in October 2022 with an ad hoc rebalance. This added risk, enabling the portfolios to participate in the rising markets seen late in the year and to outperform their respective performance comparators once again. It’s this pragmatic, flexible approach, which seeks to actively mitigate losses during market downturns while capturing a good proportion of the potential upside when markets are climbing, that continues to deliver such strong risk-adjusted returns for investors.
The benefits of WealthSelect
Source: Quilter Investors as at 31 March 2023. Total return, percentage growth rounded to one decimal place over period 24 February 2014 to 31 March 2023. All performance figures are net of underlying fund charges, but gross of the Managed Portfolio Service charge. Deduction of this charge will impact on the performance shown. The WealthSelect Managed Active Portfolios launched on 24 February 2014.
To find out more about the WealthSelect Managed Portfolio Service, please click here.
