JCB ACTIVE FUND IS UP 11.13 % (GROSS) OVER 19 MONTHS SINCE INCEPTION IN DECEMBER 2014, RUNNING A PORTFOLIO OF LONG ONLY AAA AND AA+ RATED EXPLICITLY GUARANTEED GOVERNMENT BONDS.

REMAIN ON HIGH ALERT, KEEP CALM & CARRY ON, CRISIS MANAGEMENT IN POLITICAL VACUUM

History does not repeat, but it can often rhyme. At the time of writing 6 retail UK property funds with $18 billion of assets have been frozen to investors sighting ‘’exceptional illiquidity.’’ These fund providers are all household names in the UK. Standard Life, Aviva, Aberdeen Asset Management, Henderson, Threadneedle and Canada Life now have products seized shut by market liquidity vanishing just like that.

In 2008, Bear Sterns froze two subprime funds (Bear Sterns ultimately failed) in what is often described as the prelude to the GFC, sparking contagion fears around all markets. The 2nd and 3rd round implications from BREXIT continue to playout and it is too early to know if this will morph further towards a full blown crisis,or be contained and perhaps another buying opportunity for quality assets. We believe more patience is required with this scare then previous market wobbles in August 2015 and Jan 2016.

As it stands today, the UK remains leaderless in all 3 major political parties. It is the first sovereign ever to be double downgraded from AAA to AA (usually go to AA+ first), and its GBP currency has suffered a peak to trough depreciation of 15% so far. Spare a thought for any businesses with USD debts but GBP revenues. Two weeks on from the vote we are no closer to understanding how BREXIT will work, what timeframes are required or who will lead the complex negotiations with Brussels. This situation requires heightened monitoring and will continue to dominate investor sentiment.

Unfortunately BREXIT has let the volatility genie out of the bottle. The ripples of such large moves in GBP currency markets will not remain contained. Central banks have used policy to fight poor fundamentals and dampen volatility since the GFC, however, this is different. After the one off shock of BREXIT we are now left with a number of continuing unknowns which cannot be easily dampened. In our last two monthly’s updates we have advised investors that ‘’we have concerns about macro events coming up, but well diversified portfolios will continue to perform in all scenarios. If you don’t have a balance of growth, income, defensives and liquidity then you could be in for a bumpy ride.’’ The bumps maybe just beginning. Good planning and process and asset allocation will be critical to holding investors in good stead.

Crisis management follows an obvious playbook. The better prepared and cooler the head, the better the financial outcomes. Keep calm and carry on trading perhaps? Volatility produces wonderful opportunities to both buy and sell assets, but investors must have a plan and stick to the script as these opportunities present themselves. Today’s bid can be tomorrows offer very quickly and vice versa. High quality assets may be dragged cheap making for good buying, low quality will be dragged down and may not recover. Liquidity management remains paramount, leverage, margin loans or high debt burdens need careful consideration as margin requirements can be increased or loans called at short notice.

In the aftermath of the BREXIT vote Jamieson Coote Bonds hosted a brief 30 minute conference call for investors to utilise the collective financial experience of the founders and advisory board members Saul Eslake and Mark Burgess, to discuss the opportunities and risks presented by such a shock vote. A recording of the call is still available on 1800 154 669, please use passcode 2386 78009.

Jamieson Coote Bonds Active Fund has performed at a monthly run rate of +58 bps (gross) since inception for a return of 11.13% (gross) running a portfolio of AAA and AA rated Government Bonds. The largest draw down in any month has been -62bps.