Premier Multi-Asset Distribution Fund - Fund update | First quarter 2020
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Premier
Multi-Asset Distribution Fund
Fund update | First quarter 2020
FOR INVESTMENT PROFESSIONALS ONLY.
NOT FOR DISTRIBUTION TO RETAIL CLIENTS
Q1 2020
Premier Multi-Asset Distribution Fund
Need to know Contents
The fund’s five essential characteristics: 3 Performance summary
Aiming to pay an income that rises over time with some 4 Income
long-term capital growth.
5 Market performance
For long-term investors - not for those seeking
6 Performance drivers - asset allocation
short-term gains.
7 Noteworthy holdings during the last quarter
Risk level – appropriate for the IA Mixed Investment
20%-60% Shares sector. 8 Activity - asset allocation
Invested in risk assets – there will be times when its price 9 Activity - holdings
will fall.
10 The complete portfolio
Diversified – seeking returns and protection from a range
11 Investment risk controls and parameters
of assets.
12 Glossary of terms
The performance information for Premier Multi-Asset Distribution Fund in this 13 General investment risks
document is based on the C share class, which has the lowest charging structure of
the share classes available. Many funds sold in the UK are grouped into sectors by the 16 Important information
Investment Association (the trade body that represents UK investment managers), to
facilitate comparison between funds with broadly similar characteristics. The fund is
classified in the IA Mixed Investment 20% to 60% shares sector, which we believe is a
meaningful comparator to help investors assess the performance of the fund.
2
Premier Multi-Asset Distribution Fund
Performance summary
— With risk assets falling sharply on the back of the economic Quarter ending 31.03.2020
chaos caused by the COVID-19 pandemic, the fund’s price
also declined. It’s disappointing that, after three consecutive 0
years of out-performance (and 8 of the last 10), the fund
Total return (%)
fell by more than the sector average over the quarter. This -6 Premier Multi-Asset
was primarily due to a relatively high exposure to UK equity Distribution Fund
income funds and taking less overseas currency risk than -12 IA Mixed Investment
the peers. However, there were other contributing factors: 20%-60% Shares
Our closed-end funds endured steep falls, as did many of
-18
our corporate bond and loan holdings. In nearly all cases, we
feel the declines are not justified by fundamentals and we
expect prices to recover to reflect that. -24
— On the positive side, we held around a fifth of the portfolio
in cash by mid-March, which helped greatly. We have since
redeployed most of this into bond funds which now offer
Discrete years
much better income (and growth) prospects than they did 30
at the end of 2019.
20
— The diversification benefits of holding multiple investment
2020
2018
2011
Total return (%)
ytd
strategies has not been evident recently but this did enable 10
the fund to hold up much better than the UK stock market.
0
And, given multiple sources of income, we expect our fund’s
income stream to be higher and more stable than that of an -10
equity income fund going forward.
2015
2019
2017
2016
2010
2013
2014
2012
-20
-30
Chart source: FE Analytics, bid to bid, total return, income reinvested, UK sterling basis, data based on class C income shares. Data to 31.03.2020. On 20 January 2020, this
fund moved from a single pricing basis (mid) to a swing pricing basis, which is where the price can swing to either a bid or an offer basis depending on the investment and
redemption activity in the fund. This means the investor selling or buying fund shares bears the associated [dis]investment costs and protects the continuing holders in
the fund. Performance could be shown on a combination of bid, mid or offer prices, depending on the period of reporting. Performance is shown net of fees with income
reinvested. Past performance is not an indication of future returns.
3Q1 2020
Income Distribution history
7
Annualised historic yield as at 01.04.2020
6.0p 6.1p
5.8p
6 5.5p 5.6p
5.7
5.5p
%1
5.3p
5.1p 5.0p
Net pence per share
5 4.5p
4
Last quarterly payment made:
1.3680 pence per share (paid on: 31 January 2020) 3
Total paid out in respect of 2019/20 financial year: 2
4.5364 pence per share (3 out of 4 payments)
1
Total paid out in respect of 2018/19 financial year:
6.0922 pence per share (4 out of 4 payments) 0
10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20
Next quarterly payment: Financial year ending 28 February
1.6314 pence per share (to be paid: 30 April 2020)
— The fund has continued to produce a high income over
the last year, helped by UK and overseas firms paying
record dividends. Clearly the next year will be challenging,
with dividend cuts/suspensions already being announced.
Fortunately, we are not wholly reliant on equities for
income, although even here there are still attractive yields
following the sell-off.
— As things stand, we expect equity dividends to recover in
2021. In the meantime, there are many attractively priced
assets which will pay reliable, regular income with strong
potential for capital growth.
¹ Based on class A income shares. The historic yield reflects distributions declared over the past twelve months (including the next dividend payment, payable 30.04.2020)
as a percentage of the share price of the fund. The yield is not guaranteed and will fluctuate. Past performance is not an indication of future returns.
4Premier Multi-Asset Distribution Fund
Market performance
Total returns for quarter ending 31.03.2020
— After an unremarkable start to the year, equity markets collapsed in
UK gilts 6.3% March as the COVID-19 pandemic spread to Europe and the US.
— Bond markets initially proved defensive, but as panic spread they
UK commercial property -1.0% too joined the descent, leading to the highly unusual occurrence of
government bonds and equities declining simultaneously (normally
they move in opposite directions). However, following concerted
Global equities -15.6%
action from central banks to buy bonds, these markets stabilised.
— Oil prices, which had already dropped due to the pandemic,
UK large caps -23.8%
plummeted on the back of increased supply from Saudi Arabia
and Russia. While this is good news for most, for some - such as oil
UK equities -25.1% companies or those that have financed them - it is disastrous. Most
markets reacted with further falls in prices.
UK mid caps -30.7% — On a regional basis, UK equities were among the hardest hit, while
sterling also fell sharply as the US dollar rallied (although this has
since partially reversed).
UK small caps -32.4%
— Looking across markets, the winners (which is to say those that
-40% -20% 0% 20% lost the least) tended to be large-cap ‘growth’ companies. Mid and
small-sized companies, in contrast, were hit particularly hard, while
Equities Bonds UK commercial property ‘value’ stocks of all sizes also took the brunt of the selling.
Source: FE Analytics, bid to bid, total return, UK sterling basis. Indices: FTSE Small Cap (ex IT) (UK small caps), FTSE 250 (UK mid caps), FTSE All Share (UK equities),
FTSE 100 (UK large caps), FE UK Property Proxy (UK commercial property), FTSE World (Global equities), FTSE Actuaries UK Conventional Gilt All Stocks (UK gilts).
Past performance is not an indication of future returns.
5Q1 2020
Performance drivers - asset allocation
Fund breakdown at end of last quarter (31.12.2019)
Helped
— High levels of cash going into the crisis
— Redeploying cash into risk assets late in March at lower prices
— No high-yield bonds or suspended open-ended property funds
— Modest exposure to outperforming Japan and Asia equities
UK equities 31.0%
European ex-UK equities 4.5% Hurt
Emerging market equities 4.3%
Asian ex-Japan equities 3.6%
— Minimal weighting in UK government bonds
Japanese equities 3.2% — Closed-ended funds sold-off regardless of underlying assets
Convertibles 2.7% — Bias to value stocks which lagged expensive growth stocks
Other equities 2.2%
Specialist bonds 15.4%
— Relatively large weighting in UK equities
Investment grade bonds 8.4% — Lower overseas currency exposure
Emerging market debt 6.5%
High yield bonds 5.0%
Gilts 2.1%
IA sectors - total return for quarter* ending
UK commercial property 4.4% 31.03.2020
Alternative assets 1.3% UK Gilts 7.3%
Cash 5.4%
Sterling Corporate Bond -4.4%
Sterling High Yield -15.0%
UK Commercial Property 1 -18.7%
1
UK All Companies -28.0%
UK Equity Income -28.3%
* Source: FE Analytics, bid to bid, total return, UK sterling basis. 1IA Property Other. UK Smaller Companies -30.0%
Past performance is not an indication of future returns. Please note that the asset
allocation may be above or below 100% due to rounding. -40% -20% 0% 20%
Equities Bonds UK commercial property
6Premier Multi-Asset Distribution Fund
Noteworthy holdings during the last quarter
Positive Negative
— Evenlode Income — BNY Mellon Global Infrastructure
A focus on larger, high-quality companies, as well as a Expected to be a more defensive equity holding but its
relatively high overseas weighting, helped this fund to value bias hurt, as did its unfortunate exposure to Italian
defend well. companies.
— Fidelity Moneybuilder Dividend — Empiric
A decent weighting in defensive stocks, including healthcare, Having shaken off operational issues, this REIT was
helped this fund outperform the index and peers over the knocked by concerns over university closures and student
quarter. travel restrictions.
— Polar Global Convertibles — Fidelity EMD
A useful period to hold convertible bonds as part of our Emerging Market Debt weakened sharply, with this
equity exposure. As expected; the fund held up relatively fund also suffering from currency weakness in several
well. Emerging Markets.
— Sanlam US Absolute Return — Fiera Magna Emerging Market Dividend
A timely purchase of this US equity long/short fund, which Naturally avoids the kind of low-yielding, expensive stocks
rose in March as the US equity market collapsed. that outperformed amid the sell-off, which hurt relative
returns.
— Target Healthcare
Although this care homes trust saw its share price fall at first, — VPC Specialty Lending
it soon recovered as investors refocused on the attractive Senior lending protection did not prevent concerns on
fundamentals. the outlook for unsecured consumer credit impacting the
price.
7Q1 2020
Activity - asset allocation
31.12.2019 31.03.2020 Change — Although cash is now at more normal levels, we raised
Equities (total)
it close to 20% by the middle of March after we cut our
51.5% 48.2% -3.3%
exposure to bonds before they sold off. We were then
UK 31.0% 28.4% -2.6%
able to reinvest the proceeds back into the same assets at
Europe ex-UK 4.5% 4.4% -0.1% significantly lower prices and higher yields. Unlike equities,
Emerging markets 4.3% 4.2% -0.1% we expect our bond holdings to continue to deliver a solid
Japan 3.2% 3.5% +0.3%
income stream over the next twelve months, while also
offering the potential for good capital gains.
Convertibles 2.7% 3.1% +0.4%
Asia ex-Japan 3.6% 2.5% -1.1% — The fund’s equity weighting has dropped a little, having
taken profits following a huge rebound in share prices
Other equities 2.2% 2.2% 0.0%
towards the end of March. Exposure to Asia has fallen
Bonds (total) 37.4% 41.8% +4.4% slightly, as we took profits on relative outperformance.
Specialist 15.4% 17.7% +2.3% We have also reduced our relatively high position in UK
Investment grade 8.4% 7.6% -0.8% equities.
Emerging market debt 6.5% 6.8% +0.3% — We raised our exposure to alternatives slightly in January
High yield corporate 5.0% 6.6% +1.6% by investing in the Sanlam US Absolute Return fund.
Gilts
Our modest UK commercial property position remains
2.1% 3.2% +1.1%
primarily in care homes and, to a lesser extent, student
UK commercial property 4.4% 4.6% +0.2%
accommodation.
Alternatives 1.3% 2.5% +1.2%
— Overall we feel the portfolio is positioned to continue to
Cash 5.4% 2.9% -2.5%
produce a good level of income (and capital growth) in a
world where cash is unlikely to produce any meaningful
return for the foreseeable future.
Please note that the asset allocation may be above or below 100% due to rounding.
8Premier Multi-Asset Distribution Fund
Activity - holdings
Purchases Disposals
— Sanlam US Absolute Return — Legg Mason IF RARE Global Infrastructure Income
— TwentyFour Select Monthly Income Fund — Royal London Corporate Bond
— Ashmore Emerging Markets Short Duration
9Q1 2020
The complete portfolio
Alternatives Alternatives 2.5%
Cash 2.9% UK equities
Sanlam US Absolute Return (1.3%) UK commercial property 4.6% Franklin UK Equity Income (5.3%)
Pollen Street Secured Lending (0.7%) Gilts 3.2% Montanaro UK Equity Income (4.7%)
VPC Specialty Lending (0.5%) UK equities 28.4% Evenlode Income (4.1%)
High yield bonds 6.6% GAM UK Equity Income (3.8%)
UK commercial property Fidelity Moneybuilder Dividend (3.6%)
Target Healthcare (1.2%) Emerging market debt 6.8%
MAN GLG UK Income (3.0%)
AEW Core Property Income (1.0%) Schroder Income (2.7%)
Impact Healthcare (0.9%) Downing Monthly Income Fund (1.2%)
Empiric Student Property (0.8%) European ex-UK equities 4.4%
Investment grade bonds 7.6% Europe ex-UK equities
Schroder Real Estate Investment Trust (0.7%)
Emerging market equities 4.2% Polar Capital European (Ex UK) Income (3.1%)
Bonds - emerging market debt Japanese equities 3.5% Oyster Continental European Income (1.3%)
Fidelity EMD Total Return Fund (3.8%) Specialist bonds 17.7% Convertibles 3.1% Emerging markets
BNY Mellon Emerging Markets (3.0%) Asian ex-Japan equities 2.5%
Fiera Magna Emg Market Dividend (2.9%)
Other equities 2.2%
Bonds - investment grade, high yield & gilts HMG Global Emerging Market Equity (1.4%)
TwentyFour Dynamic Bond (5.1%) Japan equities
TCW Income (5.0%)
Bonds - specialist Coupland Cardiff Japan Income & Growth (3.5%)
Investec Multi-Asset Credit (3.9%)
Pimco Select UK Income Bond (2.4%) Angel Oak Multi Strategy Income (4.9%) Convertibles
Baillie Gifford Strategy Bond (1.0%) Fairoaks Dynamic Credit (3.1%) Polar Global Convertibles (3.1%)
CIFC Global Floating Rate Credit (1.7%)
Asia ex-Japan equities
Semper Total Return (1.4%)
TwentyFour Income Fund (1.3%) Prusik Asian Equity Income (1.4%)
TwentyFour Select Monthly Income Fund (1.0%) Schroder Asian Income (1.0%)
Real Estate Credit Investments (0.9%) Other equities
Starwood European Real Estate Finance (0.7%)
BNY Mellon Global Infrastructure Income (2.2%)
CVC Credit Partners European Opportunities (0.7%)
Neuberger Berman CLO Income Fund (0.6%)
NB Global Floating Rate Income (0.5%)
UK Mortgages (0.3%)
GCP Asset Backed Income (0.3%) Each holding has been categorised to help you identify the types
Doric Nimrod Air 2 Ltd (0.2%) of asset that the Premier Multi-Asset Distribution Fund is invested
Doric Nimrod Air 3 Ltd (0.1%) in. The pie chart shows the asset allocation of the fund through
analysis of each of the underlying holdings. So, for example, a
holding which sits mainly in the ‘UK equities’ category may also
give you some exposure to international equities.
= New holding. Data as at 31.03.2020. Please note that the asset allocation may be above or below 100% due to rounding.
10Premier Multi-Asset Distribution Fund
Investment risk controls and parameters
Investment parameters Risk controls
Currency exposure: Min. 80% sterling
Overseas equity exposure: Max. 20%
Individual holding: Max. 5%
Fund management group: Max. 15%
Equities (market cap): Min. 50% large/mid cap
Fixed interest weighting: Max. 50% high yield
%
Investment parameters and risk controls are indicative figures. The fund is typically expected to be managed within these parameters and risk controls but these limits are
subject to change. Individual holding and fund management group limits exclude investments in passive funds.
11Q1 2020
Glossary of terms
Alternative assets Historic yield
Non traditional investments which could include hedge funds The historic yield reflects distributions declared over the past
and commodities for example and which are designed to twelve months.
help diversify a portfolio as they tend not to move in the same
IA Mixed Investment 20%-60% Shares sector
direction as the stockmarket.
Funds in this sector are required to have a range of different
Bonds investments. The fund must have between 20% and 60%
These are like loans to governments/companies in return for invested in company shares (equities). At least 30% of the fund
a fixed rate of interest. must be in fixed income investments (for example, corporate
and Government bonds) and/or “cash” investments. “Cash” can
Capital growth
include investments such as current account cash, short-term
The increase in value of your original investment.
fixed income investments and certificates of deposit.
Caps
IA sectors
Refers to a company’s market capitalisation, normally small,
To help with comparisons between the thousands of funds
mid and large.
available, they are categorised into different groups, organised
Equities and reviewed by the Investment Association (IA).
Another name for company shares.
Investment grade bond
Fixed income/interest A bond which is considered relatively safe and unlikely to
Another term used for corporate and government bonds. default on its debt repayment obligations and has been
assigned a high credit rating.
Floating rate debt
These are bonds which do not have a fixed rate of interest. Investment Association (IA)
The IA is the trade association that represents the UK
Gilts investment management industry.
A bond issued by the UK government.
High yield bonds/corporate bonds
A bond that provides a higher income, (or yield) but is
rated below investment grade bonds as it has a higher risk
of default.
12Premier Multi-Asset Distribution Fund
General investment risks
All types of investment carry a degree of risk. It is possible you could Alternative investments
lose some, or all, of the money you invest. The level of risk varies These typically behave differently to traditional investments such as
depending on the type of investment. bonds and equities. They can include a range of assets such as specialist
lending, private equity, hedge funds and gold. Adding alternative
Typically, you are less likely to lose money over the long term from an
investments to a portfolio can help to make it more diverse but can also
investment that is considered low risk, although potential returns may
make it more volatile.
also be lower. Investments considered higher risk typically offer greater
opportunities for better long-term returns, though the risk of losing Collective investment schemes (funds)
money is also likely to be higher. Where other funds are held in a portfolio, or where there is indirect
exposure to other funds, these could include higher-risk investments like
When you invest, it is important that you understand the risk to your
hedge funds, property funds or commodity funds (e.g. investing in gold,
money and are comfortable with that level of risk. If you are unsure, we
oil), which would increase the overall risk in the fund.
would recommend that you consult a financial adviser.
Counterparty credit
Past performance of a fund is not an indication of how it will perform
Some securities or financial instruments rely on payments or guarantees
in the future. The share price of funds, therefore the value of your
from a counterparty. This is a role usually undertaken by a bank or
investment in the funds, and any income from them, can go down as
similar entity.
well as up, and you could get back less than you invested.
Currency
The value of your investment might not keep up with any rise in the cost
Where investments in a fund are denominated in currencies other than
of living.
sterling (for example, if a fund holds assets priced in euros), its value
You could lose money if financial markets fall. will be affected by changes in the relevant exchange rate. Certain other
There is no guarantee that the investment objective of the fund will be investments, such as the shares in companies with profits from other
achieved. countries, will also be effected.
The levels of taxation that apply to income or capital gains from the Emerging markets
fund, including any tax relief that may be available, will depend on your Investments made in bonds, equities or other assets in less-developed
personal tax situation. countries generally carry higher risk than in developed countries.
Funds with similar objectives may not perform in the same way as they Equities
are likely to have different holdings. Equities (shares) can experience high levels of price fluctuation.
Fund performance will be affected by investment decisions made by Fixed interest securities
the fund manager. Government and corporate bonds generally offer a fixed level of interest
to investors, so their value can be affected by changes in interest rates.
Some of the main specific risks of investing in this fund are summarised When central bank interest rates fall, investors may be prepared to pay
here. Further detail is available in the prospectus for the fund. more for bonds and bond prices tend to rise. If interest rates rise, bonds
may be less valuable to investors and their prices can fall.
13Q1 2020
General investment risks (continued)
Inflation Operational
Higher inflation can lead to some investments falling in value, Processes, systems and controls around your investment might fail.
particularly those with a fixed level of interest, for example government The more complex or unusual the investments that the fund holds, the
bonds and corporate bonds. more likely this is to happen. For example, developing markets may
have less reliable systems or lower standards of governance than more
Infrastructure
developed markets.
Investments are often in large-scale projects whose profitability can be
affected by supply problems or rising prices for raw materials or natural Property and Real Estate Investment Trusts
resources. Changes in the wider economy and government regulation Property values can rise and fall sharply depending on the strength of a
can also have a significant influence. country’s economy.
Interest rate Smaller companies
Changes in central bank interest rates can affect all types of assets, in Investment in smaller companies is typically higher risk than
particular, securities such as government bonds and corporate bonds investment in larger companies. Shares in smaller companies can
that generally offer a fixed level of interest. If interest rates go up, the experience greater levels of volatility.
value of a bond may fall, and vice versa.
Unregulated collective investment schemes
Issuer credit These investments can carry additional risks as they are not subject to
There are times when the issuer of a security (for example, a company the same level of regulation as authorised or regulated schemes.
that has issued a bond) is unable to make income payments or repay
its debt. When this happens it can result in losses for the fund.
Legal/tax
The income or capital gains from investments can sometimes be
affected by changes in legal and tax regulations or how these rules are
applied.
Liquidity
In some instances, for example, when market conditions generally
are difficult, holdings in a fund may be difficult to sell and buy at the
desired price. The fund value could fall as a result.
Non-investment grade bonds
Bonds with a higher risk that the bond issuer might not meet its
income or repayment obligations, as assessed by independent bond
rating companies.
14Premier Multi-Asset Distribution Fund
Contact us
Fund information Fund administration Literature requests
0333 456 9033 0333 456 6363 01483 306 090
info@premiermiton.com investorservices@premiermiton.com
15Important information Whilst every effort has been made to ensure the accuracy of the information contained within this document, we regret that we cannot accept responsibility for any omissions or errors. The information given and opinions expressed are subject to change and should not be interpreted as investment advice. Reference to any particular stock does not constitute a recommendation to buy or sell the stock. All data is sourced to Premier Miton Investors unless otherwise stated. Persons who do not have professional experience in matters relating to investments should not rely on the content of this document. A free, English language copy of the fund’s full prospectus, the Key Investor Information Document and Supplementary Information Document, are available on the Premier Miton Investors website, or you can request copies by calling us on 01483 306090. For your protection, calls may be monitored and recorded for training and quality assurance purposes. Awards and ratings: The Defaqto 2020 Diamond Rating is based on the class C shares for the fund. Defaqto is an independent researcher of financial products and is not authorised to provide financial advice. We do not have any influence or control over the Defaqto Diamond Ratings or the methodology used to create them. We are therefore unable to guarantee their accuracy or that these will not change in the future, or that we will continue to use Defaqto ratings in the future. Morningstar ratings do not constitute investment advice. Copyright © 2020 Morningstar. All Rights Reserved. FE fundinfo Crown Fund Ratings do not constitute investment advice offered by FE fundinfo and should not be used as the sole basis for making any investment decision. All rights reserved. The methodology and calculations used by the companies or organisations that provide the fund or fund manager awards and ratings are not verified by us and we therefore are unable to accept responsibility for their accuracy. Ratings and awards should not be relied upon for making an investment decision, nor are they an indication, promise or guarantee of future performance of a fund or fund manager. Source: FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE under licence. All rights in the FTSE indices and / or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and / or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent. Issued by Premier Miton Investors. Premier Portfolio Managers Limited is registered in England no. 01235867. Premier Fund Managers Limited is registered in England no. 02274227. Miton Asset Management Limited is registered in England no. 01949322. Miton Trust Managers Limited is registered in England no. 04569694. All these companies are authorised and regulated by the Financial Conduct Authority and are members of the ‘Premier Miton Investors’ marketing group and subsidiaries of Premier Miton Group plc (registered in England no. 06306664). Registered office for Premier Portfolio Managers Limited, Premier Fund Managers Limited and Premier Miton Group plc: Eastgate Court, High Street, Guildford, Surrey GU1 3DE. Registered office for Miton Asset Management Limited and Miton Trust Managers Limited: 6th Floor, Paternoster House, 65 St. Paul’s Churchyard, London EC4M 8AB. 07042017021 For more information: 0333 456 9033 premiermiton.com
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