Issue 10 — Fourth quarter 2016 · 4 rathbones.com InvestmentInsights Issue 10 Fourth quarter 2016 Beware of protectionism However, this may not play out as expected if uncertainty

In brief

Sterling outlookThe pound looks undervalued across a number of measures

A developing storyLooking for opportunities in emerging market debt

The Phoney WarNot much has happened since the UK voted for Brexit

Valuations too rich?Infrastructure funds stand at substantial premiums

With popular politics on the rise around the world, a potential wave of new trade tariffs on imports represents one of the greatest risks to investment returns

Beware of protectionism

Issue 10 — Fourth quarter 2016

2 rathbones.com InvestmentInsights | Issue 10 | Fourth quarter 2016

The period since the UK voted to leave the European Union (EU) reminds us of the Phoney War. Although we have a new prime minister, little has changed, other than sterling’s precipitous decline. Article 50 is expected to be invoked before the end of March 2017, yet this will only start the two-year countdown to Brexit. In the meantime, we remain part of the EU. However, while consumer confidence remains buoyant, political noise is likely to create investment volatility until the terms of our departure become clear.

Over recent decades politics has had a limited influence on financial markets. However, this appears to be changing and the shift is becoming particularly prominent in the US as we approach the presidential election on 8 November. In our view, one of the most overlooked risks is the potential for the US to impose trade tariffs, as our lead article explores.

Back in the UK, sterling has been the main casualty from the referendum result and it appears to be deteriorating daily. Yet our analysis of exchange rates suggests it is now significantly undervalued and should appreciate back to its equilibrium rate over the long term.

Meanwhile, in an environment of low rates and depressed bond yields, investors have regained their appetite for assets in developing countries, which offer higher rates of economic activity. Our article on page 6 explains how emerging market debt looks attractive.

Lastly, in the hunt for yield, money has poured into infrastructure funds over the past few years and pushed up prices. Closed-end vehicles are now trading at a significant premium to their net asset values. On page 9, we question whether they deserve such high premiums.

I hope you enjoy this edition of Investment Insights. Please visit rathbones.com to keep abreast of our latest views on Brexit and other issues.

Julian ChillingworthChief Investment Officer

Foreword

rathbones.com 3InvestmentInsights | Issue 10 | Fourth quarter 2016


How might financial markets react to the new US president?

Barack Obama — arguably one of the most ardent advocates of free trade since Ronald Reagan — dabbled with protectionism in the early days of his presidency as the global financial crisis undercut his popularity rating. More recently, popular Democrats have used fiercely anti-free trade rhetoric.

A protectionist turn for American trade policy would lower our forecasts for the long-term returns from US equities. As we discuss in our new investment report, Trade of the century, protectionism inhibits productivity because it leads to tit-for-tat policies from trading partners (figure 1).

This matters because contributions to economic growth from labour and capital are set to be much smaller over the next two decades, with an ageing population and an ongoing slowdown of investment. The result is that the growth of developed economies in the 21st century is likely to rely on productivity.

Any drastic change in trade policy could cause uncertainty over the price at which US firms can sell their products and services overseas and vice versa. Our analysis suggests that any increase in uncertainty would depress US GDP and reduce employment.

Uncertainty correlates strongly with the equity risk premium (ERP) of the S&P 500 Index. The ERP is the compensation investors demand in return for taking on the risk associated with future earnings. Unsurprisingly, rising uncertainty is associated with a higher risk premium. In other words, investors start discounting tomorrow’s earnings into today’s valuations at a higher rate as they become more uncertain.

They are already demanding a notably higher ERP than we would expect at this point in the cycle. Although this gives us some comfort, we would still expect a Trump victory — or a Democrat clean sweep — to cause the ERP to increase further, lowering equity market valuations.

The impact of protectionismAn increase in protectionism will affect some sectors more than others. We expect a Trump win to hurt those with a high sensitivity to economic uncertainty, a high correlation with the US business cycle and a high proportion of earnings originating in China. Automotives and parts, general industrials, technology hardware and equipment, and electrical and electronic equipment rank poorly across all measures. Manufacturers that source components from China would also suffer — many are also found in these sectors.

We also consider ‘growth’ and ‘value’. Growth stocks tend to outperform during periods of economic uncertainty and when the business cycle turns down (figure 2). That said, value stocks have half the revenue exposure to China of growth stocks (4% of total revenue versus 8%) and derive 74% of sales from the US, compared with 65% for growth stocks.

Which UK sectors are most exposed to US revenue streams and its business cycle, and most sensitive to US economic uncertainty? As one would expect, the classic ‘defensive’ sectors in the UK outperform when US uncertainty rises. Yet many of these sectors also derive a considerable amount of income from US sales — over 35% in the case of pharmaceuticals and utilities. US uncertainty tends to precipitate a global ‘risk off’ environment in financial assets that benefits defensive sectors.

One of the most overlooked risks for financial markets over the next decade is the potential for the US to impose tariffs on imports. This risk is greatest if Donald Trump wins on 8 November. Yet our analysis suggests conditions are ripe for protectionism to have broader popular appeal: less extreme politicians than Mr Trump could use it to secure votes.

Source: Datastream and Rathbones.

Figure 1: Productivity suffers under protectionismProtectionism is bad news for productivity, thereby stemming what will arguably be the most important contribution to growth in the 21st century.

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However, this may not play out as expected if uncertainty is driven by trade policy disruption and a policy-induced threat to potential economic growth over the longer term. UK investors should be mindful of revenue exposures when selecting domestic defensive names.

A victory for Hillary Clinton is unlikely to generate the same uncertainty as a Trump win. Yet if the Democrats take a clean sweep — winning majorities in both the Senate and the House as well as regaining the presidency — investors should still be nervous. In such a scenario, Mrs Clinton may look to strengthen support within her party by making populist concessions to the left.

Getting tough on Wall StreetMrs Clinton has already backtracked on the Asian free-trade deal (TPP), and promised to make life difficult for fossil fuel companies, investment managers, student lenders and big brand pharmaceutical producers. In addition, she could make life tougher for Wall Street, reduce corporate tax relief programmes, tax profits stored overseas or raise the minimum wage.

Furthermore, her anti-fracking policy could push up the price of oil, given that US shale is the marginal producer at today’s prices. This would be bad for US manufacturing as well as lower income households, leaving less disposable income available for discretionary spending.

If the Democrats win a clean sweep they are most likely to enact policies supporting those left behind by technological change and globalisation, and reverse the growing gap between the rich and poor. This would help to stem the rise of popular protectionism, but in the short term, either by increasing their average tax rate or labour costs, these policies are unlikely to help companies’ bottom lines.

Some investors believe that a Trump presidency with a split Congress (one party winning the House and the other the Senate) is the best outcome for markets, because he would be unable to enact his more renegade plans and would have to concentrate instead on cutting taxes. However, the president has at least

four executive powers with which he could impose tariffs on China and Mexico without congressional approval.

Mr Trump has outlined $9 trillion of tax cuts, which would benefit the highest earners, while corresponding spending cuts would hurt the bottom earners. The spending patterns of the top earners are largely insensitive to extra income, so this would be negative for overall consumption. Given his voter base is largely middle and working class, such tax cuts would need to be accompanied by heavily protectionist trade policies.

Stock pickingInvestors would do well to look for stocks that could benefit from either Democrat or Republican initiatives. An increase in defence spending has been well flagged by both candidates. Low-end consumer discretionary stocks should fare well under both parties as they pledge to help out the working and lower-middle classes. But given a Democrat victory sweep, investors may wish to focus on firms that have already implemented a ‘living’ wage.

Infrastructure is perhaps the standout, although investors should watch for overseas earnings in this sector. Giant walls aside, the Clinton plan is the larger one, promising to spend $250 billion over five years and a further $25 billion to establish an infrastructure bank. There is even talk that the $250 billion will be financed by quasi-government ‘Build America’ bonds. Comparing the quality of US

infrastructure to that of other countries, rail and broadband stand out as particularly poor (few high-speed rail lines and very expensive broadband). In addition, America’s roads and utilities are of middling quality.

Lastly, regional banks may outperform. Mr Trump has discussed reinstating the Glass-Steagall Act, which banned Wall Street from Main Street. Mrs Clinton is unlikely to do this (her husband repealed it), but could push through similar legislation to appeal to the anti-Wall Street section of her party.

The risk of protectionism is not limited to the US. Populist rhetoric will no doubt have an effect on next year’s German and French elections: as Mrs Clinton has found, it takes a strong and secure politician to argue against populist politicians and speak up for free trade.


Figure 2: Growth outperforms during periods of uncertaintyWhen the economy becomes more uncertain, growth outperforms value.

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Sterling outlook


Figure 3: Back to equilibriumSterling should appreciate over the next few years as it returns to its long-term equilibrium rate.

The pound looks undervalued across a number of measures

Before the EU referendum, we estimated that a vote to leave would lower sterling’s trade-weighted (or ‘effective’) exchange rate by 7.5—12.5% after the immediate volatility had subsided. At the time of writing in mid-October, it is 15% below the average level recorded in the four days before Friday 24 June.

We usually avoid making short-term exchange rate forecasts. Their accuracy is highly compromised by the observation that exchange rate volatility is often far higher than the volatility of the factors that drive them. In addition, short-, medium- and long-term factors often act on exchange rates in different directions at the same time.

But these are extraordinary times. Our estimate was based on a range of assumptions about how the vote to leave might alter UK interest rate expectations relative to those for other countries, as well as sterling’s sensitivity to Brexit news and financial risk aversion in the 12 months preceding the referendum. We pored over Bank of England research papers and speeches, and were confident about our assessment. Such confidence is rare without a disruptive event, such as the referendum.

Fortunately, we are not a hedge fund chasing short-term returns. As long-term investors, when considering the strategic allocation of client capital, we are more concerned with where a currency is heading on a sustained basis and the consequences for expected returns. We say fortunately because although the academic research on modelling short-term movements in exchange rates is thin and inconclusive, there is plenty relating to ‘equilibrium’ rates over the long term.

Finding the equilibriumEquilibrium exchange rates can be thought of as a lodestone from which actual exchange rates may deviate, but to which they will gradually return over time. In our approach, we describe the equilibrium exchange rate as a function

of three factors:— First, the terms of trade, which is the

price of a country’s tradable output relative to its trading partners. Higher terms of trade should appreciate the real exchange rate through relative changes in real wealth or income. For example, an increase in the oil price improves the international competitiveness of a country that is relatively less dependent on oil.

— Second, productivity, where larger increases in the traded goods sector are associated with a real appreciation of the currency of the domestic country.

— Third, the old-age dependency ratio, where a higher share of the economically inactive dependent population reduces national saving and decreases the current account balance.

Measured against all major developed market exchange rates, our analysis of these long-term economic factors reveals sterling is substantially undervalued. As a result, while we understand why many global investors are negative on sterling in the short term, we believe it is likely to head back up towards its longer-term equilibrium rate over the next few years (figure 3).

Exchange rates are also affected

by the business cycle and temporary technical factors. In the rare instance when all of these factors point in the same direction, investors should take note. Today, our long-term analysis discussed above, business cycle indicators and technical positioning indicators, such as the number of speculative investors selling sterling, all suggest that sterling is cheap, particularly against the US dollar, but also against the euro and yen.

Brexit negotiations are set to begin formally next year and currency markets are likely to be more volatile as a result. If the UK is excluded from the EU single market and new trade deals are slow to come by, the productivity of the tradable sectors of the economy (particularly financial services) are highly likely to stagnate. In this instance, the longer-term equilibrium exchange rate would shift lower. However, sterling is so substantially undervalued relative to the equilibrium level that the actual exchange rate is still likely to strengthen back towards the equilibrium level over three-to-10 years.

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A developing story

Looking for opportunities in emerging market debt

In an environment of record low interest rates and depressed government bond yields, global investors have regained their appetite for the higher returns available in emerging markets (EMs). These countries offer higher rates of economic activity (figure 4) at a time when the developed world seems unable to escape from anaemic rates of growth.

EM debt looks attractive from a valuation perspective across various measures of value. Although there are more risks attached to investing in these markets, we believe the potential returns are sufficient to compensate investors.

The long-term positive outlook for EMs is based on the huge potential to expand their economies across many sectors as well as to deepen and broaden their financial markets. EMs contribute 60% to global GDP on a purchasing power parity basis (or 40% in nominal terms), but account for just 20% of global financing, leaving plenty of room for expansion.

Positive foundationsBased on our research, we have identified four foundations that support our positive view of EMs. In the first instance, demand for EM bonds should increase owing to a number of positive trends. Debt markets in the developing world have expanded more slowly in recent years with the annual average growth falling from 18% from 2006—10 to 10% in 2011—15.

Financial issuers have suffered the most, with a slowdown in the annual growth rate from 21% to just 8% over the same periods. Bond issuance from this sector is now expanding at a slower pace than nominal GDP growth. With fewer bonds available, and investor demand increasing, the sector looks increasingly attractive.

Quantitative easing policies by the world’s major central banks have attracted capital away from EMs, while tighter regulations have made it more expensive for banks to lend to those regions. Yet more recently, EM bond funds have

enjoyed record levels of inflows and this trend is likely to continue.

The second foundation is diversification. Although some EM governments are more indebted than others, their debt markets have expanded in part because the number of issuers has increased from 44 to 66 over the past five years. However, half of EM countries have not issued debt. Greater diversification should lead to more stability in EM debt indices.

Third, EM debt is an asset class that still offers attractive returns against a global backdrop of negative yields (figure 5). Notably, valuations are attractive relative to their credit fundamentals and conditions would have to deteriorate significantly for the markets to underperform over the long term.

For instance, in hard currency markets represented by the J.P. Morgan Emerging Market Debt Index, spreads would need to widen to 615 basis points over the next five years and remain there for investors to underperform the US Investment Grade Index. Notably, spreads only reached 650 basis points in the Lehman Brothers’ crisis. Meanwhile, corporate default rates are similar to US high yield, even at this point in the credit cycle.

The fourth foundation is that the fundamental backdrop to investing

in EM debt is improving. Although EM economic growth is uneven, most countries are expanding. Recent leading indicators finally point to an increase in GDP growth, having been stuck at 6% for the last five years.

EM debt markets threw a “taper tantrum” in 2013, when the US Federal Reserve (Fed) announced that it was considering increasing interest rates. EM debt is usually denominated in dollars, so just talking about a rise in US interest rates was enough to unsettle EMs which had got used to cheap money and arguably become complacent. Since then, however, they have benefited from rates staying lower for longer, which has kept down the cost of borrowing in US dollars.


Figure 4: Upward trend in emerging AsiaThe emerging Asia economic cycle is on a clear uptrend after six years of deceleration.

Although there are more risks attached to investing in these markets, we believe the potential returns are sufficient to compensate investors.

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A developing story

Likewise, fears of a collapse in China’s economy, which were rife at the start of the year, have subsided. Fuelled by a loan surge and property rebound, the world’s second-largest economy is on track to hit this year’s official target of 6.5—7% growth. Meanwhile, EM currencies have already depreciated sharply and overshot fair value, helping to kick-start meaningful adjustments to macro fundamentals. The rate of inflation has stabilised in many countries, offering further support for growth.

Even the political conditions in some of the more unstable countries seem to be improving. Brazil has a new president after sacking Dilma Rousseff over an accounting scandal and there are apparently business-friendly governments in Argentina, India and Peru.

Alongside these shorter-term factors, the long-term dynamics that are set to drive growth throughout EMs remain in place. They include favourable demographics and significant potential for productivity growth through upgrading skills and investment.

Opportunities and risksRisks remain, of course. The Fed could become more aggressive in hiking rates, the Chinese economy could suffer a hard landing and oil prices could fluctuate. In

addition, there is always the possibility of unexpected geopolitical risks, such as Turkey’s recent attempted coup. From an investment perspective, EMs are higher beta than developed markets.

Despite these risks, we believe there are plenty of opportunities to invest in EMs and gain exposure to their rapidly growing economies. As developed countries continue to struggle to generate decent levels of growth and loose monetary policies depress bond yields, EMs look increasingly attractive.

They are not a homogenous group. There are wide differences in the stages of development and the underlying economic and political conditions between and within the various regions. That is why we favour investing through an active manager with the skills, experience and local knowledge to identify opportunities and manage the risks.


Figure 5: Real government bond yieldsEM sovereign debt real yields offer a significant pickup compared with developed markets.

The long-term positive outlook for EMs is based on the huge potential to expand their economies across many sectors as well as to deepen and broaden their financial markets.

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The Phoney War

Not much has happened since the UK voted for Brexit

In the days following the European Union (EU) referendum, it seemed that the apocalyptic warnings about a post-Brexit Britain had come true. Sterling and the stock market fell sharply; David Cameron announced he would step down as prime minister; and many of those who had voted ‘remain’ felt deeply shocked, and alienated from their compatriots.

Four months later, it might be tempting to think that it was just a bad dream. The FTSE 100 bounced back swiftly as investors bought dollar-earning companies, and even the FTSE 250 has now recovered as domestic economic data have remained firm and exporters benefit from the exchange rate. The Conservatives avoided a long and damaging leadership battle, instead crowning Theresa May in a matter of days. Her calm leadership and choice of Philip Hammond as chancellor have reassured investors. Only sterling remains in the doldrums

A Phoney WarWe are reminded of the Phoney War at the start of the Second World War. As we said in our Investment Update on the morning of 24 June, the UK will remain part of the EU until it invokes Article 50 of the Lisbon Treaty and negotiates the terms of its exit or the two-year time limit expires, whichever is sooner. Until then, we benefit from membership of the single market. Given the relatively positive starting point of UK and global growth, we suggested that any post-referendum recession would at worst be shallow and short.

The Bank of England has played its part, arguably going further than needed at this stage in cutting its base rate to 0.25% and relaunching its quantitative easing programme. It has also indicated that it is likely to cut rates again later this year. Meanwhile, commentators expect the chancellor to announce measures to boost the economy in the Autumn Statement on

23 November, including a package of fiscal stimulus.

This support is likely to be helpful in 2017. Mrs May has now said the government will trigger article 50 before the end of March, starting a long and fraught negotiation about our future relationship with Europe. The EU and its remaining members seem determined not to make life easy: access to the single market will be conditional on accepting the free movement of people. However, given immigration from other EU states caused many to vote to leave, it seems unlikely that a positive trade deal will be reached. The next two years will be difficult, with politics dominating the investment agenda.

Investors already seem to know this. In spite of the headline recovery of the FTSE 100 Index, the stocks most exposed to the UK are languishing (figure 6). Similarly, while the FTSE 250 has done well since mid-July, it still seems to be hedging against a major downturn in the economy.


Figure 6: UK-focused large caps have underperformedThe next two years will be rife with uncertainty and UK-focused stocks may lag behind.

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Theresa May has said the government will trigger article 50 before the end of March 2017, starting a long and fraught negotiation about the UK's relationship with Europe.


Valuations too rich?

Infrastructure funds stand at substantial premiums

The infrastructure funds we can invest in fall into two groups. One comprises open-ended funds that invest in the equity of publicly-listed infrastructure companies; they own a broad range of projects from roads and airports to ports and pipelines. The other is closed-ended private finance initiative (PFI) vehicles, which were created from the government’s desire to get big infrastructure projects off its balance sheet.

The government issues contracts to the private sector to build and maintain a hospital or school for a set period ranging from 10 to 25 years. At the end of the contract, the asset reverts to government ownership. This means that the PFI funds do not own assets, instead having a stake in the cash flows from the assets in question. Consequently, these funds generate an attractive income stream.

In the hunt for yield, valuations for these PFI vehicles have been driven up. As they are closed-ended investment companies, they are now trading at double-digit premiums to their net asset values (NAVs). On day one a new investor is effectively giving up the equivalent of two to three years of income (figure 7).

We understand the yield attraction and also that the cash flows are linked to RPI: however, at these premiums, our view is that the risk-reward trade-off is unattractive. Consider the premiums in the context that investors don’t own the assets in question.

Beware the risksAlthough the NAVs and share prices have held up well in previous periods of market stress, there are questions over how they would perform in a rising rate environment. PFI vehicles have relatively short track records, none existing prior to 2006, so they haven’t been tested in such an environment.

Furthermore, PFI projects are typically 90% debt-funded and the debt has a long maturity to match the life of the asset. Consequently, these vehicles

have duration risk significantly higher than for a typical corporate bond fund.

Inflation is also important because RPI is factored into the cash flow projections — another reason why this asset class is attractive. However, what might cause inflation? ‘Cost-push inflation’ could in fact be negative for the cash flows as it could cause real interest rates to rise. A sustained increase in long-term real interest rates would be negative for the NAVs of listed PFI vehicles. This is because any inflation-linked increase in revenues would be more than offset by an increase in the gilt yield, which the funds use to discount their future cash flows.

Likewise, for listed public equity infrastructure funds, it is important to differentiate between rises in nominal and real interest rates. All else being equal, we expect an increase in the real rate to be negative here also. This is a very diverse sector and companies that are price-setters, such as European toll roads and airports, or those that are not heavily regulated, such as power companies, are better placed to pass on rising costs to the consumer. To this end, stock selection is important.

Ironically, higher interest rates could encourage infrastructure investors to return to the bond market. This might

help infrastructure managers to find new projects as the current flood of capital competing for new assets is pushing down returns. Yet, when investors look again at bonds, premiums on closed-ended vehicles are likely to fall.

In today’s environment, infrastructure is likely to remain attractive to long-term investors looking for yield. We expect increasing opportunities in this sector as governments consider fiscal stimulus packages as an alternative to monetary policy, particularly in the US and emerging markets. However, the beneficiaries would not be PFI vehicles: it would be the constructors who would benefit.

Existing investors may want to consider taking profits or rebalancing their PFI exposure at these levels, while new investors wait until valuations improve.

Source: Winterfloods and Rathbones.

Figure 7: Are they worth it?Infrastructure funds look less attractive after the premiums to NAVs rose again over the past quarter. The average premium was only 15% in May.

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Financial markets

The biggest casualty over the third quarter from the UK’s Brexit decision was sterling, which plummeted to a multi-decade low against the US dollar. The FTSE 100 Index recovered quickly and recently hit an all-time high because exporters and companies with overseas earnings benefit from sterling weakness. Even the FTSE 250 Index, which comprises more domestically focused companies, hit a record high with better-than-expected economic news driving up share prices.

In fixed income markets, the yield squeeze continued. The European Central Bank’s expansion of its asset-buying programme to include corporate debt has driven down yields to new lows. However, investors were wondering if the situation had turned by the end of the quarter. The yield on the US 10-year Treasury bond, which bottomed out in early July, began to rise. The German 10-year bond yield dropped into negative territory in late June, but was marginally positive by the end of September.

Meanwhile, 10-year UK gilt yields rose from their low of 0.5% at the start of August. The main factor behind the rise seems to have been the belief that monetary policy may be less supportive.

An emerging trendWith cash rates at or close to zero or below in many developed economies, and trillions of dollars worth of government bonds trading on a negative yield, investors have been willing to take some risk. As a result, emerging market currencies and government bonds have rallied this year.

Economic fundamentals in many developing countries have been improving. After a long period of decline, exports are showing signs of stabilising. Although the oil price has been weak in recent weeks, raw material prices in general seem to have stabilised this year, an important factor since many developing countries are commodity producers.

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Important information

This document and the information within it does not constitute investment research or a research recommendation. Forecasts of future performance are not a reliable indicator of future performance.

The above information represents the current and historic views of Rathbones’ strategic asset allocation committee in terms of weighting of asset classes, and should not be classed as research, a prediction or projection of market conditions or returns, or of guidance to investors on structuring their investments.

The opinions expressed and models provided within this document and the statements made are, due to the dynamic nature of the items discussed, valid only at the point of being published and are subject to change without notice, and their accuracy and completeness cannot be guaranteed.

Figures shown above may be subject to rounding for illustrative purposes, and such rounding could have a material effect on asset weightings in the event that the proportions above were replicated by a potential investor.

Nothing in this document should be construed as a recommendation to purchase any product or service from any provider, shares or funds in any particular asset class or weighting, and you should always take appropriate independent advice from a professional, who has made an evaluation, at the point of investing.

The value of investments and the income generated by them can go down as well as up, as can the relative value and yields of different asset classes. Emerging or less mature markets or regimes may be volatile and subject to significant political and economic change. Hedge funds and other investment classes may not be subject to regulation or the protections afforded by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA) regulatory regimes.

The asset allocation strategies included are provided as an indication of the benefits of strategic asset allocation and diversification in constructing a portfolio of investments, without provision of any views in terms of stock selection or fund selection.

Changes to the basis of taxation or currency exchange rates, and the effects they may have on investments are not taken into account. The process of strategic asset allocation should underpin a subsequent stock selection process. Rathbones produces these strategies as guidance to its investment managers in the construction of client portfolios, which the investment managers combine with the specific circumstances, needs and objectives of their client, and will vary the asset allocation accordingly to provide a bespoke asset allocation for that client.

The asset allocation strategies included should not be regarded as a benchmark or measure of performance for any client portfolio. Rathbones will not, by virtue of distribution of this document, be responsible to any person for providing the protections afforded to clients for advising on any investment, strategy or scheme of investments. Neither Rathbones nor any associated company, director, representative or employee accepts any liability whatsoever for errors of fact, errors or differences of opinion or for forecasts or estimates or for any direct or consequential loss arising from the use of or reliance on information contained in this document, provided that nothing in this document shall exclude or restrict any duty or liability which Rathbones may have to its clients under the rules of the FCA or the PRA.

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Rathbone Brothers PLC

Rathbone Brothers PLC

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Documents

Issue 10 — Fourth quarter 2016 · 4 rathbones.com InvestmentInsights Issue 10 Fourth quarter 2016 Beware of protectionism However, this may not play out as expected if uncertainty