Please click here to see Zevin Asset Management’s Q2 2014 results and corresponding charts. Attribution analysis, factbooks as well as the performance of our taxable composites are available upon request.
During the quarter, our Global Appreciation non-taxable composite increased by 2.01%, net of fees, while our Global Appreciation with Income composite increased by 2.12%, net of fees. This compares to an increase in the MSCI All Country World Index (ACWI) of 5.23% and an increase in the 60/40 blended benchmark of the MSCI ACWI/Barclays Government/Credit bond Index of 3.90%.
* Please see disclosures below
** The Balanced Benchmark is comprised of 60% MSCI ACWI Index and 40% Barclays Aggregate Govt/Credit Index
In the second quarter of 2014, returns for our portfolios lagged the global stock market, due in part to a high percentage held in cash and bonds. Cash and bonds were held partially as a hedge against global risks we see potentially unfolding over the next year, and partially because we have had a hard time finding equities we would like to own at attractive valuations. Underperformance was also due to low exposure to utilities and energy stocks, the two best performing sectors for the quarter. During the quarter we reduced our holdings in U.S. information technology stocks and European consumer discretionary stocks as both of these sectors looked unattractive in our model. We increased exposure to sectors that we forecast to have above market returns over the next twelve months: North American telecommunications, U.S. consumer discretionary, European healthcare and European financials.
Looking ahead we expect moderate returns for stocks over the next twelve months in our most likely scenario of 2% to 3% GDP growth in the U.S. and improving economies in other parts of the world. Within the U.S., we expect the Federal Reserve to begin raising rates in the first half of 2015 resulting in higher yields and lower prices on government bonds. We continue to monitor disappointing recent economic data out of Europe and its potential to de-stabilize the Eurozone, and the faltering property market in China and the wider implications that may have on Chinese economic growth. Also of concern are the increases in sectarian and political conflict around the world and the potential for these conflicts to involve larger countries and/or interrupt oil flows driving energy prices significantly higher. These risks, along with valuation concerns given the advances in stocks well in excess of growth in company profits, keep us wary of adding equity exposure and comfortable for now with our high cash position in most accounts.
We will be holding a conference call to discuss performance, our thoughts on the market, and to take any questions you may have on Thursday, July 17 at 1pm EST. The call-in number is (605) 562-3000 and the access code is 528333#.
As always, please do not hesitate to contact us with any questions or comments.
Sonia Kowal
Director of Socially Responsible Investing
Zevin Asset Management, LLC
zevin.com
