The Last 7 Years, the Next 7 Years

Table of Contents

September marks the 7 year anniversary of the creation of our model portfolios. We have been taking stock, looking at what has been good, what has been not so good and what the next 7 years might have in store.

The Last 7 Years

Tideway’s Multi Asset Balanced Portfolio Since Inception

Tideway’s Multi Asset Balanced Portfolio Since Inception

This chart shows the portfolio performance after fund manager fees but before Tideway’s fees, so you need to knock off 1% p.a. for each year you have been invested.

The past four years in particular have been volatile, first dominated by Covid in 2020 and then the steep rise in interest rates since the end of 2021 to combat the return of inflation to developed markets. In both events, pretty much all asset classes available to investors were negatively affected with bonds, equities and real assets all suffering losses at the same time, reversing trends seen across the last twenty years when fixed income offered a place to hide when equity markets suffered losses. The falls surrounding Covid were short lived, the falls from interest rises took a year with some sharp rallies along the way. A recovery has been in place since October last year, but as anticipated, it is more gradual this time after a repricing of all asset classes to take into account the new higher risk free rate.

As we head towards a 2 year gap from the last high water mark at the end of 2021 it probably does not feel like we have done a particularly good job. But actually over those 7 years we have delivered almost 20% more than and, close to double, the return of the average mixed asset portfolio in the Investment Association Mixed Investment Sector with similar equity weightings according to FE Analytics.

The outperformance is largely down to our fixed income fund selections which have performed a good deal better than UK Gilts over those 7 years. But the returns delivered do not feel that great to us and we know we have missed returns by being underweight some US equities (though we have closed this gap somewhat over the last 3 years), in particular shares in the 7 companies that now dominate the S&P 500 index namely Amazon, Apple, Alphabet, Microsoft, Meta, Nvidia and Tesla.

We added Fidelity’s S&P 500 tracker fund last year and year to date it is our top performing fund, up 13% year to date. We should have bought more! These 7 companies shares have been driven up by the clamour for AI action, particularly by private investors in the US. According to BlackRock at the start of September these 7 shares made up 28% of the S&P 500 index, and had generated 65% of its return this year. Very few active funds have held enough of these shares to keep up with the index.

Like most other wealth managers, I am sure, we are continually debating should we buy more?

The argument against is the risk involved. The cheapest of the shares; Apple, Microsoft, Meta and Alphabet are now trading at around 30 times forward earnings, well above the average share price which is nearer 20 times for the S&P500. Tesla, Amazon and Nvidia are even more expensive, one slip and these three stocks could halve in value and still be more expensive than Apple and Microsoft who continue to dominate their spaces and deliver fantastic revenue growth and profit margins. These three in particular are high wire acts!

If you have strong views one way or another on this please do let me know, we very much value your input (

The Next 7 Years

We have been saying for a while that forward looking returns will be better and we appreciate your patience in this respect.

To look at why we feel confident to say this I have taken 3 other 7 year periods starting at the beginning of each decade to illustrate. I’ve looked at the same IA sector for mixed asset portfolios and compared them to the returns over the same periods from the average UK Gilt fund.

7 Year performance analysis

This supports what you would expect to see – that by adding equities and corporate bonds instead of just gilts the average mixed asset portfolio will generally beat a pure gilt portfolio after fees. There is often an exception to any past return pattern and here it is 2000-2007. For those who remember, we woke up from the Millennium celebrations with an almighty hangover from the dot com boom which saw equity markets in a gradual grind down for two and a half years….it was not pleasant. We don’t think equity markets look anything like they did at the end of 1999 and whilst there are some highly valued businesses most are supported by healthy growing profits and strong cash flows, furthermore the broader market is not that highly valued.


2016 to 2023 clearly shows the impact of rising interest rates in 2022, with gilts delivering negative 20% total return over those 7 years. This is exceptional and we don’t expect this to happen in the next 7 years. Gilts are now yielding around 4.5-5% and this would be our central prediction for their likely return going forwards. If anything, we could see slightly higher returns if interest rates start to go lower which many predict. Few are predicting a sharp rise from here, not impossible but unlikely.


From this we can see returns of over 6% p.a. for a mixed asset portfolio like ours from here, although no doubt there will be some bumps down and rushes up along the way, it won’t come in a straight line.


We get the benefit of seeing the assumptions of our fund managers and Fidelity agreed we could share.

GBP Capital Market Assumptions

We think their high yield fixed income returns are a bit cautious and our specialist managers in this field are certainly expecting a bit more than 7% over the next 5 years. We hope this can add value going forward as it has done historically.


We would not be so bold as to expect UK equities to outperform the rest of the world, it might happen of course, but given their relevance in global equity markets today, and regulatory pressures on new listings on the London stock Exchange, much as we would like to buy British, we remain sceptical on the UK stock market providing a premium return for any extended period.


It should be noted that we would expect pockets of the equity market to do considerably better than 7-8% p.a. long term, assuming inflation and interest rates are higher going forwards and this is one area where we will strive to add value.


For those lured by current deposit rates the message from Fidelity is clear, they are unlikely to last. Fidelity are expecting a drop down to around 3.5% as the longer-term return as inflation comes down, which would leave a dilemma for cash investors when they come to renew their deposit rates at the end of their fixed term. Furthermore, if we go back to the first 7-year track record chart, the dangers of trying to time getting out and back into investments is clear with missing just a few of the best days each year significantly reducing long term returns. It sounds simple, it looks simple with hindsight, but very few people ever do it more than once, although they tend to shout a lot if they get it right.


Patience will get the job done in the end, sometimes it takes a little longer than we would like.


I should also remind you that as well as our multi asset portfolios we have pure fixed income portfolios and pure equity portfolios. The pure fixed income portfolios make perfect sense now and are likely to be a smoother journey going forwards if you don’t want the volatility of equities. Do talk to your wealth manager to make sure you are invested to best meet your objectives.


Finally, we want to share that our team recently underwent a training session on counselling skills for non-counsellors with Relate which is one of the largest providers of relationship support in England. We all found the session incredibly insightful, and our instructors highlighted the importance of this training to address the broad range of potential vulnerability characteristics people can display.


At Tideway, we recognise that anyone may experience difficult periods in their lives, and we want to support our clients in the best possible way when we become aware they are facing difficulties or uncertainty.