Burns stands by underweight position in US
Multi-manager cites low US exposure as performance drag - but is not changing its strategy.
Smith & Williamson’s (S&W) James Burns is standing by his funds’ strategic underweight position in the US in spite of the position weighing on performance.
The manager of the £26m S&W Multi-Manager Global Investment and the £32.6m Multi-Manager Endurance Balanced funds said his team had long held that placing more of the funds in Asian and emerging markets products would produce better long-term returns.
But last year the strategy worked against them, with the Endurance Balanced fund losing 6.6 per cent and the Global Investment fund losing 13 per cent over the course of 2011, according to Morningstar.
Mr Burns said: “2011 was not a good time to be underweight the US, and there have been times where we have questioned that decision, but this year Asia is up and on a three to five year view we still believe it is the right place to be.
“The worst thing to do would be to change now after the US has had such a good run.”
Since the start of 2012 the Global Investment fund has rebounded with a gain of 5.5 per cent over the course of the year to July 9, outperforming the IMA Global sector average of 4.1 per cent.
The Endurance Balanced fund also posted a 3 per cent gain, but this still lagged the IMA Mixed Investment 40-85 per cent Shares sector, where the average fund rose 4.4 per cent.
In spite of a broadly defensive positioning in both funds, Mr Burns said it was important to remain fully invested in order to participate in the “strong, quick rallies” such as those which have occured in markets over the last two years.
“If you miss those rallies you have no chance of outperforming,” the manager added.
Over five years to July 9 the Endurance Balanced fund returned 6.3 per cent, ranking in the second quartile of the IMA Mixed Investment 40-85 per cent Shares sector.
In contrast, the Global Investment fund lost 16 per cent over the same period, compared with a 3 per cent gain from the IMA Global sector.