Margetts’ Ricketts adds to equities
Multi-manager moves most cautious risk-rated fund to maximum weighting in equity income funds.
Margetts Fund Management’s Toby Ricketts has moved to just under the maximum equity income exposure permitted in his £101m Providence Strategy fund.
The top-quartile manager said the fund now has 59 per cent in equity income strategies - a little less than his 60 per cent limit - because of the low yields to be found in government bonds.
The fund delivered a top-quartile return of 17.9 per cent in the five years to September 10 compared with the average return of 11.1 per cent for a fund in its IMA Mixed Investment 20-60 per cent Shares sector, according to FE Analytics.
“Yield from equities is the place to get total return, rather than in fixed income,” he said.
“If you find a fixed income investment with a 5-6 per cent yield you are close to equity volatility and yet with stocks there are more reasons you could get capital growth.”
One of the most recent additions to the fund is the MGTS Ardevora UK Income portfolio run by Jeremy Lang, which represents 5.9 per cent of the portfolio.
“Jeremy looks at the mid-cap income space, but the other funds we hold look towards the large-cap space. The Ardevora fund is slightly higher risk, but it fits within a range of income funds and reduces risk overall.”
The fund’s exposure in equity income is predominantly to the UK, with six funds in all held, but it also has high weightings in Asia, Europe and the US.
Meanwhile, Mr Ricketts said his fixed income exposure, which makes up roughly 20 per cent of the fund, is exposed towards short-dated corporate bonds.
“I do see risk in government bonds as anything that yields almost nothing has to have downside risk,” he said.
“There is also a risk of inflation, which feels OK now, but historically it is hard to print the level of money the UK and US has without creating inflationary problems down the line.”
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