InvestmentsJan 21 2015

Burns drops Threadneedle and BlackRock in overhaul

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Burns drops Threadneedle and BlackRock in overhaul

Two major funds have been ousted by multi-manager James Burns in a portfolio revamp that has seen him hike his exposure to investment trusts.

The Smith & Williamson manager said he had dropped the Threadneedle UK fund when its manager Simon Brazier and four members of his team defected to rival Investec Asset Management.

The fund was a top-10 holding, but Mr Burns cut the position on the back of the departure.

Mr Burns has also cut loose the £1.4bn BlackRock Special Situations fund run by Richard Plackett and Roland Arnold. The fund had a tough 2014, losing more than 6 per cent, according to data from FE Analytics. Its dire performance last year led fund broker Tilney Bestinvest to recently strip the fund of two stars.

The manager has replaced the holdings with two of his favoured investment trusts run by UK equity stalwarts: Investec’s Alastair Mundy and Henderson Global Investors’ Job Curtis.

Mr Burns said Mr Curtis’s City of London trust was now his third largest holding at 5 per cent of his £35.5m MM Endurance Balanced fund, while Mr Mundy’s £894.7m Temple Bar investment trust now makes up 4.4 per cent of the portfolio.

The manager added that the new holdings would become “core positions” in his portfolio as the managers have a strong track record of delivering solid returns and a steady dividend.

Mr Burns is an investment trust specialist at Smith & Williamson and has moved to increase exposure to closed-ended products from 12 per cent of his portfolio last year to 25 per cent now.

This transition followed the departure of colleague Nick Marshall, an open-ended specialist who was made redundant last year.

“The Endurance fund used to have a focus on open-ended funds and only used investment trusts for alternative assets,” Mr Burns said.

“[But] I’ve introduced about four or five new investment trusts to the portfolio. The turnover in 2014 was much higher than normal.”

Elsewhere, Mr Burns said his performance had been hindered by his underweight stance to the US, which he described as a “wrong position”.

However, through the “freshening up” of his portfolio last year he had increased his exposure by purchasing Bill Ackman’s Pershing Square fund.

At the end of November he held roughly 15.1 per cent in North America.

He said: “It’s quite a punchy fund, but I’m confident in Mr Ackman”.

Although Mr Burns has been increasing his allocation to investment trusts, he has not been adding any passive funds.

“We could add more passive funds at some point, but it depends on the [asset class],” he said.

“For example, I’ll always opt for active management in emerging markets and Asia.”

For now his attention is focused on Europe, where he is prepared to act fast and increase his weighting should the European Central Bank produce a “shock and awe” policy. At the end of November, Mr Burns held about 6.6 per cent in the bloc.

In response to Mr Burns’s trades, Threadneedle said its UK fund had “continued its strong performance” since new manager Chris Kinder had taken on the fund in September, during which time it had outpaced the FTSE All-Share index by 3.1 percentage points.

Meanwhile, BlackRock declined to comment.