Richard Philbin, Harwood Multi-Manager chief investment officer, is shifting towards Japanese and European equity markets in the belief they offer the best risk-reward pay-offs.
In his portfolios Mr Philbin is currently overweight the two regions, and said he would use new fund flows to add more to both.
This would come at the expense of UK positions, though currency concerns mean he is not prepared to take exposure to the Japanese yen as part of this shift.
He said: “We do like international assets over the UK, as sterling is likely to weaken. Europe has some great macro opportunities. We really like Japan as well, but [not its currency risk].”
For Japanese equity exposure, Mr Philbin holds the dollar-denominated Coupland Cardiff Japan Income and Growth fund in three of his four multi-manager vehicles. In two of his portfolios, he also has allocations to Stephen Harker’s Man GLG Japan CoreAlpha fund.
The manager said he would allocate up to 40 per cent of new monies to equities, depending on the risk tolerance of the fund. Mr Philbin operates a balanced approach that should give the investor “consistent risk exposure”, and said equity markets are still the best way to play this approach, despite recent volatility.
He said: “I would not have a huge amount in fixed income as we are getting closer to a Fed interest rate rise and the end of quantitative easing. But we would still use [the asset class] as we have to give something back regarding the risk tolerances.”
As well as being concerned about the UK, Mr Philbin has also taken a more cautious stance on US equities, albeit for different reasons.
“Profits are off the table” in the US, according to the manager. And while European and UK equity markets are often correlated, he said the former offered a “better bet”.
Mr Philbin’s four portfolios have equity allocations ranging from 31 per cent to 79 per cent, as of the end of August. The portfolios had a volatility range of between 0 per cent and 19.5 per cent.
Despite his concerns about the US, Mr Philbin is still looking to the region to boost growth in his most risk-tolerant fund. The Multi-Strategy Portfolio IV has the Legg Mason ClearBridge US Aggressive Growth fund as its largest holding, at 8.7 per cent as of August 31.
Other US holdings are few and far between, however. The portfolio’s next largest positions, at 7.8 per cent and 7.4 per cent, are the TwentyFour Income Fund and the Invesco Perpetual Global Financial Capital fund.
To gain international equity exposure, the portfolio also has 6.2 per cent in Old Mutual Global Equity Absolute Return and 5.6 per cent in FP Crux European Special Situations.
Mr Philbin’s most risk-averse fund has returned 2.6 per cent in the 12 months to October 20, according to data from FE Analytics. The most risk-tolerant fund, meanwhile, has returned 10.6 per cent.