The managers of the Close Brothers multi-manager range have said a “fortuitous” defensive equity allocation has left their portfolios relatively unaffected by recent bouts of volatility.
Nancy Curtin, chief investment officer at Close Brothers Asset Management, said the fund came into 2016 slightly on the defensive, but still with enough exposure to risk assets to generate returns.
Across the company’s range of direct, multi-manager and passive funds, this meant an overweight to US equities, with UK equity exposure focused on large-cap international and dollar earners.
Ms Curtin said this defensive UK equity position proved helpful given June 23’s referendum outcome, which has hit domestic-focused stocks and sterling.
“This was because we liked them better and not because we thought the EU referendum was going to be a Brexit decision,” she said.
“With what happened on June 24, we benefited. Our UK equities went up, we benefited from dollar exposure, and the euro strengthened and left Europe performance flat. We were partially hedged in Japan but the appreciation in the yen made up for the decline in the market.
“In the midst of this unbelievable turbulence we should be massively down on the year, but we’re not. There have been things that have cushioned the decline. Quite fortuitously, the dollar exposure has helped, as have international earners. Bonds and alternatives are slightly up as well.”
The asset manager’s process sees it set out its views and then look to replicate them across direct holdings as well as external active and passive products.
“Because we have a direct strategy, we try to have alignment between our views and the managers we are choosing,” Ms Curtin said.
Of the 20 external fund managers used across the range, four are being used for the US overweight. Ms Curtin also said the firm liked funds from the likes of Legg Mason, Baillie Gifford, Barings and Lindsell Train.
The team has also recently added the Baillie Gifford American fund, which forms around 3.8 per cent of the Balanced portfolio, and Lindsell Train’s Global Equity vehicle (3.4 per cent).
The £86m Balanced fund, managed by James Davies, Matthew Stanesby and Sam Grant-Dalton, has almost 43 per cent allocated to global equities.
Fixed income makes up 27 per cent of the fund. Ms Curtin said the firm began increasing duration across its range at the start of the year.
“We’re not 100 per cent gilts, which would have been beautiful, but we are in a combination of investment grade and gilts. Both of those have done pretty well year to date,” she said.
The fund has returned 19.2 per cent over three years compared with an average return of 17.9 per cent from the IA Mixed Investment 40-85% Shares sector, according to FE Analytics.
