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There was only one call in equity markets in the first two quarters. Managers who were underweight financials and overweight commodities outperformed the index; managers holding opposite positions underperformed. Laurence Boyle was luckily on the right side of the fence. The Dublin-domiciled £32m Assetmaster Balanced fund fell only 6.7 per cent from January to June, compared with average losses of 8.4 per cent for the IMA Balanced sector.

These same positions were detrimental in July, which Mr Boyle admits was a “very poor” month for the fund of funds. “Financials had a real snap back and commodities got stretchered out. It’s not our only play in town but if you’ve got both of those things going against you in the proportions they did, it’s impossible to have a good month,” he explains.

Mr Boyle reduced his exposure to banks some 18 months ago by selling a specialist financials fund. Earlier this year, he bought the JPM Commodity IGAR Long/Short index fund, which now accounts for 7 per cent of his portfolio, as well as a commodities structured product.

But the sector weightings, which are so crucial to the recent track record, also lie beyond his direct control, in the hands of the underlying managers. What is more, the manager turnover on the Assetmaster funds is very low. “We tend to be loyal to the long-only managers we buy. Once you’ve identified a good manager, they don’t become a bad manager overnight just because their figures don’t look good,” he says.

This approach could lead to conflicts between Mr Boyle’s views and those of his underlying managers. According to the multi-manager, however, this rarely occurs in reality. For example, the funds he holds, such as Tom Walker’s new Martin Currie North American Alpha fund, also tend to be underweight financials and overweight commodities. This is partly because he maintains long-term relationships with the underlying managers and respects their opinions. “Of course our views are formulated by the experience of the team and what we read, but we are also influenced by our conversations with the managers,” he explains.

The managers occasionally take opposing views on a stock. Mr Boyle describes an incident earlier in the summer, for example, when one of the long-only managers owned a stake in a company which was being shorted by the 130/30 fund in his portfolio. The result was neutrality: a waste of money. Happily, this problem was resolved when the manager saw the error of his ways, but it illustrates the potential for inefficiencies within the fund of fund structure.

Mr Boyle stresses the importance of what he calls “attribution analysis” to monitor this kind of risk. “I can’t tell a fund manager to change their strategy but I can see how they interact with the other managers in my portfolio. Sometimes it’s to make sure there’s not too much overlap, sometimes it’s to make sure there are no inconsistencies. We spend a lot of time trying to understand what we own and how it’s acting – what’s adding to performance, what’s subtracting. Information is king.”

If a fund becomes a net detractor, Mr Boyle typically dilutes its share of the portfolio with new cash, rather than selling outright. This means the weightings shift, but the basic composition of the portfolio varies little. The only reason he might sell outright is lack of conviction. He is unimpressed by managers who lose faith in their views and buy into a trend. “We don’t like knee-jerk reactions, people chasing the mainstream. We’ve seen it in the past - it’s tough to be out of favour,” he says.

The Assetmaster Balanced portfolio currently contains 18 different vehicles. Mr Boyle feels most comfortable with around 15 funds, which is relatively concentrated by funds of funds standards. “Some people say you are increasing the tracking error and the risk with fewer funds, but if you diversify too far you become a quasi-tracker,” he stresses.

The most striking aspect of the portfolio is the extremely low weighting of bonds, at 5.9 per cent. Mr Boyle says this weighting has changed little since launch. “We’ve been completely bearish for five years on the whole asset class. It’s delivered practically nothing. Everything was pricing on the perfect gilt market, where you got 4 – 4.5 per cent in the coupon and you were likely to lose the equivalent in capital over the period,” he explains.

As a proxy for bonds, Mr Boyle first held commercial property. As the value was gradually squeezed out of the asset class, however, he reduced his exposure in favour of low-risk structured products. These, which he has specially designed by the merchant banks, now account for a striking 29 per cent of the portfolio. “In a market which doesn’t really recover for the next 18 months, we will be a net beneficiary. The only way we lose on our structured products is if there’s a raving bull market on equities,” he says.

The 56 per cent of the portfolio dedicated to equities is highly diversified, with the UK only accounting for 18 per cent. “The future is with the emerging economies. It’s partly because they have natural resources. But it’s also the growth of the middle classes. It’s not a one-way ticket – they’re suffering from massive inflation – but we’re still happy with the internal demand story,” he says.

But his biggest call for the coming months is US equity. Any new cash the Assetmaster Balanced fund receives will be fed into Martin Currie North American Alpha. “We’re getting more and more bullish on America. Having led us in there, they will come out of the credit crisis first, outside of the financials. The US economy is very dynamic in reacting to these events.”