Although the manager said he didn’t think the “exceptional” returns from the stockmarket this year will be repeated in 2014, Mr Turner said he was still more positive on the outlook for equities than bonds.
He said the environment will be a bit less “market-friendly” but that equities are still likely to rise next year.
The Aberdeen team looks to run the fund in a way that minimises volatility compared with its peers, which tends to mean it lags behind when markets rally.
That has been the case this year, with the fund lying in the fourth quartile of the IMA Mixed Investment 40-85% Shares sector as developed stockmarkets rose.
Mr Turner attributed part of the underperformance during the past year to the fund’s focus on “quality value” stocks, which he said were businesses with a strong management team, business model and cashflow generation priced at a reasonable valuation.
However, he said he would not be changing the fund’s style, adding that he had increased
his fund’s exposure to non-UK European stocks in particular.
The increased exposure to equities has been funded by selling down the fund’s fixed income holdings, primarily inflation-linked bonds.
Mr Turner said inflation-linked bonds would suffer more than conventional bonds in the short term because of rising bond yields. Rising yields, which mean prices are falling, impact inflation-linked bonds more because they have a longer life.
The manager added that moves by the government to reduce support for the economy, including the change in the Funding for Lending scheme, signalled slightly tighter monetary policy which would also impact his fixed income holdings.
“So it is about not actual inflation rising (which would help index-linked bonds relative to conventional), but the anxiety around potential inflation and the policy reaction to ward it off,” he said.
Elsewhere, the Aberdeen multi-asset team has also been adjusting the alternatives portion of the Multi-Asset fund.
The fund has traditionally had exposure to hedge funds through investment trusts listed on the London Stock Exchange but is now using Ucits-compliant open-ended funds.
Mr Turner has also been reducing the exposure to private equity investment trusts because the discount the trust’s shares trade at relative to the net value of the trusts assets have narrowed considerably this year, meaning the manager has made gains on the holdings.
However, Mr Turner has retained the fund’s exposure to infrastructure investment trusts, in spite of some other managers selling out of these products in recent months due to them having a high premium compared to their net asset values.
He said: “We have been buying some new issues where there have not been big premiums, including Riverstone Energy and Greencoat UK Wind.”
Mr Turner said he would reconsider the holdings in infrastructure if UK government bond yields rise to 4 per cent but did not expect this in the near term.
