JP Morgan fund manager seeks inspiration in the east
The fund manager said the range of portfolios has outperformed their various sectors over the past year, partly due to a bullish exposure to Japan.
He said his affinity to Japan earlier on in 2014 had been based on seeing scope for earnings growth and valuation expansion and, despite the recent challenges the country has faced, said he believed in the long-term investment opportunity.
Mr Lanning said: “The fact Japan has fallen back into technical recession does not materially affect our positive outlook for the equity market, and the slight pullback in the market on the news has cleared some overbought levels and allowed a more attractive entry level to increase equity exposure.”
The Fusion range is made up of five portfolios – Income Fund, Conservative Fund, Balanced Fund, Growth Fund and Growth Plus Fund – and is spread across the risk and return spectrum, catering for all risk tolerance levels.
The £7.6m Fusion Growth Plus embodies Mr Lanning’s highest conviction ideas. Mr Lanning said he was prepared to take more risk to potentially get a higher return, and the fund is currently overweight in equities, and underweight in government bonds.
While he is not keen to own duration, he has retained some exposure to fixed income duration – core government and high quality investment grade bonds – across the fund range, in the name of diversification, even though they offer nominally very low yields.
The portfolio is geared towards investors looking for capital growth and has a high exposure to equity markets.
According to its latest factsheet, the portfolio has a 28 per cent weighting in US equities, 22.8 per cent in UK equities and 19.1 per cent in Japanese equities.
The portfolio’s top holdings are the £1.3bn GLG Japan Core Alpha Equity Fund, at 9.3 per cent; Polar Capital Funds, at 9.2 per cent; and the £2.4bn JPM US Select Equity Fund, at 8.5 per cent.
The minimum investment is £1,000, and the ongoing charge is 1.57 per cent.
Confessing to feeling nervous about emerging market equities, Mr Lanning said they may look cheap but there is good EM and bad EM. However, the Growth Plus Fund has a 6.1 per cent exposure, again to maintain diversification.
He said he was also actively monitoring high-yield debt, and has recently added a modest exposure through the BlackRock High Yield Bond Fund.
The portfolio also has a 3.9 per cent holding in European equities. Being broadly neutral towards Europe, Mr Lanning does not believe in getting exposure through passive vehicles. However he said there were some good companies in the space, and he is keen to identify good active stock pickers.
Mr Lanning believes that the UK is an intrinsically defensive market. He has rotated global fixed income into UK core fixed income, which has worked well in the past few weeks.
He said: “Markets had been somewhat premature in pricing in the possibility of interest rate increases in the UK ahead of the US, which seems unlikely given the UK economy’s continued exposure to European headwinds. We have subsequently seen interest rate expectations pushed out in the UK.”
ADVISER VIEW
Laith Khalaf, senior analyst at Bristol-based Hargreaves Lansdown, said: “Fund sales appear to have weakened towards the end of last year, with both European and Japanese funds seeing outflows.
“Equity income funds and property are the main sectors which held up best. This tells us that income-producing assets still remain flavour of the month with UK investors.”
Top 10 holdings
GLG Japan Core Alpha Equity Fund 9.3%
Polar Capital Funds 9.2%
JPM US Select Equity Fund 8.5%
Liontrust Macro Equity Income Fund 6%
Blackrock UK Focus Fund 5.9%
Vanguard FTSE 100 Ucits ETF 5.4%
Edgewood L Select – US Growth Fund 5.4%
Neuberger Berman US Multi Cap Opportunities 5.1%
JO Hambro UK Opportunities Fund 4.8%
iShares Core S&P 500 Ucits ETF 4.6%
