S&W’s Burns de-risks multi-manager range

S&W’s Burns de-risks multi-manager range

Smith & Williamson’s James Burns has used a “get out of jail free card” to de-risk his multi-manager portfolios after a rally in equities allowed him to reduce exposure to the asset class.

Mr Burns, who leads the firm’s multi-manager team, noted that while an overweight to equities had seen Smith & Williamson’s offering “suffer accordingly” during the market falls of early 2016, a rally has since enabled him to take a more defensive position in government bonds and high yield.

Many markets appear to have recovered from the volatility that marked the early part of 2016, with the FTSE 100 index up 0.3 per cent year to date.

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“We had a significant overweight to equities in the past few years and a poor start to the year. We did suffer accordingly,” Mr Burns said.

“Markets are mainly back up to where they were. We have been taking the chance to decrease our equity weighting. It’s almost a get out of jail free card.

“It was just a warning shot that the overweight we had wasn’t necessarily the best position.”

As a result the multi-manager range – consisting of the £22m MM Global Investment, £17m MM Cautious Growth and £31m MM Endurance Balanced vehicles – has been moved to a more defensive stance.

In the Endurance Balanced fund, for example, Mr Burns has taken equity exposure down by roughly 4 per cent in favour of fixed income, but still holds a heavy 67 per cent in stocks.

He has reduced his weightings to holdings including the UBS US Equity, Invesco Perpetual UK Strategic Income and FP Argonaut European Alpha funds.

Meanwhile, the manager has upped exposure to the Henderson UK Absolute Return portfolio – though this counts towards his equity weighting – and to the Axa US Short Duration High Yield Bond fund.

“We want to take advantage of the ‘blowouts’ in spreads in the high-yield space,” he explained.

“We have been de-risking, but doing something better than holding it in cash. Rather than having 6 or 7 per cent in cash, we have 3 or 4 per cent and go for government bonds.

“If the market goes up, we still get some exposure. If the market goes down, we don’t suffer as badly. It’s a bit of a halfway house.”

Meanwhile Mr Burns is considering increasing his exposure to energy, after adding a small position in the closed-ended Riverstone Energy vehicle.

“In early February we initiated a small position in Riverstone Energy, which launched around 18 months ago,” he said.

“It primarily looks at opportunities in North America. Riverstone creates management teams, which will then work on [energy] projects to create a portfolio of assets.

“[Riverstone] has money committed [to the fund] but has only invested half of it. It can pick up on opportunities where there are distressed sellers. We think we would like to add to that [position].”

The Smith & Williamson MM Endurance Balanced fund has delivered 9 per cent over three years, compared with the average return of 13.5 per cent from its peer group, the Investment Association Mixed Investment 40-85% Shares sector, data from FE Analytics shows.