Menzies ups number of underlying funds

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Menzies ups number of underlying funds

Greystone Wealth Management’s James Menzies has increased the number of holdings in his portfolios to multi-year highs as he diversifies to safeguard against market ruptures.

Mr Menzies, who serves as Greystone’s investment director and works on the four-strong Margetts Greystone fund of funds range, said volatility had led to an increased focus on diversification.

“It has been quite a volatile period,” he said. “We want to ensure we have a good diversified mixture of managers, styles and allocations to generate risk-adjusted returns.”

This has led to a situation in which three of the four funds have their highest number of holdings for four years, although Mr Menzies stressed they remain “pretty concentrated”, with position sizes typically ranging between 3 and 7 per cent.

“We probably have the highest number of holdings since inception,” he said. “It’s an interesting time with monetary policy the way it is.

“There’s quite a bit of volatility out there, so it’s quite prudent to try and diversify across managers and investment philosophies.”

The £94m Balanced fund has 27 holdings, while the £76m Cautious Managed fund has 26 and the £62m Global Growth offering has 22. All three are near record highs.

“Compared with the rest of the industry, we are still pretty concentrated in terms of the number of holdings, but relatively it’s a slight change [upwards],” Mr Menzies said.

In another sign of caution, the manager has also been upping his positions in absolute return offerings.

In the Balanced fund, Mr Menzies has been adding to his holdings in Polar Capital UK Absolute Equity and City Financial Absolute Equity, both of which sit in the fund’s UK equities bucket.

“We have topped up on long/short positions,” he said. “[The Polar Capital fund] is offsetting volatility. It’s in our equity bucket but can generate decent returns when markets fall.

“We have had a good chunk of the City Financial fund for some time. The two funds complement each other. When one doesn’t do well, the other seems to do better. The geographies are slightly different.”

According to FE Analytics, the Polar Capital fund has returned 2.7 per cent year to date, while the City Financial offering, a top performer in recent years, has shed 7.1 per cent.

In recent weeks, Mr Menzies also bought into the Artemis US Extended Alpha long/short portfolio.

In fixed income, the manager has been favouring vehicles with short duration and high yields.

He bought the Royal London Short Duration Global High Yield bond fund in February and used market weakness in the same month to top up on the Gam Star Credit Opportunities vehicle.

On the latter he noted: “That buys financial debt and has a decent yield. We have held that for more than 12 months – it’s a decent fund, which has helped.”

Mr Menzies has also topped up on Capital Group’s Global High Income Opportunities fund, which invests in emerging market government bonds and corporate high-yield bonds.

According to FE Analytics, the Margetts Greystone Balanced fund has returned 11.4 per cent over three years compared with 10.4 per cent from its peer group, the IA Mixed Investment 40%-85% Shares sector.