Acknowledging markets have been in a state of flux, Heartwood’s Michael Stanes has ramped up his cash weighting in a bid to be able to quickly take advantage of opportunities as they arise.
The manager of the £619m CF Heartwood Balanced Multi-Asset fund has taken his allocation from around 5 per cent to a weightier 15 per cent.
While the move has partly been inspired by market headwinds, Mr Stanes asserted this has still very much been a tactical decision.
He said: “We want to protect the cash and we are quite excited about what opportunities could be created as markets have become much more discerning. The cash is there to be invested when opportunity presents itself.”
To fund the move, Mr Stanes has been tapering back his equity allocation and cut “a meaningful amount”, principally from global equities. “We have gone neutral on equities at 53 per cent, down from the mid-60s,” he said.
He has already used the liquidity buffer for a strategic play recently taking up a 2 per cent stake in gold. The price of the precious metal eased back following its strong start to the year and, given the reversal, Mr Stanes decided to invest; he subsequently made 10 per cent as a result of another rebound.
Overall, the fund, which sits in the Investment Association’s Unclassified sector, has felt the brunt of the past year’s choppy market backdrop and is down by 3 per cent over the 12 months to 16 June, according to FE Analytics. However, since its 2010 launch, it has achieved a total return of 28 per cent.
Its largest holding is the iShares Core S&P 500, which accounts for 4.9 per cent of the portfolio. “In the US, we have been plain vanilla investors, using passive funds as most active managers struggle to beat the market. However this strategy could change.”
One sector he is positive on is bricks and mortar, especially given the yields on offer. While the asset class has been making headlines recently on the back of investor redemptions, Mr Stanes remains upbeat.
He said: “We are optimistic on UK property and have exposure to some open-ended funds via Threadneedle as well as [real estate investment trusts], such as Land Securities, which is on a 20 per cent discount. We believe the fundamental demand still looks fine.”
He is holding 17 per cent of the fund’s assets in the fixed income space, mainly via medium-dated, inflation-linked bonds in the UK, short-dated gilts and some investment-grade corporate bond exposure.
“We have one small position in US energy high yield, which is a play on the recovery in the oil price,” he added.
“We have been pretty much out of commodity markets for the past three years. We do not see ourselves having any meaningful commodity exposure unless perhaps the oil price falls back again.”
Emerging markets make up 4 per cent of the vehicle and one potentially intrepid play the manager is keeping a close eye on is the battered region of Latin America, where he has had zero exposure for many years. He said: “There is a potential interest, Brazil is 65 per cent off its high in sterling terms but we have not made any moves as of yet.”