As such, our VT Chelsea Managed funds have erred somewhat on the side of caution.
For instance, the VT Chelsea Managed Aggressive Growth fund currently has more than 10 per cent invested outside of equity-only funds through the likes of Jupiter Absolute Return – which serves as a hedge against potential market falls – and F&C Market Neutral.
The latter fund, while being equity-like in terms of risk, nevertheless resides in the Investment Association (IA) Targeted Absolute Return sector.
All four of our portfolios also have small weightings in gold through Ned Neylor Layland's Old Mutual Gold and Silver fund.
On both valuation and economic grounds, the team is positive on Japanese, European and emerging market equities. Economic data coming from the US appears stable – GDP figures are strong and unemployment levels are low – but a lot of US stocks look expensive relative to history.
We can't see any immediate indicators that growth or value will outperform over the medium term. The VT Chelsea Managed Aggressive Growth fund therefore holds between 35 per cent and 37 per cent in US equities while the MSCI World index has a 52 per cent regional allocation (as at 26 January 2018).
That said, one of the newer additions to our portfolios over the last quarter has been Artemis US Extended Alpha, although manager Stephen Moore adopts a concentrated portfolio that looks very different from the benchmark.
He also uses additional long and corresponding short exposure to protect on the downside, as well as to generate extra alpha.
We also access some of our US exposure through biotechnology-focused funds. The team likes this area of the market because new drug approval in North America remains resilient, there is a significant amount of scientific innovation coming through and the US has an ageing population, all of which could benefit the sector.
However, the VT Chelsea Managed Aggressive Growth fund's biotech exposure has fallen over the last quarter.
This is because, following the election of US president Donald Trump in 2016, the sector began to rally; its performance had previously been suppressed by concerns regarding presidential candidate Hillary Clinton's desire to cut drug prices.
Because the sector suddenly performed so well, the team decided to take some profit a while back and has not been reallocating any new inflows.
In a similar fashion, our UK exposure has gradually fallen as we have simply stopped allocating new inflows into the home market. This is due to Brexit-related uncertainty.
Overall, the team has refrained from taking any particularly punchy bets over the last quarter. Something which is important to note is that we don't have a style bias across any of our portfolios at the moment.
This is because we can't see any immediate indicators that growth or value will outperform over the medium term.
The team also believes it is important to diversify across every aspect of the portfolio, given toppy valuations and macroeconomic uncertainty.
Darius McDermott is managing director of Chelsea Financial Services
