Within our Blended Managed Portfolio Service (MPS) solution, we take our central research insights and rigorous investment process and apply them in a flexible way to our Blended MPS portfolios, which offer a globally-diversified, actively-managed solution and are run on a discretionary basis.

We are not tied to using one investment implementation style or one investment vehicle structure. We choose the best method of implementing our investment ideas to try and generate the best risk-adjusted returns possible for our clients. The Charles Stanley Blended MPS solution is now risk-rated by Dynamic Planner, Defaqto and Synaptic to add additional external sense checks of the level of risk we are taking whilst facilitating client risk profiling. One of our core beliefs is that risk is more than just a single metric to be viewed in isolation and the Covid-19 pandemic once again reiterated this point.

Given our inflation-plus investment targets, we start our portfolio construction process from a blank sheet rather than taking a market index or asset allocation from external sources. There is no “home-bias” to our investment approach and therefore we invest freely across the globe. We believe an unconstrained approach to investing will deliver better risk-adjusted returns over the long term by offering a large opportunity set to us.  The most obvious example of this is the small weight allocated to the domestic UK equity market, at approximately 5% of portfolios currently, even with this being held within a 0% AMC share class of the Charles Stanley Equity Fund managed by the same team.

This flexible approach removes the need for the active vs passive debate, as we buy active managers where we think there is consistent and achievable alpha to be captured, and if not then we take on targeted market beta through passive vehicles. In the context of our current allocations, this translates to approximately 60% passive vehicles and 40% active.

This split will flex through the economic cycle as we look at the environment in which we find ourselves and the opportunities available. Generally speaking, we see more scope for active managers within areas such as Emerging Markets, Asia Pacific, High Yield Bonds and Infrastructure, than developed market equities such as the US. If we anticipate a breakdown in asset class and index correlations creating an environment in which active managers should prosper, we may shift the portfolio towards select active managers in which we hold conviction.

The lion’s share of our returns over the last year, as in many recent years, came from our North American Equity exposure – particularly positions such as the Invesco Nasdaq-100 ETF. Within our passively implemented positions we continue to isolate the themes or market segments we want exposure to, with US technology being a core example. This was, however, complemented by our second-largest equity exposures to Emerging Markets, focused on Emerging Asia.

We have composed this exposure via Stewart Asia Pacific Sustainability, Schroder Asian Total Return and JPM Emerging Markets funds. Each of these funds warrant inclusion on a standalone basis, but importantly they also aggregate well together to give a blended exposure to the regions.

We take a managed approach to our fixed-income exposure rather than outsourcing too much to strategic bond funds. We benefitted in 2020 from targeting sovereign debt, particularly from the US where there was more yield compression possible. We then trimmed some of these positions as we looked to manage our duration exposure in a very dynamic market environment, while shifting the “tail-risk” focus to inflation linked bonds in the US. These themes are primarily implemented through targeted passive vehicles focusing on a market segment or maturity profile.

In keeping with our “go anywhere” approach, we retain the ability to buy Investment Trusts where we consider them to be appropriate. Infrastructure assets are inherently long duration assets, often with forecastable revenue streams and inflation linkage to them. We currently hold two trusts in this space, International Public Partnerships (INPP) and The Renewable Infrastructure Group (TRIG). The former invests in public or social infrastructure assets and the latter those generating renewable energy. Crucially, the investment vehicle structure matches the liquidity profile of the underlying investments.

The key theme behind the Charles Stanley Blended MPS range is that we are agnostic in how we construct the portfolios and implement investment ideas in order to bring your clients the very best of Charles Stanley’s investment expertise via one centralised solution.

For those that prefer a unitised solution, the same strategy is run as a range of OEICs under the Charles Stanley Multi Asset Fund umbrella.

Contact us to find out more about our Managed Portfolio Services and how they could enhance your offering.

020 4502 7218

ist@charles-stanley.co.uk

www.charles-stanley.co.uk/blended-managed-portfolios

Chris Ainscough, Director of Asset Management, Charles Stanley

Chris joined Charles Stanley in 2014 and has worked across both our actively and passively implemented strategies. He now heads up our structure agnostic solutions, including the Blended MPS and Charles Stanley Multi Asset OEICs, where he invests across a broad investment universe from direct equity and fixed income through to active and passive collective vehicles.

Chris takes an unconstrained approach to investing, in terms of both securities used to implement an investment theme and the geographies/sectors contained in the investment universe. He is supported by the Asset Management and Research Teams, with a centralised and collegiate approach to investment management.