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Asset Allocator

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Funky stuff

Asset Allocator recently met up with Alex Funk, who runs the model portfolios at Schroders Investment Solutions, for a metaphorical coffee and slice of cake.

Funk told us serendipity, rather than foresight, led to him exiting the dedicated gilt exposure he had earlier this year in favour of global sovereign bond funds.

The recent mini Budget, and the fact the Bank of England is raising rates by a lesser quantum than the Federal Reserve, prompted a severe sell-off in the gilt market but Funk's decision was made prior to this, and with no knowledge those events would be occurring.

Instead his reason for exiting gilts was a desire to be very short duration with his fixed income exposure, and he feels the gilt market is typically long duration by nature. 

More recently, he has been using investment grade bonds to bring his duration back to neutral. 

Funk's view is that duration should be considered at the portfolio level, and as he currently has an overweight to value equities, which he considers to be a short duration asset class, he has lengthened the duration of the fixed income book to achieve more balance.

He adds that allocators today arguably have more options than in the past, and is keen on alternative investments. 

Funk has chosen Neuburger Berman’s Uncorrelated Strategies fund, a mandate which contains a number of different strategies within the one fund, and so provides diversification with just one layer of fees. 

This is probably one of the reasons it is one of the most popular alternative funds in our database, held by seven DFMs. Only one fund beats it: Janus Henderson Absolute Return which is held by nine.

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