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Road less travelled

A feature of the Evelyn Active model portfolios is the slightly contrarian nature of some of the calls made by James Burns and his team.

And the latest update from the firm continues this theme, with the decision to reduce cash and dollar denominated assets in the defensive model while buying gilts and sterling corporate bonds.

They said this was done to take profits from the dollar's strength and take advantage of the falls in the UK bond market, where they feel the yields are now attractive.

Their long-term view is that short duration is the appropriate place to be for a fixed income allocation right now. 

At the fund level, those changes were implemented by reducing the holding in the iShares USD Corporate Bond Index fund, and increasing the holding in the iShares UK Gilts 1-5 years fund and the Artemis Corporate Bond fund.

Burns also bought more of the Axa US High Yield Short Duration bond fund and the Sequoia Economic Infrastructure fund.

Continuing the alternatives theme, they reduced the holding in the BH Macro fund, a hedge fund strategy, on valuation grounds as that investment has risen 30 per cent this year to date, and bought the Fulcrum Diversified Absolute Return fund. 

In the balanced income strategy, in addition to some of the bond changes which are described above, Burns has reduced US equity exposure and bought the L&G UK 100 Index fund, a FTSE 100 tracker. This move was made as they wished to bring UK equity exposure closer to neutral in light of what he viewed as the "cheap" and "defensive" characteristics of the market. 

The average UK equity fund allocation among the allocators we cover is 15 per cent in balanced portfolios. There are comparatively few outliers here, though Charles Stanley's 4 per cent allocation distorts the average somewhat. The next lowest is Invesco at 7.3 per cent. In the balanced portfolios, Evelyn Active actually has the largest exposure, at 23 per cent.

Of the latest changes Burns says: "The changes announced in the latest re-balance, although not huge in quantum, convey a strong message that some dry powder is being deployed into areas of the fixed income market that are for the first time in years, and following a pretty savage sell-off, are looking pretty attractive."

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