InvestmentsSep 7 2017

Miton duo swap out cyclicals for tech plays

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Miton duo swap out cyclicals for tech plays
Fang stocks such as Facebook have raced higher once again this year

Multi-asset specialists David Jane and Anthony Rayner have moved away from a macro focus in favour of focusing on big winners in the US market.

The managers, who run Miton’s £427m Cautious Multi Asset, £77m Defensive Multi Asset and £249m Cautious Monthly Income funds, are concentrating on thematic plays.

“We have moved away from having macro views. We have been moving into these more thematic areas,” said Mr Rayner.

“Areas we have been selling are cyclicals and the more aggressively economically sensitive businesses.”

The duo have jettisoned commodities stalwarts Anglo American, Glencore and Rio Tinto and favoured technology exposure.

“Industrial cyclicals and resources did very well at the latter part of last year,” said Mr Jane. “We rebalanced the portfolios in the early part of this year.”

The reshuffle has involved holding the Fang names – Facebook, Amazon, Netflix and Google parent company Alphabet – although these positions have been trimmed following a “huge move” in valuations. The managers also count Chinese firms Alibaba and Tencent among their tech positions.

“We have essentially rebalanced the portfolio,” said Mr Jane. “It will still look like it’s pro-growth, but we wanted to temper exposure to growth. Uncertainty led us to not favour the big pharma stocks, but the tech-driven stocks.”

Technology shares – the Fangs in particular – have been a focus of fierce debate. This summer, valuations in the space surpassed a dotcom boom record, leading some to urge caution. While many managers have been cutting exposure, other investors have piled in.

Jupiter’s Merlin fund of funds team has warned that disproportionate gains made by the Fang stocks could signal a peak in the current US bull market. 

Product specialist Alastair Irvine said leading tech names in the S&P 500 had increased their value by $269bn (£208bn) between March 1 and May 9, equivalent to double-digit share price gains. The index rose 0.25 per cent in local currency terms over that period, according to FE.

Mr Jane, wary of over-reliance, said the Miton team had attempted to “diversify” its tech exposure via a larger number of holdings in this space. 

Areas of focus have included cybersecurity, with the team holding positions in Check Point Software and CyberArc, and a “heavy” exposure to robotics, with investments in companies such as Fanuc. The managers have also backed the case for banks.

“We have had heavy exposure to banks in equities and bonds. We thought they were oversold as the markets struggle psychologically with moving on from 2007-08. If we think the economy’s recovering, that’s not a bad place to be,” said Mr Rayner.

European banks Intesa Sanpaolo, Société Générale and BNP Paribas were among Miton Cautious Multi Asset’s largest 10 holdings at the end of July.

Separately, the Miton portfolios make limited use of other open-ended funds for specialist exposure. TwentyFour Asset Management’s Income fund was among Cautious Multi Asset’s biggest holdings at the end of July.

According to FE, the Cautious Multi Asset fund has returned 27 per cent over three years, versus a 19 per cent average from its IA Mixed Investment 20-60% Shares peer group.