Bordier UK has overhauled its alternatives exposure by buying the Henderson UK Absolute Return fund and exiting a holding in a Kames market neutral offering.
The firm made the changes to its Bordier UK managed portfolio service (MPS) in February, driven by the belief the Henderson offering would be more appropriate amid current political and geopolitical uncertainty.
The fund immediately took up a 5 per cent allocation in the Balanced strategy, investment director Ian Heap said.
As a result, the manager removed the offshore £87m Kames Equity Market Neutral Plus offering, run by trio David Griffiths, David Pringle and Malcolm McPartlin.
“We still use Kames a lot in the alternatives space,” Mr Heap said, highlighting the fact its Equity Market Neutral and Absolute Return Bond Global funds were still used in both managed portfolios and segregated mandates.
But he added: “The Market Neutral Plus strategy has shown signs of volatility due to its leverage. Its asset allocation seemed more aligned to a Remain vote [in last year’s EU referendum].
“We brought in Henderson due to its correlation matrix. We looked at a lot of what ifs from Article 50, the UK’s snap election, the end of the bull run and geopolitics – and measured how it would react as a fund [and how Henderson would react] as a group.”
The changes to the line-up stem from a process that began in June 2016, when the Bordier UK investment committee reviewed fund managers to ensure their view of the macro backdrop aligned with its own following the Brexit vote.
This led to changes to the 40-50 funds used as part of Bordier’s five MPS options, segregated mandates and platform MPS – with new funds being introduced from its reserve list.
The changes to the committee’s macro outlook meant taking a more cautious position, the team pointing to geopolitical “alarm bells” and general investment uncertainty.
Equities were cut to 40 per cent of the firm’s Balanced portfolios, down from a neutral weighting of 50 per cent.
“This is still the case now and we’re keeping that given recent reactions to geopolitics and the UK election,” Mr Heap (pictured) said.
The review also led to changes in some of the firm’s UK equity line-up, in particular the funds featured on its platform MPS. While asset and fund allocation is generally consistent across the company’s offerings, some differences do occur as a result of restrictions on platform clients.
UK equity growth and income funds had accounted for 17 per cent of the Balanced on-platform offering, spread across funds from GVQ, Columbia Threadneedle and Franklin Templeton among others.
The team subsequently added in Simon Brazier’s Investec UK Alpha strategy in its growth allocation at the expense of Artemis UK Special Situations.
Mr Heap said Artemis’s £1bn strategy had been part of the portfolio for many years, but suggested it was now out of sync with the committee’s macro expectations. He added that the committee brought in Investec to “widen exposure”.
Other changes to asset allocation have seen an increased use of short-duration bond funds at the expense of cash, long-dated bond and inflation-linked exposure. Mr Heap said the committee wanted to stay in liquid assets with some growth potential while it awaited an equity market correction.
The Bordier UK Balanced MPS has returned 20 per cent over three years compared with 17 per cent from the Asset Risk Consultants Balanced strategy benchmark, according to the firm.
