A hunt for “safe” portfolios and reliable stockpickers has prompted Architas fund buyer Nathan Sweeney to pull money from vehicles run by Neil Woodford and popular bond boutique TwentyFour.
Mr Sweeney, co-manager on the firm’s Multi-Asset Active range alongside chief investment officer Jaime Arguello, has been reassessing his holdings in the belief markets will focus more on company news as central banks unwind monetary stimulus.
“Markets have gone up with the expansion of central banks’ balance sheets. This is the beginning of the end of that support,” he said.
“We expect markets to focus more on stock-specific moves. That will increase volatility.
“We are starting to see signs of that creep in: stocks such as AstraZeneca have been hit hard by stock-specific news. Price action is hitting markets a lot more.”
As such, Mr Sweeney has been looking for managers that could prosper in the new environment.
“We are meeting a number of different managers at the moment, and we have [backed] stockpickers and moved away from managers that have benefited from the general trend,” he explained.
On the equity front, this strategy has prompted Mr Sweeney to put more money into Lindsell Train UK Equity. Others funds, such as Standard Life Investments UK Equity Unconstrained, have been sold as part of the overhaul.
Mr Sweeney is also among those to scrutinise Mr Woodford’s flagship Equity Income fund after it was hit by several share price drops.
The manager has reduced exposure to the vehicle and is considering whether to sell out completely.
“What have they missed in terms of analysis? AstraZeneca was a drug trial, but there are other stocks where they missed a big problem,” he said.
“The question is whether we continue to stick with that.”
Mr Sweeney’s dash for cover has also affected his fixed income positioning, as he ups exposure to government bonds using passives and focuses on ‘high-quality’ credit, both in investment grade and high yield.
The move has seen the manager add to holdings such as Kames Investment Grade Bond, run by Stephen Snowden and Euan McNeil, while eschewing portfolios that appear riskier.
“We sold TwentyFour Dynamic Bond,” he said.
“They have got a good name with lots of diversification, but as we move to a world with more winners and losers, a fund with exposure to things like asset-backed securities and high yield – I don’t want any exposure to those risks.”
Similarly, he reduced a weighting in the Royal London Corporate Bond fund, using money from fixed income sales to increase cash. This has risen from around 2 per cent at the start of 2017 to nearly 6 per cent.
This same sense of caution also prompted Mr Sweeney to underweight US equities, reducing holdings such as Schroder US Mid Cap, while buying an iShares Edge Minimum Volatility ETF for its defensive qualities.
“If you take out tech, the markets are probably down,” he said.
“Everyone has been very bullish...growth is solid but earnings are questionable. The baton has been passed to politics, but the way they operate is much slower than how central banks reacted post-2007.”
The Architas MA Active Intermediate Income fund has returned 25 per cent over three years, compared with a 19 per cent average by the IA Mixed Investments 20-60% Shares sector, data from FE Analytics shows.