Our panel of expert investors detail recent trading activity.
With the continuing success of the Covid-19 vaccine, economies have re-opened. But as restrictions are lifted and with case going up again rapidly, the economic bounce back might be short-lived.
Every quarter, our multi-manager panel participants reveal their current bull and bear points. They discuss the new funds and trusts they have purchased, those they have increased their holdings in and the ones they have trimmed or sold.
In the third quarter of 2021, our managers focus on diversifying their portfolios through investments in sectors including property, healthcare, private equity and financials.
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Peter Hewitt, fund manager of BMO Managed Portfolio Trust
Reason to be bullish: as economies re-open there are continuing upgrades to economic growth in the UK, the US and Europe. This is the key driver to upgrades of similar magnitude to corporate profits, earnings and dividends.
Reason to be bearish: inflation has risen sharply in recent months. Central banks take the view that this is transitory and will fall back. However, should investors lose confidence in this view and believe that bond yields and interest rates need to rise (in response to very strong growth) then this will manifest in increased volatility for equity markets.
Bought: Hewitt recently purchased BB Healthcare (LSE:BBH), an investment trust that has a high-conviction, unconstrained, concentrated portfolio of 35 holdings. It is invested across all the sub-sectors in healthcare including biotechnology, medical technology, life sciences, managed care and pharmaceuticals. The sector has underperformed since the November announcement of successful vaccines for Covid-19, while valuations are back at attractive levels and secular growth characteristics remain strong. “Over half the portfolio is invested in medium and smaller companies where the managers have demonstrated good stock selection,” says Hewitt. “This trust is an excellent way to gain exposure to attractive long-term fundamentals of the healthcare sector.”
Increased: he has increased his position in Lowland Investment Company (LSE:LWI), which he says is positioned to benefit from the re-opening of the UK economy. The trust employs a valuation-driven investment process that aims to identify high-quality companies that are undervalued at the time of purchase. The portfolio is invested across the size spectrum of the UK equity market with roughly equal amounts in large, medium-sized and smaller companies. Their “current preference is for companies with a domestic bias in their revenues”, adds Hewitt. The long-term performance record is good, and the trust offers an attractive 4.4% dividend yield.
Sold: the income component of returns from Murray International (LSE:MYI), one of interactive investor’s Super 60 choices, has been and continues to be good, as it offers a dividend yield of 4.5%, which is attractive for income investors. However, Hewitt notes that the capital growth prospects are less clear. The portfolio has significant holdings in tobacco, banks and mining companies and 12% in bonds, all of which have relatively low capital growth characteristics. He concludes: “For investors seeking capital growth, there are other trusts which offer more potential.”
David Hambidge, head of multi-asset investment at Premier Miton Investors
Reason to be bullish: strong economic recovery, improving corporate earnings in most sectors and an improving dividend picture should help support share prices, particularly in the UK.
Reason to be bearish: if higher inflation turns out to be more than transitory, central banks are likely to respond by increasing interest rates. This will almost certainly be negative for fixed-income securities and possibly equities as well.
New position: Hambidge has taken out a new position in Allianz UK Equity Income, which he says looks “set to benefit from the strong economic recovery and rapidly improving corporate earnings”. The fund adopts a value approach in a concentrated 40-60 benchmark-agnostic stock portfolio that seeks to outperform the FTSE All-Share Index. While the investment approach is unconstrained, the managers do consider sector and factor risk alongside environmental, social and governance (ESG) considerations within their investment analysis and decisions, together with adopting an ‘active ownership’ approach.
Increased: the holding of Secure Income REIT (LSE:SIR) was increased. This trust focuses on generating long-term inflation-protected income from real estate investments. It listed on London’s Alternative Investment Market in 2014 and is externally managed by Prestbury Investments. “The defensive portfolio has one of the longest lease lengths in its sector with a weighted average unexpired lease of over 20 years,” says Hambidge.
Its portfolio includes the world’s second-largest operator of leisure attractions, Merlin Entertainment Plc, and Ramsay Health Care Ltd (ASX:RHC), a leading private hospital operator. In addition, the REIT has recently acquired a portfolio of hotels, increasing its existing holding of Travelodge hotels to 131, as well as acquiring two event venues: Manchester Arena and The Brewery in London. The REIT is targeting returns in excess of 10% a year over the longer term and has a progressive dividend policy.
Reduced: Hambidge’s team has recently taken profits from a number of their holdings that invest in specialist areas of the credit markets including Angel Oak Multi-Strategy Income. This fund invests in asset-backed securities and has produced strong returns over the last 12 months or so.
Vincent Ropers, co-manager of TB Wise Multi-Asset Growth and TB Wise Multi-Asset Income
Reason to be bullish: the easy gains for financial markets, which started when the path for a global economic recovery became clear in the fourth quarter of last year, are likely behind us. This doesn’t mean that it is all downhill from here though, and there are many assets where attractive valuations can now act as a catalyst in themselves for further upside.
Reason to be bearish: from now on, more attention will be paid to macroeconomic data points, particularly inflation, and whether central banks are forced to tighten their policies to prevent the economy from overheating. While they are likely to remain accommodative for as long as possible, central bankers are walking a tightrope and any tweak to their commitments of support will be scrutinised and create volatility.
Bought: Ropers’ team participated in a new share issuance by the Polar Capital Global Financials (LSE:PCFT) trust. “Financials are, in our mind, one of those areas with significant upside left, benefiting from robust balance sheets, attractive valuations and a positive correlation with rising yields,” he says. The global and specialised approach of the Polar Capital managers also gives them exposure to interesting growth themes through emerging markets, fintech and smaller companies in the sector.
Increased: the allocation to private equity has been increased this quarter, particularly through the Oakley Capital Investment Trust (LSE:OCI). “In addition to the quality of the manager and of its concentrated portfolio of companies, we think private equity currently offers a rare opportunity to invest as if looking into a crystal ball,” says Ropers.
He argues that the tide-lifts-all-boats environment seen over the past few months is likely to have positively impacted private companies in line with their public counterparts, but this is yet to be reflected in valuations since those are only reviewed periodically. “One can thus reasonably expect the Oakley portfolio to be revalued higher and the current 10% discount to look attractive in hindsight.”
Trimmed: Ropers’ team didn’t exit any position this quarter but, as usual, actively took profits from winners to recycle their gains into new positions. One such position where they took some profits was in the AVI Global Trust (LSE:AGT). It has performed strongly over the past year thanks to a combination of good stock-picking and tightening of the discount in both its portfolio of holding companies and external trusts, and the trust itself. “This remains our largest position though and we believe that this trust continues to be well placed to perform strongly going forward,” says Ropers.
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John Husselbee, head of multi-asset at Liontrust
Reason to be bullish: global stocks ended June with a fifth consecutive positive quarter as reflation continues. Both the S&P 500 and Nasdaq hit record highs once again, buoyed by news of a massive infrastructure deal in the US.
Reason to be bearish: overall, there is a growing feeling markets had a fairly easy ride in the first stage of recovery from the pandemic, with recent peak data driving new highs, but more volatility is expected over the summer and equities could remain rangebound as investors wait to see what the Federal Reserve and other central banks decide. At the very least, expectations of higher inflation are becoming more commonplace and while unlikely to panic policymakers into aggressive tightening, it does signal crisis-level policy is no longer essential.
Bought: one new addition to Husselbee’s portfolio has been VH Global Sustainable Energy Opportunities (LSE:GSEO. “We participated in this IPO to diversify our UK infrastructure allocation through a more global investment in sustainable energy infrastructure assets,” he says. This trust has a broad mandate to invest in energy generation (wind, solar, hydro), energy storage (batteries) and energy transportation (pipelines).
Increased: the holding in Cordiant Digital Infrastructure (LSE:CORD) has been increased. “We added to our position via an attractive C share class issue, following our initial IPO allocation in February 2021,” says Husselbee, adding that their strategy provides access to core digital infrastructure assets such as data centres, telecommunication towers, and fibre networks in the UK, Europe and the US.
Sold: a holding sold recently was JPMorgan Global Core Real Assets (LSE:JARA). “We sold this diversified property and infrastructure portfolio focused on the US and Asia,” he says. The team wanted to reduce exposure to such diversified plays and recycle the proceeds towards more focused, higher-conviction strategies in core infrastructure (as outlined above) and specialist property.
The four multi-manager panellists
Peter Hewitt is a director and investment manager with the BMO global equities team, and fund manager of the BMO Managed Portfolio Trust, where he specialises in investment trusts.
John Husselbee is head of multi-asset at Liontrust. He manages a range of multi-asset funds, including growth and income portfolios.
Vincent Ropers is a portfolio manager at Wise Funds, responsible for multi-asset strategies, using value and fundamental investment styles. He is co-manager of TB Wise Multi-Asset Growth and TB Wise Multi-Asset Income.
David Hambidge is head of multi-asset investment at Premier Miton Investors. He helped set up the fund-of-funds operation in 1995 and is regarded as one of the UK’s most experienced multi-managers.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
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