Given the volatile wider economic backdrop, he remains active with his equity positions which he believes are attractively valued compared to government bonds.
AXA FRAM MANAGED BALANCED MIXED INV 40-85% SHARES
The portfolio’s cash weighting has increased, reflecting Richard Peirson’s cautious view specifically on government bonds, The bond portion of the fund is defensively positioned, with half of the UK holdings in index-linked bonds. The recent rally in equity markets has benefited the fund.
SCHRODER MANAGED BALANCED NEPTUNE BALANCED MIXED INV 40-85% SHARES
The balance of global economic power is gradually shifting towards emerging markets. Robin Geffen is keen to capture this trend, whilst retaining exposure to less risky assets such as cash and bonds to dampen volatility. Although the UK accounts for the majority of equity exposure, the focus is on companies supplying emerging and other overseas markets. A prime example is Rolls Royce, whose aircraft engines are sold worldwide.
The big risk of a meltdown in Europe has been avoided for now, meaning both equities and bonds should finish the year in positive territory.
Johanna Kyrklund favours the UK and US equity markets, especially areas with high yields. Exposure to Europe has been increased as the political situation looks to have improved. In the bond markets she prefers investment-grade corporate bonds (those issued by companies perceived to be more financially secure) over government bonds, which currently offer very low yields.
MAM CF MITON STRATEGIC PORT FLEXIBLE INVESTMENT
Martin Gray believes we face an environment of low or negative growth for some time ‑ potentially three to five years. His fundamental reason for being bearish is the state of the banking system. He worries that there are more chapters to the banking crisis to come and that further capital raisings, or even nationalisations, are likely. This, he believes, will continue to hamper economic activity, constraining the ability of businesses to borrow money to expand.
The fund therefore retains its defensive positioning, investing in predominantly low-risk assets including 30% in cash across US dollars, Japanese yen and sterling. One stock market he does favour is Japan, which he argues is the most realistically valued of the major equity markets. He added to Japanese positions when the market fell in May. The portfolio is little changed in the last few months, though significantly Martin Gray has now taken profits in the remainder of his direct gilt holdings after a strong run.
The absolute return sector contains a mix of funds, including those focused on the UK, Europe, global equities, bonds and alternative assets. While many share similar objectives, such as aiming to achieve positive returns in a variety of market conditions, they go about achieving this in very different ways. Each fund in the sector therefore needs to be considered on its individual merits and comparisons between funds in the sector are not always valid. The sector has been in the spotlight recently because many funds have not lived up to expectations.