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Sipp Investor: what Anthony Bolton teaches us about fund selection
Rob Kyprianou explains what he looks for in a fund, and shows how his wariness about 'style creep' proved its value during Anthony Bolton's foray into China.
Following another strong quarter for his Sipp portfolio, Rob Kyprianou explains how he monitors the performance of the funds he holds.
Beating my benchmark
The flattish close could not detract from what was a good first quarter for equities. My self-invested pension portfolio (Sipp) benefited, rising by 8.2% compared with 4.3% for my benchmark, which comprises 25% UK gilts, 50% UK equities, and 25% euro equities.
My overweight to equities and heavy underweight in bonds – in fact I owned none in the quarter, compared with a 25% weight in the benchmark – were the main drivers of this relative outperformance of plus 3.9%.
Within equities, the portfolio’s barbell of overweight US and emerging market equities and underweight UK and european equities also added value relative to the benchmark.
As I flagged up in last month’s article, after a strong recovery in the previous six months I felt that the outlook was now more balanced for equities, and that I would be using March to eliminate my overweight equities position.
Selling down emerging market equities
Given my very heavy overweight position in emerging market equities (37% versus 0% in the benchmark), this would be the area of focus, selling the extra holdings I had accumulated in the summer of last year when these markets had been struggling.
My emerging market holdings are held in six funds managed by three fund management houses. Although all have served me well, I have issues with all the funds, so I have 'top sliced' each holding. Specifically:
- Aberdeen Emerging Markets – a star fund in this sector, but it has grown very rapidly to the point where even the management house is concerned enough to ask for no further promotion of the fund. In my experience, such concerns should not be ignored: caveat emptor.
- First State’s Global Emerging Market Leaders , Asia Pacific Leaders , Indian Subcontinent and Greater China Growth funds. All good funds in their sector, but First State’s broad excellence in emerging markets has meant that it has become responsible as a management house for more than 20% of my portfolio, which is a lot to have under one roof.
- Fidelity South East Asia fund. A long-running core holding in my portfolio whose performance had seen it rise to more than 10% of my portfolio – a lot to have in one fund.
All the sales were converted to cash, as I was waiting to see how markets and market news would unfold before deciding on my next asset allocation move. So at the start of the second quarter my allocation to overall equities is neutral at 75%, although the barbell remains in place, with the balance in cash – I still hold no bonds.
Managing your fund managers
My actions in March show how important it is in my view to manage your asset allocation and your fund managers. I believe in active management, but I believe it is crucial to pick your managers very carefully if you outsource any of the management of your wealth.
In my case, I do my own asset allocation, but outsource stock selection to fund managers. This suits my relative strengths and weaknesses, and the time and information flow available to me. In my investment process, asset allocation comes first, but then I carefully search out good managers in each asset class chosen.
I spend considerable time performing this search – there is nothing more frustrating than making the right asset allocation call and seeing it fritted away by poor stock selection. Also, poor asset allocation can be mitigated (rarely saved) by good management of the underlying stocks.
What makes a good manager?
After 33 years in the industry, I hopefully have a leg-up in understanding what makes a good fund manager. There is no one rule or one way of managing money successfully – if only it were that simple.
The Citywire guide to investment trusts
In association with Aberdeen Asset Management
More about this:
Look up the funds
- Aberdeen Emerging Markets A Acc
- First State Global Emerging Markets Leaders A GBP
- First State Asia Pacific Leaders A GBP Acc
- First State Indian Subcontinent A GBP Acc
- First State Greater China Growth A GBP Acc
- Fidelity South East Asia Acc
Look up the fund managers
More from us
- Sipp Investor: selling off shares after a good run
- Buy Fidelity, but not Bolton, for China
- Bolton discusses his future, QE and China stocks
- Fidelity drops Special Situations fund from 'Select' list
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