Milton Keynes-based Wealth & Tax Management (W&TM) offers in-house portfolios to clients seeking an active approach. But it offers portfolios from Parmenion Capital Partners to those concerned about minimising costs.
Managing director Tony Byrne is pessimistic about traditional asset allocation strategy. He agrees with consultant Tim Hale, chief executive of Albion Strategic, who forecasts losses in the main four asset classes for the next decade.
Byrne said this was partly because many traditional FTSE 100 constituents were facing challenges, notably the banking and fossil fuel energy sectors.
He said he preferred to base allocations for in-house portfolios on the momentum-based theory of crowd behaviour, espoused in the Elliott wave forecasting model.
W&TM is part of the Business Development Network, from which it receives monthly allocation recommendations based on the Elliott model. It overlays these with insights from its investment committee.
The committee chooses a fund for each asset class, based on: above-sector average performance over one and three years; below-sector average volatility over one and three years; costs; and fund style.
In recent years, asset allocation moves have included:
- reallocating towards Japan;
- increasing UK equity income to bolster performance in the low-risk element of the portfolios;
- removing gilts when UK interest rates were expected to rise, then adding them when that probability receded in the short term.
In the past six months, W&TM has reduced exposure to US equities following the US interest rate rise, and increased exposure to European smaller funds. ‘Europe has fallen sufficiently and opportunities are appearing,’ said Byrne. ‘Because of the EU referendum, we will probably reduce holdings in the UK and continue to increase European funds.’
He believes some non-traditional types of equity will buck the gloomy long-term outlook, such as firms involved in disruptive technology.
W&TM plans to launch its own new technology fund later this year to benefit from these opportunities.
Data to: 31 December 2015