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My asset allocation: Scott Mordrick of Montage Wealth Management

My asset allocation: Scott Mordrick of Montage Wealth Management

The unloved UK market offers investors opportunities despite Brexit uncertainties, according to Montage Wealth Management. Head of portfolio management Scott Mordrick said, in many cases, these are not reliant on the UK striking a good departure deal with the EU.

‘In fact, a bad deal is equally compelling in terms of opportunity,’ he said. ‘We continue to favour large-cap value equities in developed economies.’

Montage’s investment team adopts a top-down, ‘full cycle’ approach to investing, taking a long-term view and sticking to strategic asset allocation parameters in place since launch. For example, the growth-focused portfolio has 40% in cash and fixed interest, and 60% in growth assets.

‘Tactical decisions won’t change the split between growth and defensive assets. But they affect the weighting of the underlying assets classes in these two buckets,’ Mordrick noted.

The team continues to hold government bonds in the ‘defensive’ bucket, believing they can hedge against equity risks during a period of elevated valuations. But it has sought to limit interest rate risk by reducing duration.

It also holds index-linked bonds and has a neutral exposure to investment grade corporates. ‘We’re positioned for rising long-term interest rates, for their rise from ultra-low to low levels and on to what we might describe as moderate levels,’ he added.

Risky business

The team’s allocation to high-yield bonds is above neutral because it expects the asset class to perform well in a rising interest rate environment. But it is nervous of what Mordrick calls a ‘relatively low’ risk premium, particularly as several bonds were issued with little investor protection.

The investment committee meets monthly to review portfolio performance, underlying fund performance, portfolio attribution, tactical allocations and fund selection. But strategic asset allocation is reviewed annually. ‘We don’t seek to make changes at the strategic level, but want to ensure the risk levels of each portfolio remain appropriate,’ the chief investment officer explained.

In the past year, Mordrick highlighted thematic and alternative investments as key performance drivers. These include the Polar Capital Financial Opportunities fund, the Miton Global Opportunities investment trust and the JP Morgan Global Macro Opportunities fund.

In addition, the team’s overweight position in overseas bonds and US equities has paid off in the past three years. ‘The more cautious portfolios have also benefited from maintaining duration and developed government debt,’ Mordrick added.

Data to 28 February 2018. *Other includes alternative investment strategies/undisclosed/others. **Excludes platform charges and adviser fees. Includes charges on constituent funds, management fee and VAT.

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