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Brown Shipley’s Botham: why it will be a struggle to beat 10% in 2014
by Elsa Buchanan on Jan 28, 2014 at 14:49
Brown Shipley CIO Peter Botham is moving out of the US to capture a European recovery and counter muted returns in 2014.
‘I think you’ll struggle to make more than 10% total return this year,’ Botham said. ‘Last year’s equity run was all about buying for the good news of this year. By and large, it is already priced in.’
This, he said, is in stark contrast with 2013 when returns beat expectations of between 10% and 12% for the year with the FTSE fair value at 6,500.
Botham (pictured) has been struggling to find much value in the US. Believing the recovery has already played out has led him to take profits and trim his exposure.
‘You could argue it was possibly wrong that we took money out of the US because the markets kept going, but that 3% to 4% went into Europe during the course of the year on the back of anticipated growth and recovery,’ he said.
During the year, he also took money out of emerging markets, reducing his exposure to 3%. Some of this money was added to his position in Japan in the first quarter of 2013. ‘I am still on the bullish side on Japan, but my 5% allocation doesn’t reflect that entirely,’ he said, adding the country was still a ‘gamble’ despite the recent Abenomics-backed momentum. He anticipates Japan will deliver ‘above average returns’.
In fixed income, Botham has turned bullish on global and high yield bonds with a 10% weighting, two-thirds of which are in high yield and emerging markets. He recently bought into the Schroder ISF Global High Yield fund.
Part of his emerging market equity exposure was transferred to EM debt. ‘After the mid-year big sell-off, we thought there was some good value once again. Yields got to 6%, or 8% so we put some money back into that.’ He holds the Legg Mason Western Asset Emerging Markets Bond and the Payden Emerging Markets Bond funds, which he uses for ‘riskier parts’ of the market. The portfolio has a 4% allocation to corporate bonds.
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