Select UK funds have powered James Brearley’s medium risk portfolios, while an S&P 500 structured product has proved lucrative, says director David Hannis.
James Brearley’s balanced portfolio has seen little tweaking over the last year, but exposure to US funds has been trimmed to 7%, while a position in the Aviva Property fund was dropped and the cash moved to bump up HSBC Infrastructure Company exposure from 2.5% to 4.5%.
‘We just saw that there doesn’t seem to be any imminent pick-up in the UK economy, which we feel is necessary to move UK commercial property values along, and so we like the much more reliable returns offered by an infrastructure play.’
The balanced portfolio has returned 11.9% over 12 months to 31 August, compared to 9.6% in the FTSE Apcims Balanced benchmark.
Hannis has seen success from a range accrual structured product based on the S&P 500 built by Barclays Capital.
‘Because the product was issued at a time when market volatility was high and was there was concern about some of the banks, that 11.6% was an extremely attractive rate of return,’ he explained.
‘So you are not really taking market risk, the markets can move sideways and you are still getting something akin to upside.’
A less successful call has been a position in the British Empire Securities investment trust, on which the discount has fallen to more than 11%. Nevertheless, Hannis is hanging in there.
‘It has an overweight to Europe that they were probably a bit too early going into. But we still feel things will sort themselves out over there, and compared to other markets it looks cheap.’
The M&G Global Basics fund has also ‘been a bit disappointing,’ Hannis said, but he retains conviction in the fund’s long-term themes.
UK funds have provided the mainstay of performance over the last year and with a 43.5% weighting to the sector Hannis expects the top performers to keep on doing well.
He cites Julie Dean’s Cazenove UK Opportunities fund as his best selection. ‘We like her style and she’s quite thematic and we have just been a long-term supporter of her,’ Hannis said.
‘Wood can flex away from growth to value,’ he said. ‘It’s always on a value basis but he’s not regimented in his approach. We stuck with John through 2011 when he didn’t have the best of times.’