Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

Performance review: why Charles Stanley backs the S&P 500

Performance review: why Charles Stanley backs the S&P 500

Gerard Sweeting, Charles Stanley’s director of wealth management, has reduced his UK exposure and upped his weighting to the US. He anticipates a continuation of the US rally, which he says will be supported by a shift away from money markets.

The firm’s managed balanced portfolio now has 7.3% in US equities. Sweeting added to the position in August through a 2.5% stake in the AXA Framlington American Growth fund, which sits alongside his existing holding in the Findlay Park American fund.

‘Over the year we have had more a rating expansion than profit growth, and there is more to come,’ he said. ‘We could be looking at better than expected corporate results, and the forward earnings outlook will surprise on the upside.’

Although still positive on UK equities, Sweeting has reduced his exposure to 43.9%. Within this allocation he is playing several themes, including housebuilders. He has a holding in Berkeley Group, where he believes there is further upside, and in pub groups as a recovery play, with stakes in Mitchells & Butlers and Greene King Brewery.

The portfolio is also overweight financials and life insurers, with favourite names including Aberdeen Asset Management and Legal & General, which he deems to be  ‘undervalued and a good divi payer’.

He is steering clear of consumer staples with significant emerging market exposure, such as Unilever, oil and gas producers, and retailers. Charles Stanley’s UK equity allocation is held through direct share holdings with international equity exposure achieved through third party collectives.

Globally, Sweeting has European equity exposure through the European Investment trust. It was one of the portfolio’s top performers in 2013, up 36% and he believes there could still be room for a further rerating of European equities as investors start to close their underweight exposure to the region.

Elsewhere, he holds the JO Hambro Japan yen-hedged fund, run by AA-rated duo Scott McGlashan and Ruth Nash.

Sweeting’s 3.4% fixed interest exposure is held entirely in corporate bonds, with direct holdings in names such as Daimler, General Electric and Zurich.

These positions returned 3.7%, compared to the FTSE UK Gilt index’s 3.9% loss. ‘It is a far better area to be in than gilts, but it is still not as good as high yield,’ he said. ‘We might well go towards floating-rate notes or strategic bond funds later on.’

He sold out of gold in April last year and switched the money into the Standard Life Investments Global Absolute Return Strategies and BNY Mellon Global Absolute Return funds.

‘Cash plus 5 to 7% is what we look for in an absolute return fund,’ he said.

Performance

Over 12 months, the portfolio has returned 22.3%, outperforming its Apcims Balanced Total Return benchmark, which rose 14.1% over the same period.

Since inception in November 2011, the model is up 46.3%, against the benchmark’s 25.9% rise. Key drivers of performance include holdings in Berkeley Group, Shire and Findlay Park’s fund.

However, Sweeting acknowledges having bought into HSBC ‘a bit too early’, which has been a drag on performance, as has a holding in Imperial Tobacco.

‘Our biggest detractors were Asia and the emerging markets,’ he said, pointing to the Schroder Asian Total Return fund run by Citywire AA-rated duo Robin Parbrook and Lee King Fuei, and the JPM Global Emerging Markets fund.

He continues to favour the US, where he believes a rotation out of money markets into equities could support the rally.

‘The amount of money in the US money markets has gone up,’ he said.

‘The rotation didn’t happen in 2013 because people were just putting cash – not money – into markets, but it may well hit the equity markets. I believe there will be a rotation toward equities in 2014.’

BUY: Miners

‘There is anecdotal evidence that inventories in China have fallen from higher levels, which could mean a hike in demand, while cost cutting should help the bottom line’

HOLD: Pharma, healthcare and builders

‘We anticipate there is more to come after a good run in both sectors, where we hold Smith & Nephew and Shire. We are also holding on to builders such as Berkeley Group and GKN’

SELL: Food retailers

‘Despite a good run from large caps, 2013 was a consumer-led recovery, and not a sustainable one. We sold out of Sainsbury's in the second half of the year after they did exceptionally well. They are and will be facing headwinds.'

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Related Fund Managers

Scott McGlashan
Scott McGlashan
79/95 in Equity - Japan (Performance over 3 years) Average Total Return: 32.13%
Ruth Nash
Ruth Nash
78/95 in Equity - Japan (Performance over 3 years) Average Total Return: 32.13%
Robin Parbrook
Robin Parbrook
4/135 in Equity - Asia Pacific Excluding Japan (Performance over 3 years) Average Total Return: 57.03%
Lee King Fuei
Lee King Fuei
77/135 in Equity - Asia Pacific Excluding Japan (Performance over 3 years) Average Total Return: 32.11%
Citywire TV
Play CEO Tapes: Buxton to Gilbert - ‘my Glencore quandary’

CEO Tapes: Buxton to Gilbert - ‘my Glencore quandary’

Do not miss the first two minutes of this film as Richard Buxton shares how he has been challenged by a client for owning shares in a certain company.

Play CEO Tapes: the huge opportunities for asset managers

CEO Tapes: the huge opportunities for asset managers

From tech disruption, retirement and poaching, the CEO discuss the opportunities for their businesses in this episode.

Play CEO Tapes: 'we're just a bunch of white dudes sitting here'

CEO Tapes: 'we're just a bunch of white dudes sitting here'

In our brand new series, eight CEOs discuss how the industry could do a better job for female fund managers.

Read More
Your Business: Cover Star Club

Profile: Kevin Doran's formula for success at AJ Bell

Profile: Kevin Doran's formula for success at AJ Bell

From a degree in theoretical physics to teaching and becoming one of the youngest chief investment officers in the UK, Kevin Doran has certainly had an interesting career.

Wealth Manager on Twitter