Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Performance review: why Saunderson House is sceptical on Japan

Performance review: why Saunderson House is sceptical on Japan

Japan’s disappointing fourth-quarter GDP growth figures have convinced Saunderson House investment director Christopher Sexton that Japan’s ‘Abenomics’ turnaround plan is not really working.

While Sexton (pictured) has retained a 3% allocation to Japan in the firm’s balanced portfolio, he has no plans to ‘ever increase it’. He said: ‘We’ve struggled to keep advisers interested in this basket case because historically, nothing has really changed when everyone said “Japan is back”. I’m not convinced Abenomics have worked.’

Since mid-2012, Sexton has taken his equity weighting from 44% to 66%, almost doubling his European exposure, and adding 4% to his UK allocation, which now weighs in at 28.5%.

‘The UK is cheap enough and the small and mid cap markets had a fantastic run last year,’ he said.

He recently took some profits from the Schroder Recovery fund, run by Citywire AAA-rated duo Kevin Murphy and Nick Kirrage. The fund has doubled the performance of the FTSE All Shares index, returning over 42% over three years.

Some of this was recycled into BlackRock UK Special Situations, managed by + rated Richard Plackett, and the JO Hambro UK Opportunities fund, run by + rated John Wood and A-rated Ben Leyland.

Sexton has added a ‘tiny’ amount to his US weighting of 11%. While he has had to ‘look into dusty areas to find good managers’, Sexton cites the AXA Framlington American Growth and Fidelity American funds as top holdings.

He has retained a 6% allocation to emerging markets (EM) through the First State Global EM Leaders fund, run by AA-rated Jonathan Asante, and has recently bought into Somerset Capital’s Somerset EM Dividend Growth fund, managed by Edward Lam also AA-rated.

He prefers managers who avoid the ‘fragile five’ (Brazil, India, Indonesia, South Africa and Turkey) and focusing on export-orientated Taiwan and Korea. Taking a five-year view, however, he believes EMs could outperform developed markets.

Sexton holds almost half of his 21% fixed income exposure in the Schroder Absolute Return Bond fund, and ‘some of the slightly more risk-taking managers’, such as the Kames Strategic Bond fund, run by + rated David Roberts and Philip Milburn. For diversification, he has allocated 5% to Fidelity and Standard Life Investment’s Global Inflation-Linked Bond funds.

On property, Sexton is neutral to slightly positive with a 10% allocation. Despite not finding ‘many compelling opportunities’, he has exposure to commercial property through ‘a lot of investment trusts bought early at a discount and now trading at a premium’. Portfolios are focusing outside of London, and on distribution warehouses, which Sexton said are boosted by online sales.

The firm has no allocation to either hedge funds or long/short strategies.

Saunderson House’s balanced portfolio has posted a 10.9% return over 12 months, outperforming the ARC Steady Growth Portfolio benchmark’s 6.5%. Over three years, the model is up 8.1%, against the benchmark’s 5.4% rise.

Returns were driven by the Schroder recovery fund, which has delivered 24% per annum over five years, against the All Share’s 15% rise, and AAA-rated Julie Dean’s Cazenove UK Opportunities.

Sexton also backs the GAM North American Growth fund, managed by ‘fantastic fundamental investor’ + rated Gordon Grender, and A-rated Andrew Rose’s ‘very steady ’Schroder Tokyo fund as top performers. 

In a forward view, Sexton warns China's sizeable shadow banking sector could trigger a credit crisis, and he says he will be paying attention to European deflation.

Sexton added he could well be buying back into gilts, and adding to his emerging market 6% exposure on the back of cheaper valuations.

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

Kevin Murphy
Kevin Murphy
95/158 in Equity - UK (All Companies) (Performance over 3 years) Average Total Return: 24.73%
Nick Kirrage
Nick Kirrage
96/158 in Equity - UK (All Companies) (Performance over 3 years) Average Total Return: 24.73%
John Wood
John Wood
90/158 in Equity - UK (All Companies) (Performance over 3 years) Average Total Return: 25.40%
Julie Dean
Julie Dean
152/158 in Equity - UK (All Companies) (Performance over 3 years) Average Total Return: 12.70%
Ben Leyland
Ben Leyland
68/406 in Equity - Global (Performance over 3 years) Average Total Return: 59.88%
David Roberts
David Roberts
44/53 in Bonds - Sterling Strategic Bond (Performance over 3 years) Average Total Return: 7.44%
Philip Milburn
Philip Milburn
45/53 in Bonds - Sterling Strategic Bond (Performance over 3 years) Average Total Return: 7.44%
Gordon Grender
Gordon Grender
167/193 in Equity - US (Performance over 3 years) Average Total Return: 49.52%
Andrew Rose
Andrew Rose
41/84 in Equity - Japan (Performance over 3 years) Average Total Return: 55.44%
Jonathan Asante
Jonathan Asante
91/196 in Equity - Global Emerging Markets (Performance over 3 years) Average Total Return: 37.82%
Edward Lam
Edward Lam
33/196 in Equity - Global Emerging Markets (Performance over 3 years) Average Total Return: 44.34%
Richard Plackett
Richard Plackett
Your Business: Cover Star Club

Profile: a Williams de Broe vet on striking out from Investec

Profile: a Williams de Broe vet on striking out from Investec

Laurence Boyle and his team became ‘somewhat of an oddity’ within Investec after joining via its acquisition of Williams de Broë

Wealth Manager on Twitter