Jupiter private client manager David Blake told Wealth Manager he is on the lookout for multinational companies that are growing their dividends, as income remains key for private client investors.
A typical medium risk private client portfolio at the firm currently has around 67% in equities. Of this, about 27.7% is invested in UK equity funds, including 5.5% in both Invesco Perpetual Income and Artemis Income. The remaining 40.3% of the equity allocation is invested internationally, with Newton Asian Income, First State Asia Pacific and M&G Global Dividend represent key picks.
‘Income is the main theme of the portfolio and over the past 12 months, we’ve slowly reduced its risk exposure. We focus on large international companies that are growing their dividends in markets with high barriers to entry,’ said Blake.
The rest of the portfolio is divided between 16.9% in fixed income, 5.6% in physical gold exchange traded funds, 6% in cash and 3.4% in hedge funds.
Over 12 months to 31 October, Jupiter’s average medium risk private client portfolio has returned 2.89%, while the IMA Balanced sector rose by 0.26% over the same period.
When compared against the MSCI World Index, this return was achieved with a volatility ratio of 0.69%. Over two years, the same portfolio returned 15.86% versus an IMA Balanced sector rise of 12.35%.
Blake said exposure to gold through physical ETFs was the biggest driver of performance. ‘Prices have risen quite a lot as it is a store of value in times of deflation and inflation. We are in a low interest rate environment and countries are racing to devalue their currency, so I think there is still room for it to go up,’ he said.
One dampener on performance was a lack of holdings in long-dated government debt during September, when prices for 30-year gilts rose on the back of the Eurozone debt crisis.
In challenging markets, Blake remains cautious, focusing on income and yield for wealth preservation as the primary concern. ‘We will reduce risk depending on what happens in the Eurozone and it could take a long time to sort out,’ he said.
He anticipates further rounds of quantitative easing as governments look to inflate their way out of debt.
‘When that money works its way into the system it will drive asset prices up as cash and fixed income won’t give the necessary returns. When that happens we wouldn’t just sit back. If there is a rally, we will be part of it.’
To hedge against inflation Blake could increase exposure to inflation-linked and high yield bonds. However, he stressed that the market is being moved by political rather than investment decisions, ‘making it very difficult to invest in’.