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View the article online at http://citywire.co.uk/wealth-manager/article/a758509

Performance review: How Coutts’ Higgins is preparing for 10% US correction

by Elsa Buchanan on Jul 01, 2014 at 14:28

‘We find value in Japan, and we like the corporate reforms such as the public pension fund overhaul and the introduction of the new benchmark for governance,’ he said.

In Europe, where he has a preference for Italy and Spain, he again blends active and passive strategies, and holds the Hermes Sourcecap European Alpha fund, managed by Citywire A-rated James Rutherford.

Domestically, Higgins holds a direct blue chip stock portfolio with holdings including Shell, Unilever, GlaxoSmithKlineHSBC and Diageo. As a play on China, Higgins is also backing BHP Billiton and Rio Tinto.

‘A lot of the bad news about China is in the price, so one way to play this would be to be long those companies, which also have attractive dividend yields.’

In fixed income, Higgins has sold ‘large chunks’ of his overweight peripheral debt exposure this month, but retained small positions in Irish, sterling-denominated Spanish and Italian debt.

Higgins’ largest fixed income exposure is the Pimco UK Long Corporate Bond fund, which comprises 6% of his portfolio and is managed by A-rated Ketish Pothalingam.

Seeking diversification, he recently introduced a 100-year maturity Mexican bond along with Slovenian debt. At the height of the strife in Ukraine, the team also bought a Russia 7.5% 2030 dollar-denominated bond, which sits alongside a 2.4% weighting to the Pictet EM debt (local currency) fund.

In performance terms, Italian sovereign debt, commercial property and Japanese equities have been positive drivers. Since inception on 15 November 2012, the model has returned 14.6%, with a historical volatility of 6%, versus a 14% rise in the ARC PCI benchmark.

In contrast, Higgins’s 2.1% exposure to gold mining stocks and the Citywire Selection pick BlackRock Gold & General fund, run by + rated Evy Hambro, have dampened returns, with emerging markets also a negative performer before clawing back some of those losses over the past six months.

BUY: Exposure to the NIKKEI 400 Index

‘Look to get exposure to the new Japanese corporate governance index’

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