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Performance review: why Arbuthnot's Osman is still overweight Japan

by Elsa Buchanan on Apr 08, 2014 at 15:23

‘There will be an opportunity for investors with a long-term time horizon to increase their allocation at some point in the near future, although not just yet,’ Osman said.

He is relatively positive on the US, despite the market being ‘at, or slightly above, fair value’, albeit underweight by 12%. US equity exposure is gained though a core passive holding in the Vanguard S&P 500 ETF and a ‘satellite’ allocation to the Vulcan Value Equity fund.

The model is light in fixed interest with a position in the Fidelity MoneyBuilder Income fund. He recently reduced his weighting to investment grade corporate credit and backs strategic bond funds.

‘We favour funds that are unconstrained and have allocated to Goldman Sachs Global Strategic Income , which currently holds a negative duration position,’ he said. A further 5% is held in the ICG Longbow UK Property Debt investment trust, which Osman describes as having a ‘fairly attractive expected 7% to 8% yield’.

‘Overall, I think hedge funds will play an increasingly important part of portfolios to help stabilise them,’ he said, highlighting a 13% exposure across the Old Mutual Global Equity Absolute Return  - run by AAA-rated Ian Heslop and AA-rated duo Amadeo Alentorn and Mike Servent and Citywire Selection pick Standard Life Global Absolute Return Strategies funds. The latter is managed by AA-rated Guy Stern.

Over the last 12 months the model posted an 8.1% return, outperforming its IMA Mixed Investment 40-85% Shares peer group, which rose by 7.1%.

Over three years, the portfolio is up 17.7%, compared to a 17.6% rise by the IMA sector.

BUY Rolls-Royce

Shares have fallen 20% year-to-date based on lower than expected 2014 earnings, mostly driven by cuts in defence spending. We expect Rolls-Royce to significantly benefit from a major increase in aircraft production. Additionally, the company has made efforts to reduce costs and enhance its free cashflow.’

HOLD Coupland Cardiff Asian Evolution

We maintain a high level of conviction in the rise of the Asian consumer. There will be an opportunity for investors with a long-term time horizon to increase their allocation in the near future, although not just yet.’

SELL JP Morgan Strategic Bond

To reduce interest rate sensitivity we have cut exposure to investment grade corporate credit, including the JP Morgan Strategic Bond, which positions itself between 0-7 years duration. We favour unconstrained funds and have allocated to Goldman Sachs Global Strategic Income.’

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