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

by Elsa Buchanan on Jan 22, 2014 at 12:01

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.’

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