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Performance review: why Towry's Wilson broke alternatives record
by Elsa Buchanan on Feb 19, 2014 at 08:47
Towry head of investment Andrew Wilson was betting on rising volatility providing a cheaper entry point to risk assets, but it was his passive allocation that was the big winner in 2013.
In the firm’s intermediate risk-targeted strategy, Wilson had 11.2% passive exposure in US and also UK equities, which returned 211 basis points (bps) and 293bps, respectively. The rest of the portfolio’s asset allocation was held in active managers.
Over the last 12 months, Wilson took profits from equity positions where they had drifted above target weight, with a view to recycling the money into other cheaper or underweight assets, although he admits that he did not get the hoped for opportunity to buy an equity market sell-off.
‘We expected a 10% excess correctional drawdown, particularly in the autumn, and to buy some more risk assets more cheaply at some point, but it never really happened,’ he said. ‘It was a bit of a shame from a strategy point of view.’
More recently, Wilson has maintained a small overweight position in long only equities, with a 56% allocation, but also with exposure to long short equity, with holdings including a large position in the Majedie Tortoise fund, managed by Citywire AAA-rated Matthew Smith and Tom Morris.
He holds UK and US smaller companies as separate asset classes totalling 9.6% , including a holding in the River & Mercantile UK Smaller Companies fund. ‘The UK small caps’ risk was well rewarded in 2013 with a 220bps contribution to return while US small caps added an extra 84bps.’
In Europe, he retained a small exposure (4.2%) through ‘long-time core holding’ JOHCM Continental European , run by A-rated Paul Wild, along with the Henderson European Focus trust and the BlackRock Continental fund, managed by + rated Vincent Devlin.
‘A lot of investors were adding to European equities over the summer on the basis that they were relatively cheap versus the US, but our view was that while it was a bit cheaper, it was getting priced in quickly.’
However, Wilson said his allocation to the region could climb as high as 10%. ‘There will be an occasion to buy Europe more cheaply if we get a “European event” later on this year, possibly from the banking stress test, and ultimately some renewed eurozone volatility. We’ll lean against the wind on that, and look to buy in cheap.’
In Japan he is 'fairly neutral', with a 6.1% exposure.
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- Majedie Tortoise A Acc
- Royal London UK Smaller Companies A
- JOHCM Continental European A EUR
- BlackRock Continental European A Inc
- Prusik Asian Smaller Companies C
- Prusik Asian Equity Income 1 A
- Legal & General Dynamic Bond R Acc
- MLIS York Event Driven UCITS GBP A Acc