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Performance review: why Towry's Wilson broke alternatives record

by Elsa Buchanan on Feb 19, 2014 at 08:47

‘We were worried at the end of 2012 that it was becoming a bit of a consensus trade. We let it run in 2013, and didn’t take profits, so even though we didn’t add any more, we are pleased with the performance.’

Notwithstanding the ‘yen issue’, the allocation returned 146bps for the portfolio. ‘The only question about Japan was whether we could have held more than we did without having 20/20 hindsight,’ he added.

Elsewhere, he holds 6.8% in Asia, where he favours A-rated Heather Manners’ Prusik Asian Smaller Companies  and Asian Equity Income  funds. Both are now soft-closed.

In fixed income, Wilson has been running record-low exposure to traditional bonds at 9.3%. He instead highlights Legal & General Dynamic Bond   as a top pick, within “relative value” fixed interest funds.

He also has a record 24% exposure to non-traditional strategies such as long/short equity strategies (4.9%), relative value fixed interest (4.1%), global macro (3.6%) and managed futures  (6.1%). Exposure also includes traded volatility (1.4%) and event driven strategies (2.2%), including the York Event-Driven  fund, a strong performer last year.

His small position in commodities, which is half-weighted to gold, cost the portfolio 37bps over the year.

Performance

Over the past 12 months, the intermediate portfolio has posted an 11% return with a volatility of 6.6%, and over three years it has delivered 10% with a volatility of 8.1%. Performance was driven by equity exposure, and US equities in particular.

‘It wasn’t all that long ago when clients were asking why we owned eurozone exposure at all. Similarly to our Japan allocation, you could instead question whether we had enough in Europe in 2013,’ Wilson said.

While fixed income underperformed detracting 23bps, he says gilts ‘only lost 1%’ on the back of his preference for shorter duration paper. International assets were diluted by 200bps, due to sterling strength, he added.

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