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Vestra's David Scott: why I gave up on alternatives
Markets
by David Campbell on May 10, 2011 at 00:01
Commodities – primarily gold and oil – and pegging down overall fixed income exposure have been the biggest contributors to Vestra Wealth portfolios over the past year, said company founder David Scott.
While gold is mainly held as a hedge and, at between 5% and 6%, is not a significant asset allocation, having been held since it was priced at $700 its positive contribution has been disproportionate.
Likewise, a shift from corporate to high yield debt and a downgrading of exposure from around 12% to 8%, have not been decisive in terms of scale but have produced a disproportionate returns.
On equity, positive stock selection in the US, via Findlay Park supplemented with the Vanguard US Equity tracker , has outweighed a market that has largely moved sideways in the last quarter.
The same is true of emerging markets, where Devan Kaloo’s Aberdeen Emerging Markets fund and Templeton Latin America provide the mainstay of exposure.
The biggest detractor over the past year has been the company’s exposure to absolute return and hedge funds, which before being recently downgraded had consistently been as much as 15% of exposure and as much as 20% at points in the past 12 months.
‘Performance has been much more disappointing than it was in 2008,’ said David Scott, who added that the heightened volatility and uncertainty of the past year should have provided optimal opportunities for the sector.
While the company continues to hold the most successful strategic multi-asset mandates in its portfolio such as Ruffer and Artemis Strategic Assets , it has divested many of its less successful holdings such as the HSBC Macro fund, and several single strategy mandates.
A strong run on equity was also beginning to look as if it was reaching its full potential and the company was moving toward a more cautious approach, Scott added.
‘I don’t think people have cottoned on to how much [central bank] liquidity has kept things going,’ said Scott.
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